The interpretation of provisions in the Limitation Act, S.B.C. 2012, c. 13, establishing the statutory limitation period for claims for contribution or indemnity, can be straightforward – until it is not.
The BC Court of Appeal dealt with one such situation when Neale Engineering Ltd. was sued by Ross Land Mushroom Farm Ltd. and others, for damages arising from a fire that occurred on May 15, 2016, at a mushroom farm in Langley, British Columbia. Ross Land denied liability and filed a third-party notice against Neale Engineering seeking contribution and indemnity on May 15, 2018. Neale Engineering opposed the third-party notice on the basis that it was statute-barred because it was filed two years after discovery of the contribution claim. The chambers judge granted leave to Ross Land to file the third-party notice.
The chambers judge, following the precedent in Sohal v. Lezama, 2021 BCCA 40, determined that the time for a contribution and indemnity claim had not started because the plaintiff had not served a pleading alleging fault on the part of two or more persons. Accordingly, she held that a proposed third-party claim against Neale Engineering was not time-barred. The chambers judge held that the time did not begin to run when the respondents were served with a pleading in which they alone were named as defendants. It did not matter whether they knew or ought to have known at that time that they had a plausible claim for contribution or indemnity against potential third parties. Neale Engineering appealed, arguing that the relevant part of Sohal relied upon by the chambers judge was obiter. The Court allowed the appeal.
The Court held that the relevant passage of Sohal, which suggests that a claim for contribution or indemnity is only “discovered” under s. 16(a) of the Limitation Act when a plaintiff serves a pleading alleging damage caused by the fault of two or more persons, is obiter.
The Court further clarified that a claim for contribution or indemnity is "discovered" under the Limitation Act when a pleading is served that, if proven, could result in a defendant paying more than its share of damages. This interpretation aligns with the remedial purpose of the provision and common sense. When s. 16 of the Limitation Act is properly applied, the Court held that the chambers judge’s unchallenged conclusions were dispositive of the appeal.
The clarification by the BC Court of Appeal serves as a reminder of the critical importance of time sensitivity in legal proceedings.
The case underscores the need for parties to exercise due diligence in identifying potential claims and causes of action promptly. Delaying legal action may result in the loss of the right to bring a claim for contribution and indemnity.