Digital Brain
digital brain
digital brain

Ontario Divisional Court Affirms Use of Contractual Limitation Period in Guarding Against Third Party Claims

October 2017 Litigation Bulletin 3 minute read

In a recent decision, the Ontario Divisional Court affirmed the ability of a party to protect against third party contribution and indemnity claims by way of a contractual limitation period.

Weinbaum v. Weidberg (2017 ONSC 1040) resulted after the plaintiff (Weinbaum, in her capacity as an estate trustee) discovered extensive water damage in a residential home. Weinbaum started an action against the home’s builder and other (referred to here as the “Weidberg respondents”) alleging various construction deficiencies. The Weidberg respondents subsequently brought a third party action for contribution and indemnity under the Negligence Act (the “Act”) against the home’s architect, Makow Architects.

At issue in this particular decision was whether or not a limitation clause in the Makow Architects’ contract with the plaintiff home owner could also bar the defendant builder from bringing its third party action. The question arose because the work was completed in 1994 but the water damage was not discovered until 2008. However, the Architectural Agreement between the third party Makow Architects and the plaintiff barred any action requiring payment of damages by the Makow Architects outside of a 6-year limitation window (which had, quite obviously, expired). As a result, after the Weidberg respondents started the third party claim, relying on that contractual limitation period.

In response to the initial summary judgment motion, the Weidberg respondents argued that section 18 of the Ontario Limitations Act (the “Limitations Act“) supersedes any contractual limitation period. Section 18(1) of the Limitations Act states:

“For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.”

In essence, the Weidberg respondents argued that since their claim was for contribution and indemnity, the limitation period for their third party claim was 2 years (the standard period under the Act) from the date on which they were served with the plaintiffs’ action. The Weidberg respondents, therefore, argued that the 6-year limitation period in the Architectural Agreement (operating from 1994 onward) did not apply to them and did not bar their third party action against the Makow Architects.

In the original summary judgment motion, the Makow Architects relied on the Supreme Court of Canada decision in Giffels Associates ([1978] 2 SCR 1346), wherein the court held that where a contractor protects itself from liability through a contractual term, another contractor cannot assert a right which goes behind that agreement to force the protected contractor(which has an agreement with the plaintiff) to share in compensating the plaintiff for proven losses.

Despite the rule in Giffels Associates, the motion judge found in favour of the Weidberg respondents and held that section 18 of the Limitations Act set an overriding limitation period for contribution and indemnity claims of 2 years from the date on which the main claim is served.

In the Makow Architects’ appeal, the Divisional Court therefore focused on the question of whether a contract can set a limitation period for contribution and indemnity regardless of section 18 of the Limitations Act. The Divisional Court overturned the original motion decision and awarded the Makow Architects summary judgment, stating:

“I am of the view that principles of Giffels continue to be the applicable law in Ontario and that it remains available to contracting parties to limit the scope of liability in a contract. Consequently, the right of a party to claim contribution and indemnity against another party is lost where the plaintiff’s rights to advance a claim have been extinguished by contract.”

As a result, the defendant’s third party claim against the Makow Architects was dismissed due to it having been started outside of the limitation period in the Makow Architects’ contract with the plaintiff.

The Divisional Court’s decision in Weinbaum v. Weidberg strongly affirms the benefits of contractual limitation periods, which can protect against not just long-delayed claims by the other contracting party, but against claims for contribution and indemnity where the latter contracting party has sued an individual or entity that is not party to the contract.

by Kyle Lambert

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

Insights (5 Posts)

Featured Insight

New Obligations in Terms of Corporate Transparency

Details Québec's new measures and improvements made to the information available in the registre des entreprises in order to improve companies' transparency.

Read More
Feb 1, 2023
Featured Insight

Display of Trademark on Stickers Affixed to Goods Constitutes Trademark Use

Displaying a retailer’s trademark on stickers affixed to goods already branded with a third party’s mark constitutes "use" of a trademark in Canada.

Read More
Jan 31, 2023
Featured Insight

Term CORRA Officially Under Development

1- and 3- month Term CORRA under development; targeted publication date is at end of Q3 2023; Term CORRA administrator will be CanDeal Innovations Inc.

Read More
Jan 30, 2023
Featured Insight

The State of Play in Shareholder Activism: Issues, Concerns and Trends

Join us for a series of engaging discussions on shareholder activism in Canada. Industry experts will share valuable insights into regulatory and market issues, concerns and trends.

Details
Tuesday, February 28, 2023
Featured Insight

CSA Publishes Results of Continuous Disclosure Review Program Activities

CSA Staff Notice 51-364 - Continuous Disclosure Review Program Activities for fiscal years ended March 31, 2022 and March 31, 2021.

Read More
Jan 26, 2023