COURT FILE NO.: 11-53253

DATE: 20121019

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CANACCORD CAPITAL CORPORATION

Plaintiff/Respondent

– and –

GREGORY ROSCOE

Defendant/Applicant

Helen A. Daley, for the Plaintiff/Respondent

John I.G. Melia, for the Defendant/Applicant

HEARD: September 12, 2012

REASONS FOR DECISION

POLOWIN J.

[1] The Defendant Gregory Roscoe (“Roscoe”) has brought this motion for summary judgment asking that the action of the Plaintiff, Canaccord Capital Corporation (“Canaccord”) be dismissed, submitting that the action is barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. (the “Limitations Act”).

[2] According to Roscoe, on or about June 8, 2011, Canaccord issued and served a claim for contribution and indemnity against him. The subject matter of this claim relates to an August 2008 action served by Thomas and Kathleen Cavanagh (the “Cavanaghs”) against Canaccord and Roscoe. It is the position of Roscoe that s. 18 of the Limitations Act applies and that Canaccord’s claim should have been commenced prior to August 21, 2010, and is statute‑barred. As such, there is no genuine issue requiring a trial.

Factual Background

[3] The evidence can be briefly stated and is not disputed. Canaccord is an investment dealer. Roscoe was employed in Canaccord’s Ottawa office, initially as a trainee and, upon completing his training, as an investment advisor. He worked at Canaccord from September 1999 to August 2008 when he left the company to be employed by a competitor.

[4] After completing his training period, Roscoe became a registered securities representative and signed an employment contract with Canaccord (the “Employment Contract”). Under the terms of the Employment Contract, Roscoe agreed to indemnify or reimburse Canaccord for losses stemming from the employee’s client dealings. Article 5.02 of the Employment Contract provides as follows:

In the event that any claim is made against the Company or the Company is found vicariously liable or jointly or severally liable with the Registered Representative resulting from a claim made against the Registered Representative and/or the Company principally arising out of an act or omission of the Registered Representative within or without the course of his activities or employment, the Registered Representative shall be responsible for and shall indemnify, reimburse and save harmless the Company for all losses, damages or amounts due to any claimant and as well as e [sic] expenses or costs including legal fees reasonably incurred by the Company in defence of any claim or legal action arising from such act or omission. Such liability of the Registered Representative shall extend to indemnify and reimburse the Company as aforesaid whether or not such liability arises as a result of a judgment of a court of law, decision of an administrative body, an arbitration aware [sic] or a settlement reasonably made by the Company to avoid the necessity of a trial or hearing.

[5] It was the evidence of James Miller, the Vice-President of Compliance at Canaccord, that it is standard practice in the industry that registered securities advisors such as Roscoe are expected to compensate the dealer where they are registered for all losses resulting from their client dealings, including monies paid out when an unsatisfied client sues the securities dealer and/or the registered securities advisor in a civil action. In his experience this is a standard term of employment in the industry. In Canaccord’s case it is documented in all employment agreements entered into between Canaccord and its registered securities advisors. Mr. Miller has been a security industry professional for more than 25 years.

[6] On July 15, 2008, the Cavanaghs issued a statement of claim against Canaccord and Roscoe with respect to losses arising out of their investment in the Olympus hedge fund (the “Cavanagh Action”). The statement of claim was served on Roscoe and Canaccord on or about August 21, 2008. Canaccord retained Michael Donsky of Fogler Rubinoff LLP to defend it and Roscoe in the Cavanagh Action. Canaccord funded the entirety of the joint defence. At no time did Canaccord issue a cross-claim against Roscoe in the Cavanagh Action.

[7] The statement of defence put forward in the Cavanagh Action was lengthy and detailed. According to Miller, as Roscoe was the Canaccord employee who had all of the dealings with the Cavanaghs, Roscoe was the source of the facts and information put forward by way of defence in the statement of defence. According to Miller, it was always Canaccord’s and Roscoe’s mutual intention, and their litigation counsel’s advice, to present a unified front to the plaintiffs in the Cavanagh Action and not to point fingers at one another. Canaccord and Roscoe were represented by the same counsel. Under no circumstances would Canaccord have asserted a cross-motion against Roscoe in the Cavanagh Action.

