When You Know, You Know: The Supreme Court Of Canada Clarifies The Degree Of Knowledge Required For Discoverability

• Published date: 03 August 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation, Personal Injury, Professional Negligence
• Law Firm: McCarthy Tétrault LLP
• Author: Canadian Appeals Monitor, Christine Wadsworth, Bonnie Greenaway and Akiva Stern

In Grant Thornton LLP v. New Brunswick,¹ the Supreme Court of Canada considered the standard for determining whether a plaintiff has the requisite degree of knowledge to discover a claim under section 5 of New Brunswick's Limitation of Actions Act ("LAA"),² which is similar to other provincial limitation statutes in establishing a two year limitation period.³

The Supreme Court held that a claim is discovered when a plaintiff has actual or constructive knowledge "of the material facts upon which a plausible inference of liability on the defendant's part can be drawn." A plaintiff does not need to have knowledge of all of the constituent elements of the claim to discover it.

Background

In the fall of 2008, a New Brunswick-based company sought loans from the Bank of Nova Scotia (the "Loans"). To obtain the Loans, the company needed loan guarantees from the Province of New Brunswick. The province agreed to $50 million in loan guarantees conditional upon the company undergoing an external review of its assets by an auditing firm (Grant Thornton, the "Auditor").

The Auditor delivered an opinion letter and a report on the company's consolidated financial statements, opining that they presented fairly, in all material respects, the company's financial position. On June 30, 2009, the province executed the loan guarantees and the company then received the Loans. The company ran out of working capital four months after receiving the loan guarantees and ultimately went into receivership. The province paid out the $50 million in guarantees on March 18, 2010.

In June 2010, the province retained a separate accounting and auditing firm to review the company's financial position. That firm's draft report was issued in February 4, 2011 (the "Richter Report"). The Richter Report found that the company's financial statements had not been prepared in conformity with Generally Accepted Accounting Principles, there were material errors in the financial statements, and the company's assets and net earnings had been overstated by a material amount. The Auditor had not identified these issues.

On June 23, 2014, the province issued a Statement of Claim against the Auditor alleging negligence. The Auditor denied the allegations and brought a summary judgment motion seeking to have the province's claim dismissed as being statute-barred under the LAA because it was commenced two years after it was discoverable.

Motions Judge's Decision⁴

The main issue before the motions judge was when...