Executive Summary: Key Legal and Evidentiary Issues

• At issue is whether filing a notice of application for leave to file a third-party notice — rather than filing the third-party notice itself — is sufficient to stop the running of the limitation period under s. 22(2) of the Limitation Act, S.B.C. 2012, c. 13.
   
• Oldcastle Building Products Canada Inc. dba Oldcastle Building Envelope filed a third-party notice against Division 8 Consulting Corp. claiming contribution and indemnity, but did so after the applicable two-year limitation period had expired.
   
• Central to the appeal is the statutory interpretation of the phrase "to commence a court proceeding" in s. 22(2), specifically whether a notice of application constitutes commencement of a third-party claim.
   
• The chambers judge set aside the third-party notice on the basis that only the filing of a third-party notice — not a notice of application for leave — commences a third-party proceeding under the Limitation Act.
   
• Relevant procedural complications included a Covid-19 limitation period suspension (March 26, 2020 to March 25, 2021) and a tolling agreement between the parties that extended the deadline to the earlier of the hearing date or September 30, 2021.
   
• Binding appellate authority — specifically Sohal CA (2021 BCCA 40) and Neale Engineering Ltd. v. Ross Land Mushroom Farm Ltd. (2023 BCCA 429) — confirmed that a third-party notice is an originating process and its filing is what commences the court proceeding for limitation purposes.

Facts of the case

The underlying action arose from allegations of deficiencies and defects in the construction of a building, with claims of negligence and breach of contract advanced against multiple defendants including Oldcastle Building Products Canada Inc. dba Oldcastle Building Envelope. Division 8 Consulting Corp. was a subcontractor retained for engineering and design work that the plaintiffs alleged was deficient and attributable to Oldcastle. On August 14, 2018, Oldcastle was served with the plaintiffs' notice of civil claim — the date from which the two-year limitation period for contribution and indemnity claims began to run under ss. 6(1), 16, and 22(2) of the Limitation Act. Oldcastle filed its response to the civil claim on July 20, 2020, and filed the first of two applications for leave to file a third-party notice against Division 8 and several others on July 23, 2020. That first application, as it related to Division 8, was dismissed with liberty to apply again on a revised proposed third-party notice.

Oldcastle's second application was filed on March 2, 2021, but was not heard until September 9, 2021. Limitation periods in British Columbia had been suspended for one year between March 26, 2020 and March 25, 2021 due to the Covid-19 pandemic. Prior to the hearing, Division 8 asserted the limitation period for filing a third-party notice would expire on August 12, 2021. The parties signed a tolling agreement extending the limitation period to the earlier of: (1) the date of the hearing; or (2) September 30, 2021. The application was granted on September 16, 2021, but the parties disagreed about the form of order. Division 8 proposed a resolution to the impasse on November 16, 2021, but Oldcastle did not respond. On June 28, 2022, Division 8 wrote to Oldcastle indicating no third-party notice had been filed and the limitation period had expired. On July 15, 2022, Oldcastle advised Division 8 that a third-party notice had been filed against it on June 14, 2022. Division 8 subsequently applied to strike or set aside the third-party notice on the basis that the limitation period had expired.

Statutory provisions at issue

The Limitation Act, S.B.C. 2012, c. 13 provides the framework governing the dispute. Section 6(1) sets out the basic two-year limitation period, providing that a court proceeding in respect of a claim must not be commenced more than two years after the day on which the claim is discovered. Section 16 contains the specific discovery rule for contribution or indemnity claims, providing that such a claim is discovered on the later of: (a) the day on which the claimant is served with a pleading in respect of the claim on which the contribution or indemnity claim is based; or (b) the first day on which the claimant knew or reasonably ought to have known that a contribution or indemnity claim may be made. Section 22(2) removes the right "to commence a court proceeding" for contribution or indemnity under s. 22(1)(b) — which would otherwise permit a related third-party proceeding despite the expiry of the limitation period — once the applicable limitation period has expired. The term "court proceeding" is not defined in the Act, but "limitation period" and "claim" are defined in s. 1.

Reasoning and analysis

The central question on appeal was whether the chambers judge correctly interpreted "to commence a court proceeding" in s. 22(2) as requiring the filing of a third-party notice, rather than a notice of application for leave to file one. Applying the modern principle of statutory interpretation — requiring statutory words to be read in their entire context, in their grammatical and ordinary sense, harmoniously with the scheme and object of the Act — the Court of Appeal agreed with the chambers judge.

Oldcastle argued that the judge's interpretation was too narrow and inconsistent with existing case law, and that it created uncertainty by exposing defendants to the risk of missing limitation deadlines due to scheduling delays and other procedural complexities outside their control. Oldcastle relied principally on Sumas Remediation Services Inc. v. Crowe MacKay LLP (21 February 2020, Vancouver S169817, B.C.S.C. in Chambers), which had interpreted Sohal v. Lezama, 2019 BCSC 1709 (Sohal SC) as standing for the proposition that filing an application for leave stops the limitation period. The Court of Appeal found that Sumas could not be reconciled with the subsequent guidance in Sohal CA (2021 BCCA 40) and Neale Engineering Ltd. v. Ross Land Mushroom Farm Ltd., 2023 BCCA 429.

In Sohal CA, Justice Grauer confirmed that "court proceeding" encompasses originating processes, and that a third-party notice falls within the definition of an "originating pleading" under R. 1-1 of the Supreme Court Civil Rules, B.C. Reg. 168/2009, as a document that "starts a proceeding." A notice of application, by contrast, is not an originating pleading and does not commence a court proceeding. Justice Willcock's analysis in Neale, writing for a five-member division, reinforced this conclusion by identifying the intent and purpose of the discovery provision in s. 16 as requiring defendants to address potential third-party claims early in the litigation and to initiate proceedings within the limitation period to preserve any right to contribution or indemnity.

The Court further rejected Oldcastle's concern that the interpretation created unfairness, noting that a defendant wishing to preserve the limitation period always has the practical option of filing a separate notice of civil claim for contribution or indemnity. Any multiplicity of proceedings could then be addressed by discontinuing the separate action once leave to file a third-party notice is granted, or by consenting to an order that the two actions be heard together — a practice found to be common since the Limitation Act came into force in 2013. The Court also dismissed Oldcastle's alternative argument that the hearing date for the leave application, or the pronouncement of the order granting leave, should be treated as the relevant date for limitation purposes, finding that this argument could not succeed given the correct interpretation of s. 22(2).

Ruling and outcome

The Court of Appeal dismissed the appeal. Justice Fleming, writing for the court with Justices Winteringham and Edelmann concurring, affirmed the chambers judge's conclusion that filing a third-party notice — not a notice of application for leave to file — commences a third-party claim for contribution or indemnity and stops the running of the limitation period under s. 22(2) of the Limitation Act. Division 8 Consulting Corp. was the successful party. No monetary award, damages, or costs amount is stated in the decision.