[8] Roscoe attended a mediation in the Cavanagh Action with Miller on April 7, 2009. Settlement was not achieved at the mediation. Sometime after, in April or May 2009, Canaccord entered into settlement discussions with the Cavanaghs. On or about May 21, 2009, Roscoe retained a lawyer from Nelligan O’Brien Payne LLP, Robert Monti, who wrote a letter to Michael Donsky concerning the settlement arrangement with the Cavanaghs. In this letter counsel asserted:

(a) Canaccord should not require any contribution from Roscoe with respect to the settlement with the Cavanaghs;

(b) Roscoe disputed any future reliance by Canaccord on the indemnity provision contained in his alleged employment agreement;

(c) Roscoe did not relinquish any of the defences available to him for any future indemnification sought by Canaccord in relation to any settlement with the Cavanaghs.

[9] The last paragraph of the May 21, 2009 letter stated as follows:

But, as you have pointed out, not increasing the costs and the ultimate number that is paid to the plaintiffs (assuming for the moment that liability is likely as you have indicated) is in everyone’s best interests. In that context, Mr. Roscoe will provide instructions you are seeking with respect to the draft offer, on the explicit understanding as between Canaccord and Mr. Roscoe, that this instruction is without prejudice to any and all defences available to Mr. Roscoe as against Canaccord for any indemnification it may seek for the payment by Canaccord to the plaintiffs. The issues as to what responsibility should be borne by Mr. Roscoe and the amount of contribution/payment, if any, to be made by him remain to be determined later, either through negotiation or litigation/arbitration, if the defendants cannot agree through direct negotiation.

[10] According to Miller, Canaccord accepted and agreed with Roscoe’s position as set out in the above-quoted paragraph of the May 21, 2009 letter. Canaccord’s first priority was to deal with the Cavanagh Action and then approach Roscoe for his contribution pursuant to the Employment Agreement.

[11] Mr. Donsky continued settlement negotiations with the Cavanaghs’ counsel during the spring and summer of 2009. Agreement was reached to settle the Cavanagh Action on July 31, 2009 and settlement documents were executed as of that date.

[12] On January 15, 2010 Miller wrote to Roscoe requesting that he indemnify Canaccord in relation to the Cavanagh settlement. Roscoe retained Carole J. Browne as she then was of Borden Ladner Gervais LLP to respond to this demand letter. In her letter dated February 19, 2010, counsel set out Roscoe’s position that he was not liable to Canaccord for payment of the settlement funds or legal fees as sought.

[13] There was no further negotiation offered or proposed by Roscoe. Canaccord commenced its action against Roscoe on June 8, 2011. The following is set out at paragraphs 1 and 8-12 of the statement of claim:

1. The plaintiff claims the following relief:

(a) Damages for breach of contract in the amount of $383,670 as more particularly described below;

(b) Pre-judgment and post-judgment interest on the above sum, both in accordance with the provisions of the Court of Justice Act;

(c) Its costs of this action; and

(d) Such further and other relief as this Honourable Court may deem just.

8. The amount paid by Canaccord to settle the Cavanaghs’ Claim was $316,816 and Canaccord incurred legal fees of $66,854 in defending the Claim up to the time of settlement, for a total expenditure of $383,670.

9. Roscoe is liable to indemnify Canaccord for the amount it paid to settle the Cavanaghs’ Claim and for its legal fees pursuant to his Employment Agreement with Canaccord. The Employment Agreement specifically provides that Roscoe is required to “indemnify, reimburse and save harmless” Canaccord for all amounts paid to settle claims by Roscoe’s clients together with the legal fees reasonably incurred by Canaccord in relation to those claims.

10. In the alternative, it is an accepted custom and practice within the retail investment industry that investment advisors such as Roscoe indemnify their employer for moneys paid on the advisors’ behalf to compensate clients in circumstances such as those arising in the Cavanagh Claim.

11. Notwithstanding Canaccord’s demand that Roscoe honour his obligation to indemnify it for its legal fees and the amount which it paid to settle the Cavanagh Claim, Roscoe has neglected or refused to do so.

12. Roscoe is liable to Canaccord for the amount claimed in paragraph 1 hereof pursuant to the Employment Agreement between the parties or otherwise at law. Canaccord accordingly seeks judgment in accordance with paragraph 1 of the Statement of Claim.

Position of the Parties

[14] Counsel for Roscoe referred to the principles governing summary judgment set out in Combined Air Mechanical Services Inc. v. Flesh, 2011 ONCA 764, 108 O.R. (3d) 1 (“Combined Air”). It is the position of Roscoe that there is no genuine issue requiring a trial in this matter. The record is clear and vive voce evidence is unnecessary to determine the legal issue before this court.

