Feb 17, 2021

Civil Procedure: Limitation Periods; Discoverability

Province of New Brunswick v. Grant Thornton, 2020 NBCA 18 (CanLII)
The Province of New Brunswick (NB) commenced an action in negligence against Grant Thornton LLP, one of its partners, and Grant Thornton International Ltd. (“Grant Thornton”) re an audit of the financial statements of some corporations (“Atcon”) for the fiscal year ending January 31, 2009 (“F2009”). By the action, NB sought to recover damages corresponding to $50M it was required to pay, in March 2010, by virtue of loan guarantees provided to Atcon’s bank after Atcon’s bank successfully applied for a receivership order under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3  and for relief under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 . NB claims it relied on Grant Thornton’s unqualified auditor’s report in agreeing to execute the loan guarantees. After paying the $50M, NB retained a different auditing firm to review and comment on Atcon’s F2009 financial position. In February 2011, that auditing firm provided NB with a draft report expressing the opinion that Atcon’s financial statements for F2009 had not been prepared in accordance with generally accepted accounting principles and that they overstated Atcon’s assets and net earnings. NB commenced its action on June 23, 2014. Grant Thornton sought summary judgment on the basis that NB’s claim was time-barred. The motions judge allowed Grant Thornton’s motion, finding NB discovered its claim more than two years before commencing the proceedings. The C.A. allowed NB’s appeal, holding that the applicable test was more exacting than the one applied by the motions judge, so that the two-year limitation period did not begin to run until a claimant discovered they have a claim, rather than discovering they have a potential claim.