Weinbaum et al. v. Weidberg et al.; Makow et al., Third Parties

[Indexed as: Weinbaum v. Weidberg]

Ontario Reports

Ontario Superior Court of Justice,

Divisional Court,

Nordheimer, Stewart and Labrosse JJ.

March 6, 2017

136 O.R. (3d) 537 | 2017 ONSC 1040

Case Summary

Limitations — Contractual limitation period — Section 18 of Limitations Act, 2002 not superseding principle that contractual limitation provision can preclude claim for contribution and indemnity — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 18. [page538]

The plaintiffs entered into an agreement with M Inc. in 1993 to provide architectural services with respect to the design and construction of their residence. The architectural agreement provided for a six-year limitation period after substantial performance for all claims relating to "substantial performance of work". Substantial performance occurred in 1994. The plaintiffs allegedly discovered evidence of water damage and mold growth in August 2008. They commenced an action in January 2010 against the defendants for damages for construction deficiencies in the residence. They did not name M Inc. or its principal, M, and did not commence any other proceeding against either M or M Inc. The defendant W commenced third party proceedings against M and M Inc. in October 2011 for indemnity under the Negligence Act, R.S.O. 1990, c. N.1, alleging that M and M Inc. failed to carry out their duties to the plaintiffs. The third party claim did not assert any independent or contractual claim against M or M Inc. M and M Inc. brought a motion for summary judgment dismissing the claim against them on the basis that their contract with the plaintiffs protected them from liability to either the plaintiffs or a third party by way of contribution. The motion was dismissed. M and M Inc. appealed.

Held, the appeal should be allowed.

Section 18 of the Limitations Act, 2002 did not bring an end to the long-standing principle that a contractual limitation provision can preclude a claim for contribution and indemnity. 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.

Giffels Associates Ltd. v. Eastern Construction Co., 1978 39 (SCC), [1978] 2 S.C.R. 1346, [1978] S.C.J. No. 61, 84 D.L.R. (3d) 344, 19 N.R. 298, 4 C.C.L.T. 143, 5 C.P.C. 223, [1978] 1 A.C.W.S. 465, apld

Canaccord Capital Corp. v. Roscoe (2013), 115 O.R. (3d) 641, [2013] O.J. No. 2643, 2013 ONCA 378, 306 O.A.C. 382, 9 C.C.E.L. (4th) 26, 363 D.L.R. (4th) 182, 228 A.C.W.S. (3d) 252; HSBC Securities (Canada) Inc. v. Davies, Ward & Beck (2005), 2005 1626 (ON CA), 74 O.R. (3d) 295, [2005] O.J. No. 277, 249 D.L.R. (4th) 571, 194 O.A.C. 1, 136 A.C.W.S. (3d) 822 (C.A.); Waterloo Region District School Board v. CRD Construction Ltd. (2010), 103 O.R. (3d) 81, [2010] O.J. No. 5358, 2010 ONCA 838, 271 O.A.C. 142, 97 C.L.R. (3d) 274, 327 D.L.R. (4th) 611, 100 C.P.C. (6th) 1, 313 D.L.R. (4th) 82, 196 A.C.W.S. (3d) 257, consd

Other cases referred to

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 145 (SCC), [1993] 1 S.C.R. 12, [1993] S.C.J. No. 1, 99 D.L.R. (4th) 577, 147 N.R. 81, [1993] 2 W.W.R. 321, J.E. 93-271, 20 B.C.A.C. 241, 75 B.C.L.R. (2d) 145, 14 C.C.L.T. (2d) 233, 5 C.L.R. (2d) 173, 37 A.C.W.S. (3d) 1202; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, 308 B.C.A.C. 1, 419 N.R. 1, 2011EXP-2380, J.E. 2011-1326, 335 D.L.R. (4th) 513, 21 B.C.L.R. (5th) 215, 25 Admin. L.R. (5th) 1, 86 C.C.L.T. (3d) 1, [2011] 11 W.W.R. 215, 83 C.B.R. (5th) 169, 205 A.C.W.S. (3d) 92; Weinbaum v. Weidberg, [2016] O.J. No. 2684, 2016 ONSC 2525, 60 B.L.R. (5th) 143, 62 C.L.R. (4th) 256, 266 A.C.W.S. (3d) 965 (S.C.J.)