[15] It is the submitted that the court must use a purposive approach to assessing Canaccord’s pleading. The true substance of this claim is a claim of indemnity. To characterize this as a breach of contract case is a formalistic approach. Counsel referred to sections 4, 5 and 18 of the Limitations Act. Section 18 of the Limitations Act specifically deals with the date that the acts upon which a claim for contribution and indemnity are based are discovered. A claim for contribution and indemnity, whether in tort or otherwise, now has a two year limitation period that runs 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. In support of its position, counsel referred to Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, 103 O.R. (3d) 81, (“Waterloo Region”), Wright v. Wal-Mart Canada Corp., 2010 ONSC 2936, [2010] O.J. No. 2206 (S.C.J.), (“Wright”), and Ipex Inc. v. Lubrizol Advanced Materials Canada Inc., 2012 ONSC 2717, [2012] O.J. No. 2218 (S.C.J.), (“Ipex”).

[16] Counsel for Canaccord submitted that Canaccord’s claim is a claim to remedy its losses suffered when Roscoe failed to fulfill his obligations under his Employment Contract. It is a claim for monetary damages for breach of contract and s. 18 of the Limitations Act does not apply to Canaccord’s claim. Counsel referred to sections 1, 4, and 5 of the Limitations Act and submitted that, applying the statutory language to this case, Canaccord had the right to be reimbursed by Roscoe pursuant to the Employment Contract when it settled the Cavanaghs’ claim and received no reimbursement from him. This occurred at the earliest on July 31, 2009, and at the latest in February 2010.

[17] It is submitted that s. 18 of the Limitations Act does not apply to Canaccord’s claim for breach of contract. The plain language of s. 18 restricts its application to claims made by one alleged wrongdoer against another. In Canaccord’s breach of contract claim, there is only one alleged wrongdoer – Roscoe. It is also noted that s. 18 refers to claims for contribution and indemnity. Here, Canaccord has not pleaded contribution. Further, s. 18 applies on its face to claims seeking contribution or indemnity, not to damages claim for breach of contract. Referring to case law, counsel submitted that contribution and indemnity claims are restitutionary claims based on unjust enrichment and are not claims for damages. Canaccord’s damage claim is fundamentally different at law than a claim for “contribution and indemnity” within the meaning of s. 18 of the Limitations Act.

The Law

[18] In accordance with Rule 20.04(2)(a) a court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim. The Court of Appeal in Combined Air recently set out the guiding principles to be applied with respect to motions for summary judgement.

[19] The Court noted three categories of cases that are amenable to summary judgment:

(a) Cases where the parties have agreed that a motion for summary judgement is the appropriate procedure to determine the action and the court is satisfied that it is appropriate to do so;

(b) Cases where the claim or defence is without merit and has no chance of success;

(c) Cases where the trial process is not required in the interest of justice. These are cases where a court can achieve a “full appreciation of the evidence” and thereby fairly and justly resolve the issues, exercising the powers in Rule 20.04 (2.1).

[20] The Court stated the following at paragraphs 51 and 52:

We think this “full appreciation test” provides a useful benchmark for deciding whether or not a trial is required in the interest of justice. In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the “interest of justice” requires a trial.

In contrast, in document-driven cases with limited testimonial evidence, a motion judge would be able to achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Similarly, the full appreciation test may be met in cases with limited contentious factual issues. The full appreciation test may also be met in cases where the record can be supplemented to the requisite degree at the motion judge's direction by hearing oral evidence on discrete issues.

[21] I turn now to the Limitations Act. Counsel referred to a number of sections in the Limitations Act which are set out below for ease of reference.

Definitions

1. In this Act,

“claim” means a claim to remedy an injury, loss or damage that occurred as a result of an act or omission; (“réclamation”)

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4.

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

Demand obligations

(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.

Same

(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004.

Contribution and indemnity

18. (1) 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.

Application

(2) Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.

[22] Section 18 of the Limitations Act was considered by the Court of Appeal in Waterloo Region, in the context of a summary judgment motion. A school board sued a number of defendants for work performed on a school gymnasium damaged in a severe storm. Truax, an engineering firm, appealed from the dismissal of its motion for summary dismissal of a cross-claim brought by CRD Construction. Truax had completed its work on the gymnasium in February 2003. The school board commenced a negligence action against CRD Construction and others in June 2008, long after the 12 month limitation period under the Professional Engineers Act, R.S.O. 1990, c. P. 28 had passed. CRD Construction and the other defendants brought cross-claims against Truax within two years of the school board commencing the action.

