Keep Your Client Out Of Litigation: British Columbia Courts Rule Expiry of Limitation Period is an Absolute Bar to Commencing Third Party Proceedings

Opposing the addition of your client as a new third party defendant to existing litigation can be a daunting task, and one that has, historically, had a low prospect of success. Until recently, the exercise of the court’s discretion to grant or deny leave to add a third party to an existing action in British Columbia has been exercised based on a multi-factor analysis, with none of the factors – including the expiry of a statutory limitation period – determinative of the outcome of the application.

In June 2013, the new Limitation Act, SBC 2012, c. 13 came into force in British Columbia, and the rules of the game changed. Unlike its predecessor, the new Limitation Act contains provisions specifically dealing with the timing of third party claims and claims for contribution and indemnity. In the intervening years, the court’s application of these new rules has varied from case to case, creating confusion for counsel and their clients.

It has taken more than five years, but these new provisions have recently received judicial consideration at the appellate level in Sohal v Lezama et al., 2019 BCSC 1709 (“Sohal“). Based on the decision of Mr. Justice Kent, Sohal stands for the proposition that the expiry of the 2-year limitation period under the Limitation Act is no longer just one of an number of factors in the court’s analysis – instead, the expiry of the limitation period now constitutes an absolute bar to commencing third party proceedings in British Columbia.

Sohal involves a claim for personal injury arising from an motor vehicle accident that occurred in October 2012. The Notice of Civil Claim was filed two years after the date of the accident, and the Defendants, Graham Lezama and Enterprise Rent-A-Car, jointly filed a Response to Civil Claim in April 2016. That Response contained information regarding the identity of a new party, PFM Productions Inc., that may have shared in liability for the accident. As a result, PFM was added as a defendant to the action. Later, in May of 2018, Enterprise applied to add PFM as a third party, but significantly more than two years had elapsed since Enterprise had “discovered” that it had a potential claim against PFM. In other words, the limitation period for commencing a third party claim against PFM had expired.

At paragraph 55 of Sohal, Mr. Justice Kent framed the question before the court in the following terms:

“What exactly is the effect of s. 22(2) of the new Limitation Act upon a proposed third party proceeding for contribution under the Negligence Act if the limitation period for such a contribution claim has otherwise expired?”

As it turns out, the case law that had developed since the new Limitation Act came into force was split almost evenly between authorities that stand for the principle that the court retains discretion to grant leave to commence third party proceedings despite the expiry of a limitation period, and other authorities that treat the expiry of a limitation period as an absolute bar to adding a new third party.

On review of the competing case law, the legislative debates, and various publications of the Ministry of Justice, Justice Kent determined that the intent of the legislature was to remove any discretion to overcome the expiry of a limitation period. At paragraph 74, he directs the court to approach an application to add a third party as follows:

• if it is clear the limitation period has expired, the application under Rule 3-5(4) to issue a Third Party Notice beyond the 42-day time limit must be dismissed;
• if it is clear the limitation period has not expired, the court may exercise its discretion under Rule 3-5(4) taking into to account the well-established factors for the exercise of that discretion; and
• if the parties disagree as to whether the limitation period has expired, and the court is unable to determine this issue on the leave application, the court should consider the factors for the exercise of its discretion under Rule 3-5(4), and if it is otherwise inclined to grant leave, direct that the merits of the limitation defence be decided in the third party proceedings on a more fulsome evidentiary platform.

From these authors’ perspectives, the clarity that the Sohal decision brings to what has otherwise been a particularly murky area of the law is a welcome development; however, the implications of this decision are far-reaching and may fundamentally alter defence counsels’ litigation strategies, especially in complex, multi-party proceedings.

In the wake of this decision, counsel should act proactively by taking steps early in the litigation to avoid a situation where proceedings cannot be commenced against a new liability target, and counsel resisting an application to add their client as a third party after the expiry of a limitation period now stand on firm ground in their defence of that application.

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