Canada: Alberta Court of Appeal Clarifies and Reaffirms Limitations Act

The recent trend in Alberta litigation has been to avoid making difficult decisions relating to limitation issues at the early stages of litigation. As a result, there has been a general judicial reluctance to permit summary dismissal applications on the basis that claims are statute barred under the Alberta Limitations Act. In its recent decision in Boyd v. Cook, the Alberta Court of Appeal decisively rejects the current trend and reaffirms the importance of limitation periods and the importance of dealing with limitation issues at a preliminary stage in the proceedings.

In Boyd v. Cook, the defendant sought summary dismissal of the plaintiff's claim on the basis that it was brought after the limitation period expired. The action arose from an investment Boyd made in shares of a mortgage company, under Cook's inducement. Unbeknownst to Boyd, the mortgage company invested most of its funds in a land development that Boyd repeatedly refused to personally invest in. The mortgage company became seriously insolvent, and Boyd lost a substantial portion of his invested funds. Between March and early June 2009, Boyd discovered that he was indirectly investing in the oft-rejected land development, and made attempts to limit his losses. Being unable to recover his investment, Boyd filed a claim against Cook in June 2011.

Master Hanebury dismissed Cook's application for summary dismissal, which decision was upheld by the chambers justice. In reversing the two lower court decisions, the Court of Appeal began its decision with an authoritative "first principles" reminder on the role and importance of limitation periods. According to the Court: "Limitations statutes exist for a purpose. They are not mere tidiness, nor a trick to give defendants a windfall or bargaining points. Limitations legislation exists to give some certainty in their lives to all those who may at some time be sued". In addition, the Court condemned attempts to compromise limitation goals or adopt hybrid approaches to limitations. The Court also emphasized the importance of deciding limitations issues at an early stage, rather than simply deferring them to trial.

Under the Alberta Limitations Act, the general two-year limitation period is based on the rule of discoverability. The time period, for purposes of ascertaining when to file a claim, commences from the date on which the claimant knew or ought to have known that: (1) the injury occurred; (2) the injury was attributable to the defendant's conduct; and (3) that the injury warranted bringing a proceeding.

The sole issue before the Alberta Court of Appeal was whether by June 2009, Boyd knew (or ought to have known) that the injury warranted bringing a proceeding. The evidence disclosed that by June 2009, Boyd was aware that he was likely going to lose money as a result of Cook's conduct, but he was unsure as to exactly how much. The Court noted that one reason for not commencing a proceeding is that the costs of litigation may exceed any recovery. In determining whether a claim warranted bringing a proceeding, the Court introduced a subjective element into the otherwise objective test of "ought to have known". As a result, the Court focussed on the knowledge and circumstances of Boyd, in particular the fact that he was a sophisticated, knowledgeable and wealthy businessman. In the circumstances, the Court found that there was enough information prior to the commencement of the action for Boyd to calculate that the amounts lost would be large enough to sue for. The Court held that Boyd was required to, and more than capable of (due to his extensive business experience) estimating his net investment loss in determining whether the injury warranted bringing a proceeding.

In addition, the Court recognized that the cost of running a suit may be uncertain, however, this uncertainty was alleviated by the unilateral ability to discontinue the proceedings until a very late stage. Accordingly, the Court allowed the appeal and dismissed the action as statute barred.

The Court's decision makes it clear that the subjective element does matter when determining limitations. The Court relied heavily on the knowledge and status of Boyd in arriving at its decision. If Boyd were an unsophisticated party, the result likely would have been different. More importantly, the decision requires plaintiffs to engage in a cost-benefit analysis to determine if an injury warrants bringing a proceeding. If it appears that a potential recovery exceeds the costs of the litigation, that may be sufficient to warrant bringing proceedings. Finally, the decision is an important reminder that when in doubt, claimants should file a statement of claim to preserve the limitation period and, if necessary, simply discontinue at a later stage in the proceedings (without serious cost consequences).

The decision in Boyd reaffirms the significance of limitation periods, how they operate and the importance of dealing with those issues at a preliminary stage in the proceedings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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