[23] The issue, as framed by the Court of Appeal was whether, under s. 18 of the Limitations Act, a person who has been sued for damages by a plaintiff and who wishes to bring a cross-claim against a concurrent tortfeasor for contribution and indemnity, may bring the claim at a time when the plaintiff’s claim against the concurrent tortfeasor is statute barred. The court reviewed the historical provisions of s. 8 of the Negligence Act, R.S.O. 1990, c. N. 1 and case law with respect thereto. It concluded that as a matter of statutory interpretation, reading the relevant sections of the Limitations Act, a claim for contribution and indemnity 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 give rise to its claim over.

[24] The court stated as follows at paragraphs 24 and 26-29:

Reading the relevant sections together, a claim for 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. This is the only limitation period in the Act that applies to claims for contribution and indemnity. The previous limitation period provision that applied where the plaintiff's limitation period against other concurrent tortfeasors had expired, s. 8 of the Negligence Act, is repealed by the Limitations Act, 2002.

If the court were to conclude that, despite the clear wording of s. 18, there is a further limitation period that applies to claims for contribution and indemnity against a concurrent tortfeasor in negligence, and that such claims must also be brought before the expiry of the limitation period applicable to the plaintiff's claim against that tortfeasor, the effect of a universal limitation period for contribution and indemnity claims in s. 18 would be abrogated and the clarity and efficacy of the section undermined. In its recent decision in Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19, [2010] 1 S.C.R. 649, the Supreme Court explained the streamlining purpose of Alberta's new limitations regime at para. 36:

The [Limitations] Act was intended to create a comprehensive and simplified limitations regime to replace the previous Limitation of Actions Act. ... As the Alberta Court of Appeal noted in Daniels v. Mitchell, 2005 ABCA 271 ... at para. 30:

[A] main purpose of the [Limitations Act] was the simplification of limitations law, by the imposition of one period (two years) for nearly all causes of action. ... [D]ebates in the Legislative Assembly repeatedly emphasized that the new legislation would simplify and clarify the system while eliminating inconsistencies and special treatment for certain defendants.

Thus, the purpose of the Act was to streamline the law of limitations by limiting the number of exceptions and providing a uniform limitation period for most actions. [Internal citations omitted.]

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 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).

Section 18 also signals that a defendant who wishes to claim contribution and indemnity should bring the claim not after judgment in the main action, but as part of it. Although in theory a defendant could commence a new action for contribution and indemnity within two years of being served with a statement of claim, the more likely procedure is to bring a cross-claim or third party proceeding in the main action. Even if a new action were commenced, one could envision that, for reasons of economy and efficiency, the actions would likely be joined and tried together.

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, and procedurally, it is contemplated that all claims arising out of the incident that caused the injury will be tried and disposed of together. Therefore, to the extent that a claim for contribution and indemnity may be brought beyond the limitation period that applied to the plaintiff's potential claim against a particular tortfeasor, the extension is minimized by the operation of s. 18 and any negative consequences to the tortfeasor by being brought into an action after he or she could have been sued by the plaintiff are minimized as well.

[25] The court concluded that the motions judge was correct to dismiss the appellant’s motion for summary judgment that sought dismissal before trial of the claim for contribution and indemnity. The cross-claims against Truax were brought within two years of service of the school board’s claim and were not statute-barred.

[26] Wright concerned the issue of apportionment, contribution and indemnity as between tortfeasors and costs. Ms. Wright was injured in a shopping mall. She made a claim against the owner of the shopping mall and others. Cross-claims were made by some of the defendants. One of the defendants, Magic, argued that the cross-claim brought by another defendant was statute-barred in that the defendant failed to plead its contractual right of indemnification under the janitorial contract. Pierce J. stated the following at paragraphs 338, 339, 342 and 343:

Both Ivanhoe and Paragon commenced their actions against Magic in a timely manner by delivering their respective Statements of Defence and cross-claims against Magic within two years after having been served with Ms. Wright's Statement of Claim. Because Ivanhoe was entitled to indemnification pursuant to the Negligence Act and properly pleaded its claim under that Act, it is immaterial that it did not also specifically plead its contractual right of indemnification under the Janitorial Contract.

In Paragon’s case, it pleaded its right to indemnification based on both Magic’s negligence and its breach of contract. Its right to recover its costs from Magic and its adherence to the limitation period are not dependent on its having characterized its costs as “damages” or on its having pleaded the indemnification clause in support of its right.

When section 18(2) of the Limitation Act, 2002 states that “subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise”, it is referring to the tort or contractual breach from which the loss, damages or costs arise in respect of which one wrongdoer claims contribution from another, not the source of legal entitlement to indemnification for them. Thus, the starting point, for purposes of the Act, of the time within which the claim must be made for contribution or indemnity, whether for damages or costs, is the date when Ms. Wright's Statement of Claim was received, not the date when knowledge of a contract providing for indemnification, or of the fact of an injury or loss covered by such a contract, is received. The contract is one fact, but not the only one, that the wrongdoer may rely on in support of its right to indemnification.

Magic's insistence on Ivanhoe and Paragon framing their claim for indemnification as one for “damages” is an invocation of more highly formal rules of pleading that once prevailed to frame claims within the exclusive jurisdiction of one court or another. The current approach is a purposive one which addresses the need for procedural fairness, informed by the defendant's need to know the claim being made against it in time to be able to prepare to meet it. In the present case, the failure of either Ivanhoe or Paragon to refer specifically to the indemnification clause in Magic’s contract with Ivanhoe in no way impaired Magic’s knowledge of the claim being asserted against it, the basis for it, or its ability to respond to it.

[27] In Ipex, the plaintiff manufacturer Ipex sued the defendant supplier for negligence and breach of contract after some of the plaintiff’s customers sued the plaintiff over product failure alleging that the raw material supplied was defective. The defendant sought summary judgment dismissing the action on the basis that the plaintiff’s claims under the 2002 supply agreement were statute-barred under the Limitations Act. The plaintiff commenced the action in October 2008. The defendant stated that the action was statute-barred because Ipex was aware in February 2006 that the claims and complaints that were being made about pre-2001 products could also be made about post 2001 products and that the plaintiff might have to sue the defendant. It submitted that the limitations clock started to run in February 2006.

[28] Belobaba J. stated the following at paragraphs 18-20:

There are two answers to this submission - one short, the other a bit longer.

The short answer is found in s. 18 of the Limitations Act, which deals with claims of contribution and indemnity, whether in tort “or otherwise.” The plaintiff's action, although based in contract and tort, is primarily a claim for indemnity. Section 18 makes clear that the limitation period begins to run on the day on which the first alleged wrongdoer (IPEX) was served with the claim in respect of which contribution and indemnity is sought. Here, the plaintiff was served with the Washington-based Jensen class action claim in the fall of 2007. In March, 2008 it determined that the piping in the Jensen residence was manufactured with post-2001 material supplied by the defendants. Seven months later, in October, 2008 it commenced this action. Even if the plaintiff should have come to this conclusion in the fall of 2007 when it was first served with the Jensen claim, the filing of this lawsuit a year later was not in breach of the limitations period.

The longer answer to LZAM's limitations argument goes to the core of limitations law and policy. LZAM argues that the two-year limitation period begins to run not when someone actually incurs a loss but when that person first realizes that he or she may incur a loss. In my view, this is contrary to the plain language of the Limitations Act.

Determination

[29] First, applying the principles set out in Combined Air, the present case is precisely the type of a case that is amenable to summary judgment. It is a case of statutory and contractual interpretation. The documentary evidence is limited and the facts are not disputed. Each party provided one affidavit. The affidavits were not lengthy. There was no cross-examination on the affidavits. The record is such that a motions judge can achieve a full appreciation of the evidence and the issues to make dispositive findings on the merits. The trial process is not required in this matter in the interest of justice.

[30] In my view, Canaccord’s action is an action for breach of Roscoe’s Employment Contract. It is not a claim for “contribution and indemnity” as between one wrongdoer and another. For the reasons which follow, I find that s. 18 of the Limitations Act has no application to this matter, that Canaccord’s action is not statute-barred and that this motion for summary judgment must fail.

[31] It is Roscoe’s position that in essence what is before the court is a claim for indemnity and that therefore s. 18 of the Limitations Act must apply. Counsel pointed to the language of Canaccord’s demand letter, dated January 15, 2010, which set out the settlement of the Cavanagh action, noted that Roscoe had agreed to “fully indemnify” Canaccord in the Employment Contract and requested that he pay the “Indemnity Amount”. Further, counsel asked this court to use a purposive approach in assessing Canaccord’s pleading. At paragraph 4 of the statement of claim the Cavanaghs’ are referenced. At paragraph 5, the Cavanagh Action is referenced. In addition, according to Roscoe, paragraphs 7-12 set out the true substance of the claim, a claim for indemnity. Paragraphs 9, 10 and 11 refer to Roscoe’s obligation to “indemnify”.

[32] It is a fact that the words “indemnity’ and “indemnification amount” have been used in the demand letter and the statement of claim. However, to focus simply on that language in the context of this case is simplistic and misconceived. It is the Employment Contract between Canaccord and Roscoe on which this claim is based. It is in that contract that Mr. Roscoe’s obligation to pay is grounded. The contract sets out Mr. Roscoe’s obligation to “indemnify, reimburse and save harmless”. That is the promise Mr. Roscoe made and the performance he must render. How else could Canaccord have framed its pleadings in this matter? The fact that the damages claimed are measured by the Cavanagh settlement amount does not conflate this matter into a claim for contribution and indemnity within the language of s. 18 of the Limitations Act.

[33] For ease of reference, article 5.02 of the Employment Contract is set out below with emphasis added:

In the event that any claim is made against the Company or the Company is found vicariously liable or jointly or severally liable with the Registered Representative resulting from a claim made against the Registered Representative and/or the Company principally arising out of an act or omission of the Registered Representative within or without the course of his activities or employment, the Registered Representative shall be responsible for and shall indemnify, reimburse and save harmless the Company for all losses, damages or amounts due to any claimant and as well as e [sic] expenses or costs including legal fees reasonably incurred by the Company in defence of any claim or legal action arising from such act or omission. Such liability of the Registered Representative shall extend to indemnify and reimburse the Company as aforesaid whether or not such liability arises as a result of a judgment of a court of law, decision of an administrative body, an arbitration aware [sic] or a settlement reasonably made by the Company to avoid the necessity of a trial or hearing.

[34] Under the Employment Contract, Roscoe’s obligation to reimburse Canaccord for the amount it pays out to compensate Roscoe’s clients arises only after, and as a result of the following occurrences: a judgment of a court of law; a decision of an administrative body, an arbitration award; or a settlement. The Cavanagh matter did not settle until July 31, 2010. That is the earliest date on which Mr. Roscoe’s performance obligation arises. It is only when the indemnity amount is known that the obligation crystallizes. Canaccord could not have sued Mr. Roscoe on this obligation to reimburse prior to July 31, 2010.

[35] It is submitted for Roscoe that Canaccord should have cross-claimed against Roscoe in the Cavanagh Action. Counsel pointed to Waterloo Region, supra, where it is stated that a defendant who wishes to claim contribution and indemnity should bring the claim not after judgment in the main action but as a part of it. Such an approach is completely disconnected from the clear language of article 5.02 of the Employment Contract, where contractual performance is only due after judgment is obtained (or settlement). How can Canaccord cross‑claim for a breach that has not yet happened and may never happen? How can damages be quantified for this “anticipated” breach? The presumptive discovery date provided for in s. 18 of the Limitations Act, that is, the day on which the first wrongdoer was served with the claim, could never apply to the Employment Contract.

[36] It is also to be noted that Canaccord did not plead contribution. As indicated in the January 15, 2010, demand letter and in the statement of claim, Canaccord is seeking to recover the full amount it paid in settlement to the Cavanaghs as well as the legal costs incurred, in accordance with article 5.02. A breach of contract claim for damages is fundamentally different at law from a claim for contribution and indemnity. A claim for contribution and indemnity involves two wrongdoers. A claim is served on one wrongdoer (X) by a plaintiff. That wrongdoer X wishes to claim contribution and indemnity from another wrongdoer (Y). X’s claim arises in respect of the plaintiff’s claim. X should cross-claim or third party Y (depending on whether Y has been sued by the plaintiff). This is the situation to which s. 18 of the Limitations Act speaks. In this case, the claim is based on a breach of the Employment Contract. There is only one wrongdoer in these circumstances: Roscoe.

[37] Section 18 on its face applies to claims seeking contribution and indemnity, not to damages claims for breach of contract. The case law has characterised contribution and indemnity claims generally as restitutionary claims based on unjust enrichment. In Ukrainian (Fort William) Credit Union Ltd. v. Nesbitt Burns Ltd. (1997), 1997 CanLII 1411 (ON CA), 36 O.R. (3d) 311 (C.A.), the Ontario Court of Appeal reviewed the case law and held that claims for contribution and indemnity are not claims for damages. The following is stated at paragraphs 20-29:

This brings me to the issue whether the third party claim is an action or other proceeding “for damages.” If it is, it is caught by s. 253(1), subject, of course, to the appellants' argument that s. 253(1) should not be given retrospective effect so as to bar actions based on pre March 1, 1995 events.

Contribution (which I think is essentially what it sought in Nesbitt's third party claim), falls generally under the broad ambit of the law of restitution. See The Law of Restitution, Peter D. Maddough, John D. McAmus, Canada Law Book at p. 189 and Dan B. Dobbs, Law of Remedies, Damages - Equity - Restitution, 2nd ed. Vol. 1, pp. 607-608.