Statutes referred to

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 18 [page539]

Negligence Act, R.S.O. 1990, c. N.1, s. 8 [rep.]

Professional Engineers Act, R.S.O. 1990, c. P.28, s. 46(1) [rep. S.O. 2002, c. 24, Sch. B, s. 25]

APPEAL from an order dismissing a motion for summary judgment.

No one appearing for plaintiffs.

Iain Peck, for defendant/respondent David Weidberg.

John A. Little, for third parties/appellants Stan P. Makow and Makow Associates Architect Inc.

The judgment of the court was delivered by

LABROSSE J.: —

Overview

[1] This is an appeal, with leave, of Dow J.'s order dated May 25, 2016 [[2016] O.J. No. 2684, 2016 ONSC 2525 (S.C.J.)] dismissing the appellants' motion for summary judgment.

[2] The appellants had sought to have the third party claim brought against them by the respondent David Weidberg dismissed by way of motion for summary judgment. They argued that their contract with the plaintiffs in this action protects them from liability to either the plaintiffs or a third party by way of contribution. The appellants seek an order setting aside the decision of Dow J. and dismissing the respondent's third party claim against the appellants. The other parties to this matter have not participated in the appeal.

[3] This appeal relates to the very specific issue of determining if s. 18 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the "Limitations Act") supersedes the law in Giffels Associates Ltd. v. Eastern Construction Co., 1978 39 (SCC), [1978] 2 S.C.R. 1346, [1978] S.C.J. No. 61, which supports the principle that a contractual limitation provision can preclude a claim for contribution and indemnity.

Background

[4] The factual history of this matter is very straightforward. In 1993, Jack and Anne Weinbaum entered into an agreement with Makow Associates Architect Inc. ("Makow Architects") to provide certain architectural services with respect to the design and construction of the Weinbaum's residence (the "architectural agreement").

[5] The architectural agreement provided for a six-year limitation period after substantial performance for all claims relating to "substantial performance of work". The architectural agreement [page540] went on to state that "following the expiration of such period, the Client shall have no claim whatsoever against the Architect". Substantial performance of the work on the Weinbaum residence occurred in 1994.

[6] By statement of claim issued January 29, 2010, the Weinbaums commenced an action for damages for construction deficiencies in their residence. It is alleged that the Weinbaums first discovered evidence of extensive water damage and mold growth in August of 2008.

[7] The Weinbaums did not name either Stan P. Makow or Makow Architects as defendants, nor did they commence any other proceeding against Mr. Makow or his company.

[8] Jack Weinbaum passed away on December 5, 2014.

[9] By third party claim issued October 13, 2011, David Weidberg, the construction manager for the project, commenced third party proceedings against Mr. Makow, Makow Architects and the City of Toronto. The third party claim seeks indemnity from the appellants pursuant to the provisions of the Negligence Act, R.S.O. 1990, c. N.1 on the basis that their actions caused or contributed to any damages suffered by the plaintiffs. It is alleged that the appellants failed to carry out their duties to the plaintiffs. It does not assert any independent or contractual claim against the appellants.

The Motion for Summary Judgment

[10] On April 12, 2016, the appellants' motion for summary judgment proceeded before the motion judge. The following two issues were identified by the motion judge to be before the court:

(a) does s. 18 of the Limitations Act, 2002 supersede the law that where a party has protected itself from liability by contract from the plaintiff, a defendant cannot compel the protected party to share the burden of compensating the injured party; and

(b) if the issue is resolved in favour of the protected party, does the protection extend to the principle of the protected party as one of its employees/architects that did the actual work (and likely an officer and director)?

[11] In deciding the first issue, the motion judge considered the law in Giffels but relied on the Court of Appeal for Ontario's decision in Waterloo Region District School Board v. CRD Construction Ltd. (2010), 103 O.R. (3d) 81, [2010] O.J. No. 5358, 2010 ONCA 838 in finding that the intention of the legislature was to alter the law so that [at para. 24] "a claim for [page541] contribution and indemnity, whether in tort or otherwise, now has a two-year limitation period that is presumed to run from the date when the person who seeks contribution and indemnity is served with the plaintiff's claim that gives rise to its claim over".

