Discoverability and Professional Relationships

Recently, in Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, the Court of Appeal again addressed the discoverability doctrine within the scope of professional relationships. This decision is likely to have significant implications in cases involving professional negligence.

The facts of the Presidential MSH Corporation (Presidential) case were relatively straightforward. Presidential retained the defendant accountants to file its income taxes, which they were late doing. This error resulted in Presidential suffering damages totalling approximately $550,000.00.

From a timeline perspective, Presidential received notice from the CRA that it’s claim was disallowed on April 12, 2010. Shortly thereafter, it retained a tax lawyer to determine how to remedy the error (though there was no evidence a claim against the defendant accountants was suggested). The lawyer filed a Notice of Objection, and the defendants continued to help Presidential attempt to address the issue until at least November 2011. In the interim, the CRA informed Presidential that it had confirmed its assessment on July 7, 2011. Presidential brought suit against its accountants the following year on August 1, 2012. The defendants argued that the action was barred by the Limitations Act, 2002 S.O. 2002, c. 24, Sched B. While the defendants prevailed on that argument in front of the motions Judge, that ruling was overturned by the Court of Appeal.

In so doing, the Court of Appeal noted that legal action may not be appropriate (i.e. that the limitations period does not begin) where a claim arises out of professional negligence, but such negligence may be resolved by the professional fixing the mistake themselves. The Court further noted that resort to legal action may be inappropriate where the plaintiff is relying upon the superior knowledge and skill of the defendant, and that in the context of legal malpractice, a number of cases indicate that a claim is not discovered until a party is advised by another legal professional about the claim.

The Court of Appeal further noted that it may not be appropriate to bring a claim where other processes are in place that could resolve the claim. In support thereof, it cited the Lipson v. Cassels Brock & Blackwell LLP, 2013 ONCA 165 case. In Lipsom, the defendant law firm provided an opinion (in 2004) to 900 taxpaxers to the effect that certain donations were likely entitled to tax credits. The CRA challenged such deductions in 2004, though the matter was not resolved through litigation until 2008. Thereafter, in 2009, suit was brought against the defendant law firm, which also pled a limitations defence. In dismissing the firm’s limitation defence, the Court of appeal held that the taxpayers could not know of the claim until 2008, when the underlying dispute with the CRA had been resolved.

This case illustrates that it will be increasingly difficult for professionals to hide behind limitations defences commencing before the termination of professional relationship and/or the exhaustion of alternative processes.

At Michael’s Law Firm in Hamilton and Toronto, ON, we offer legal assistance for several forms of professional negligence including Insurance Broker Professional Negligence, Legal Malpractice Negligence, and Investment Adviser/Broker Negligence.

If you have suffered from professional negligence and incurred substantial damages, call us today at 647-495-8995 to speak with one of our lawyers today.

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