The law of restitution provides an array of proprietary and non-proprietary remedies (including constructive trust, tracing, subrogation, the equitable lien and equitable accounting), all directed to remedying what would otherwise be unjust enrichment. See Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834; LAC Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574.

Contribution, in the context of Nesbitt's claim against DICO, would remedy the unjust enrichment that would accrue if Nesbitt were required to pay all of the Credit Union's claim, in circumstances where DICO was responsible for part of the loss. Requiring DICO to pay its share of the loss to Nesbitt, by the application of the restitutionary principles thus corrects what would otherwise be an unjust enrichment. All of this assumes that Nesbitt is liable to the Credit Union and that there is merit in Nesbitt's claim for contribution (or indemnity) from DICO. Who is liable to whom and for what will, of course have to be determined at trial.

What the substance of a claim for contribution is (and the difference between contribution and damages) has been considered in a number of cases. I will now review some of them.

Baker v. Grey Coach Lines, 1949 CanLII 291 (ON CA), [1949] 2 D.L.R. 238 (C.A.) provides a clear illustration of the difference between a judgment for "contribution" and a judgment for “damages”. In Baker, the question was whether a judgment on a claim for contribution and indemnity asserted by one defendant against a co-defendant, was a judgment for damages. In Baker there were two defendants and the plaintiff recovered judgment against both. As between the two defendants, liability was split on a 85-15% basis. The defendant against which the 85% finding of negligence was made paid the plaintiff's judgment in full. That defendant sought an order directing payment out of the Unsatisfied Judgment Fund of the amount for which the trial judge had held the co-defendant to be responsible (15% of the plaintiff's damages). The applicant defendant relied upon s. 93(b)(i) of the Highway Traffic Act R.S.O. 1937, c. 288 which provided that access to the Fund was available if the claimant recovered a “judgment for damages”, occasioned by a motor vehicle owned or operated by a judgment debtor in Ontario. To resolve the issue of the applicant's entitlement to be paid out of the Fund, the court had to consider whether the applicant defendant's judgment for contribution was a judgment for damages.

At p. 240, Roach J.A. clearly expressed the view that judgment for contribution was not a judgment for damages. He said:

The judgment referred to in s. 93(b)(i) of the Highway Traffic Act, is a judgment founded on a tort giving rise to a claim for damage. The claim of the appellant against its co-defendants is not one laid in damages. It is a claim for indemnification and contribution in respect of a debt, the debt being any judgment recovered against the appellant and its co-defendants by the plaintiff. The appellant therefore does not come within s. 93(b)(i) of the Act. [Emphasis added.]

It seems to me to follow from Baker that if a claim for contribution does not give rise to a judgment for damages, then the claim for contribution is not a claim for damages.

Gibson Co. Ct. J. considered the same question, in entirely different circumstances, in Italiano v. Tobias (1984), 1984 CanLII 1860 (ON SC), 45 O.R. (2d) 380. He followed the authority of Baker v. Grey Coach Lines Limited, supra, and concluded "the proceeding for indemnity is not an action for damages."

The distinction between a third party claim for contribution and indemnity and a plaintiff's claim for damages was considered by this court in Dorland v. Appollo Leasing (1981), 1981 CanLII 1767 (ON CA), 36 O.R. (2d) 16 (Ont. C.A.)..

[38] Canaccord commenced a claim for damages for breach of contract. The fact that Canaccord’s damages are measured by reference to the amount paid to the Cavanaghs plus legal fees does not convert the contract claim into a claim between wrongdoers for contribution and indemnity for the purposes of s. 18 of the Act.

[39] Roscoe has relied on the cases of Waterloo Region, Wright, and Ipex, in support of his position. However, while these cases generally consider the application of s. 18 of the Limitations Act, not one involved a factual context which included a contract for indemnity per se. The issue before the Court of Appeal in Waterloo Region was whether under s.18 of the Limitations Act, a person who has been sued for damages by a plaintiff and who wishes to bring a cross-claim against a concurrent tortfeasor for contribution and indemnity, may bring the claim at a time when the plaintiff’s claim against the concurrent tortfeasor is statute-barred. In Wright, Justice Pierce was faced with and rejected a formalistic approach and pleading. While Justice Belobaba commented in Ipex at paragraph 19, that “the plaintiff’s action, although based in contract and tort, is primarily a claim for indemnity”, the contract provision was not referenced in his reasons. Counsel for Roscoe noted that the supplier’s contract was appended to the decision in Ipex, but a close reading of that contract makes clear that the indemnity contained therein related to the supplier being indemnified by the plaintiff Ipex, not vice-versa.

[40] It appears that the issue before this court, that is whether a contract of indemnity is governed by s. 18 of the Limitations Act, has not yet been squarely considered by any court in this province. To accept the position of Roscoe would be to find that for all other types of contracts, a claim is discovered and the limitation period begins to commence in accordance with sections 1 and 5 of the Limitations Act, whereas for contracts of indemnity, a different limitation period would apply. This would run contrary to the purpose and intent of the Limitations Act, which was amended in 2002 to provide a simplified and uniform limitation period for most actions.

[41] In Wright, Pierce J. stated at paragraph 342:

When section 18(2) of the Limitation Act, 2002 states that “subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise”, it is referring to the tort or contractual breach from which the loss, damages or costs arise in respect of which one wrongdoer claims contribution from another, not the source of legal entitlement to indemnification for them... [Emphasis added.]

[42] I agree with the above comment. In a claim for contribution and indemnity, the “tort or otherwise” refers to the tort or contractual breach committed by the wrongdoers against the plaintiff (the Cavanaghs). In my view the words “or otherwise” in s. 18(2) do not create a different limitation period for contracts of indemnity. Clearer language than that contained in s. 18 would be required to treat contracts of indemnity differently from all other contracts for purposes of the application of the Limitations Act.

[43] In my view there is no ambiguity with respect to the interpretation of s. 18 of the Limitations Act. However, even if I concluded that s. 18 is amenable to two reasonable interpretations, Canaccord’s claim would be allowed to proceed. In Dundas v. Zurich Canada, 2012 ONCA 181, 109 O.R. (3d) 521 (C.A.), the following is stated at paragraph 40:

The courts have held that a limitation period, which by definition circumscribes the rights of action of the citizen, should be strictly interpreted and ambiguities “should be resolved in favour of the person whose rights are being truncated”: Berardinelli v. Ontario Housing Corp. (1978), 1978 CanLII 42 (SCC), [1979] 1 S.C.R. 275, (S.C.C.) at p. 280. To the extent the statutory conditions are capable of more than one reasonable interpretation, it is appropriate to adopt the least restrictive one.

[44] Finally, the interpretation that s. 18 does not apply to Canaccord’s claim for damages for breach of contract accords with the parties’ intention, understanding and behaviour in this matter. The Canaccord action exists in the context of an employer/employee relationship, where the employer Canaccord could be found vicariously liable for the actions of Roscoe. Canaccord retained counsel to defend it and Roscoe in the Cavanagh Action. It funded the entirety of the joint defence, which benefitted Roscoe. Moreover, as Roscoe was the Canaccord employee who had all the dealings with the Cavanaghs, he was the source of facts and information put forward in the statement of defence. It was the undisputed evidence of Miller that it was always Canaccord’s and Roscoe’s mutual intention, and their litigation counsel’s advice, to present a united front to the plaintiffs in the Cavanagh Action and not to point fingers at one another. This strategy benefitted both parties and was acceded to by both parties. Roscoe understood, as evidenced by the last paragraph of Mr. Monti’s May 21, 2009 letter, that the amount of contribution/payment, if any to be made by him, would be determined later in accordance with article 5.02 of his Employment Contract.

[45] In summary, I find that Canaccord’s action is an action for breach of Roscoe’s Employment Contract. It is not a claim for contribution and indemnity as between one wrongdoer and another that would attract the application of s. 18 of the Limitations Act. Applying the language of sections 1, 4 and 5 of the Limitations Act, Canaccord had the right to be reimbursed by Roscoe pursuant to the Employment Contract when it settled the Cavanagh claim on July 31, 2010. This is the earliest date from which the limitation period could run. Canaccord commenced this action on June 8, 2011, within the applicable limitation period. The motion for summary judgment is therefore dismissed.

[46] I did not hear submission from the parties with respect to costs. If they are unable to resolve same they are to provide brief written costs submissions and their costs outlines. Canaccord is to provide its submissions by November 7, 2012. Roscoe is to respond by November 21, 2012.

The Hon. Madam Justice Heidi Polowin

Released: October 19, 2012

COURT FILE NO.: 11-53253

DATE: 20121019

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CANACCORD CAPITAL CORPORATION

Plaintiff/Respondent

– and –

GREGORY ROSCOE

Defendant/Applicant

REASONS FOR DECISION

Polowin J.

Released: October 19, 2012