[12] It is this finding that is the subject of this appeal.

[13] The motion judge also went on to deal with the second issue where he concluded that the protection afforded to the protected party would also extend to the principal of the protected party as one of its employees/architects who did the actual work (and likely an officer and director). This finding has not been appealed.

Standard of Review

[14] The parties are in agreement that the proper standard of review on this question of law is correctness: see Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, at paras. 8 and 9.

Analysis

[15] The analysis of the relevant issues begins with the Court of Appeal's decision in Waterloo and how Feldman J.A. determined that s. 18 of the Limitations Act was the only limitation period in the Limitations Act which applies to claims for contribution and indemnity. As such, there is a two-year limitation period which begins to run from the date when the person who seeks contribution and indemnity is served with the plaintiff's claim that gives rise to its claim over.

[16] However, the Court of Appeal in Waterloo was dealing with a statutory limitation period, being s. 46(1) of the Professional Engineers Act, R.S.O. 1990, c. P.28. At para. 6 of her decision, Feldman J.A. identifies the relevant issue as being:

Can a cross-claim for contribution and indemnity exist when the person from whom contribution is sought is no longer liable in law to the plaintiff because the plaintiff's claim against that person is statute barred? Or is it sufficient that that person was potentially liable to the plaintiff at one time?

(Emphasis added)

[17] The analysis in Waterloo is then contrasted with the law set out by the Supreme Court of Canada in Giffels. It is relevant to note that Feldman J.A. did not refer to Giffels or its principles in her decision.

[18] The law set out by the Supreme Court of Canada in Giffels was properly summarized by the motion judge, where he stated [at para. 8]: [page542]

The source of the position taken by the third parties is the Supreme Court of Canada decision in Giffels Associates Ltd. v. Eastern Construction Co., 1978 39 (SCC), [1978], 2 S.C.R. 1346, which reviewed a similar situation. In its reasons, Chief Justice Laskin (at page 1355) assumed where a plaintiff chose to sue only one of two contractors that each had a separate contract with the plaintiff after the plaintiff suffers damages from concurrent breaches of those contracts, it would be inequitable for that one contractor to bear the entire brunt of the plaintiff's loss. However, the court accepted that it was open to one of the contractors to protect itself from liability by a term in its contact and, as a result, the other contractor could not assert a right which would go behind that agreement and force the protected contractor to share in compensating the plaintiff for its losses.

[19] The motion judge also recognized a more recent acknowledgment of the legal principles which stem from Giffels in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, at para. 29, where McLachlin C.J.C. stated:

I agree with Canada and the Court of Appeal that a third party may only be liable for contribution under the Negligence Act if it is directly liable to the plaintiff.

[20] The respondent in these proceedings has acknowledged that the plaintiff's claim against the appellants is barred by the limitation period in the architecture agreement.

[21] The Court of Appeal in Waterloo specifically states, at para. 30, that the conclusions of the Court of Appeal in HSBC Securities (Canada) Inc. v. Davies, Ward & Beck (2005), 74 O.R. (3d) 295, [2005] O.J. No. 277, 2005 1626 (ON CA) were not applicable to the determination in Waterloo.

[22] This is significant in my view given the very clear statements of the Court of Appeal in paras. 47 and 48 of HSBC, where Lane J. (ad hoc) confirms that the law in Giffels continues to apply where the limitation period at issue is contractual. It is also acknowledged in HSBC that s. 8 of the Negligence Act only protects contribution claims from the expiry of statutory limitation periods. It is this distinction in my view that suggests that the Court of Appeal's decision in Waterloo did not change the law in Giffels.

