Citations [1986] 2 S.C.R. 147 Unanimous reasons by Le Dain J. | Docket No. 17753 Docket number 17,753 | |
 | ||
Full case name Central Trust Company v. Jack P. Rafuse and Franklyn W. Cordon Ruling Central Trust appeal dismissed. People also search for BG Checo International Ltd v British Columbia Hydro and Power Authority | ||
Central Trust Co v Rafuse, [1986] 2 S.C.R. 147 is a leading decision of the Supreme Court of Canada on liability of solicitors in negligence and breach of contract as well as the doctrine of discoverability under the Statute of Limitations.
Contents
Background
Jack Rafuse and Franklyn Cordon were solicitors hired by a company that had purchased the shares of Stonehouse Motel and Restaurant Limited. The agreement of sale required that the purchasers take out a mortgage on the property and use the assets used as part of the purchase price of the shares. The solicitors had been retained in order to complete the mortgage transaction.
Eight years later the creditor for the mortgage, Central Trust Co., initiated a foreclosure of the mortgage. The creditor, Irving Oil tried to prevent the foreclosure by claiming that the mortgage was invalid. The case went to the Supreme Court of Canada and in the decision of Central and Eastern Trust Co. v. Irving Oil Ltd., [1980] 2 S.C.R. 29 the mortgage was invalidated. Having lost the case, Central Trust brought an action against the lawyers for negligence and breach of contract.
In their defence Rafuse and Cordon claimed:
The issues before the Court were:
- Can a solicitor be liable to a client in tort as well as in contract for negligence in the performance of the professional services for which the solicitor has been retained?
- Were the respondent solicitors negligent in carrying out the mortgage transaction for the Nova Scotia Trust Company?
- Was there contributory negligence on the part of the Nova Scotia Trust Company or those for whom it was responsible?
- Is the appellant prevented from bringing its action because of the illegality of the mortgage?
- Is the appellant's action barred by The Statute of Limitations?
Reasons of the court
Justice LeDain wrote the reasons for the majority.
On the first issue he held that the duty in tort and in contract are two entirely separate duties and can be held concurrently by a defendant.
On the limitations issue it was held that the plaintiffs were not statute-barred from commencing an action. The commencement of the limitation period was postponed pursuant to the common law "discoverability principle": "A cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence."