Third Party Claims and Attornment

The Court of Appeal’s decision in Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, describes what a defendant should do if it has a viable third party claim for contribution and indemnity, but wants to challenge whether Ontario is the appropriate forum for the main action.

When faced with a limitation period, the defendant may feel that it is in a conundrum because, by filing a defence and commencing a third party action, the defendant may be seen as attorning to the jurisdiction of the Ontario court.

The Court of Appeal held that a forum challenge does not postpone the running of the limitation period, noting that a forum challenge does not resolve the dispute between the parties but merely moves the dispute to a court in another jurisdiction.

The Court of Appeal stated that the defendant should have taken one of the following steps:

• It could have alerted the potential third party that the third party claim was coming and sought a stand-still agreement under s. 22(3) of the Limitations Act, 2002.
• If there was no stand-still agreement, the defendant could have sought an advance judicial determination that the third party claim would not amount to attornment.
• It could have served the third party claim with an express reservation of its rights, and then argued at its forum motion that it did so only to preserve the limitation period and, therefore, has not attorned to Ontario’s jurisdiction.

By not taking one of the above steps, the Court of Appeal ruled that the defendant’s third party claim was out of time.