[23] While the motion judge states, at para. 11, that Feldman J.A. chose not to follow the principle set out in Giffels in considering the matter of HSBC, I do not agree. In Waterloo, Feldman J.A. specifically sets out her understanding of the rationale behind s. 18 of the Limitations Act when she stated [at para. 27]:

In my view, to the extent that the legislature intended to change the law that has been in place since 1948 regarding the requirements for bringing a claim for contribution and indemnity, it did so specifically by changing the limitation period (from one year to two years) and the commencement date from which it runs (from the date of the plaintiff's judgment against a particular tortfeasor to the date when the plaintiff's claim was served on [page543] a particular tortfeasor). The new limitation period under s. 18 applies, as did the former one under s. 8, both to claims that are tried and to those that are settled (ss. 1 and 2 of the Negligence Act).

[24] Feldman J.A. concludes her analysis by recognizing that the effect of the new provision is that the period for bringing the claim for contribution and indemnity now coincides much more closely with the basic limitation for bringing all actions. This in my view is a key component to the analysis of the Court of Appeal in Waterloo: being the objective to end the confusion that historically had existed with the various statutory limitation periods.

[25] However, the present case brings in a very different consideration: the right of parties to determine their affairs by way of contract. This was acknowledged by the Supreme Court of Canada in BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 145 (SCC), [1993] 1 S.C.R. 12, [1993] S.C.J. No. 1, at paras. 15 and 16, where the right of parties to determine the extent of their liability to one another was clearly recognized as being "of great importance in preserving a sphere of individual liberty and commercial flexibility".

[26] Further, I note that the principles established in Giffels were established by the Supreme Court of Canada well after the adoption of s. 8 of the Negligence Act. The parties to this appeal agree that s. 18 of the Limitations Act has the same effect as s. 8 of the Negligence Act with the main difference being a change in procedure to the starting point and duration of the claim for contribution and indemnity. While this may be so practically, Feldman J.A. [in Waterloo] did summarize the effect of s. 18 of the Limitations Act as follows [at para. 16]:

The new section did three things: (1) it made the claim for contribution and indemnity an action that could be brought in separate proceedings after judgment against, or settlement by, a tortfeasor in the main action; (2) it enacted a one-year limitation period, subject to certain conditions; and (3) it allowed the contribution claim to be brought notwithstanding the passage of the limitation period that would have applied to a claim by the plaintiff against the other tortfeasor, had one been brought.

[27] The scope of s. 18 of the Limitations Act was also considered by the Court of Appeal in Canaccord Capital Corp. v. Roscoe (2013), 115 O.R. (3d) 641, [2013] O.J. No. 2643, 2013 ONCA 378. In Canaccord, Sharpe J.A. highlighted a further difference where s. 8 of the Negligence Act previously referred to a "tortfeaser" and that s. 18 of the Limitations Act now refers to a "wrongdoer". This was significant in Canaccord as the issue was whether s. 18 and the two-year limitation period in the [page544] Limitations Act could bar a claim for contribution and indemnity which arose from a contract as opposed to a claim in negligence.

[28] In Canaccord, Sharpe J.A. highlighted the intended expanded scope of s. 18 of the Limitations Act as being equally applicable to a claim which arises in respect of a tort or in contract. However, as in Waterloo, the Court of Appeal in Canaccord makes no mention of the specific principles established in Giffels or the right of parties to contractually determine their liability to each other.

[29] There is no suggestion in either of these Court of Appeal authorities that s. 18 of the Limitations Act should be interpreted as bringing an end to the ability for contractual agreements to set out the conditions of liability one party may have to the other.

[30] In the end, I am of the view that s. 18 of the Limitations Act does not bring an end to the long standing principles enunciated in Giffels absent clear direction of the Court of Appeal that this section applies to contractual limitation periods. The validity of contractual limitation periods was acknowledged in HSBC. Absent clear judicial authority to the contrary, 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.

[31] The decision of the motion judge dated May 25, 2016 is therefore set aside and summary judgment shall be granted dismissing the third party claim of David Weidberg against Stan P. Makow and Makow Associates Architect Inc. with costs.

Costs

[32] The parties were in agreement on the issue of costs depending on the outcome of the appeal; however, it was not specified if those costs included the motion for leave to appeal and the costs of the third party claim. If the parties require any further adjudication on the issue of costs, they may provide written submissions within 30 days. On consent, the appellants are entitled to their costs of this appeal fixed at $18,000, inclusive of taxes and disbursements.

Appeal allowed.

End of Document