Estate Planning

Hughes v. Kennedy Automation Limited: due diligence and discoverability under the Limitations Act, 2002

By Hull & Hull LLP

The Ontario Court of Appeals recently affirmed the decision of Mr. Justice Glithero to refuse a motion to add a solicitor and his law firm as a defendant party to a proceeding for breach of contract, because the claim was discoverable more than two years prior to the motion.

In Hughes v. Kennedy Automation Limited, 2008 ONCA 770, the plaintiffs were suing the defendant for non-payment under a purchase and sale agreement for shares.  The purchase and sale agreement had been drafted by the defendant corporation's solicitor; the plaintiffs had not retained their own lawyer to act for them in the share sale transaction.   The plaintiffs became aware of the original non-payment on July 31, 2005.  However, the plaintiffs waited until November 2006 to retain their own lawyer to sue the defendant. 

In November 2007, the plaintiffs brought a motion to add the defendant's solicitor and his law firm, for breach of fiduciary duty and negligence.  The plaintiffs were alleging that the solicitor acted in a conflict of interest and failed to recommend they seek independant legal advice.  The motions judge ruled that the claim against the solicitor and his law firm were barred by the two-year limitation in section 4 of the Limitations Act, 2002.  On the evidence before him, Glithero J. was satisfied that the identity of the solicitor and his law firm, the facts surrounding his involvement and the fact of non-payment were all known to the plaintiffs by July 31, 2005.  Therefore the presumption in section 5(2) of the Limitations Act, 2002 applied to make the claim discoverable by that time, more than two years before the November 2007 motion to add the solicitor and his law firm.   The Ontario Court of Appeals affirmed this decision.

Enjoy your vacation,

Chris Graham

Full post as published by Toronto Estate Law Blog on December 24, 2008 (boomark / email).