In its recent decision in Boyd v. Cook, the Alberta Court of Appeal stressed the importance of limitation periods, the means by which to determine when the limitation period starts to run, and of the need to dismiss, at a preliminary stage of litigation, those actions which have been filed beyond the applicable limitation period.
The action arose out of a personal and professional relationship between the plaintiff Boyd and the defendant Cook. The two knew each other well. Mr. Boyd was educated, holding an engineering degree, and a sophisticated businessman with extensive experience in land development. Mr. Cook tried on numerous occasions to persuade Mr. Boyd to invest in a particular land development project, which Mr. Boyd refused repeatedly. Mr. Cook was, however, eventually able to induce Mr. Boyd to invest in shares in a mortgage company. However, unknown to Mr. Boyd, about 60% of those funds were later invested in the very land development project in which Mr. Boyd had previously refused to invest. That project became insolvent and it appeared that a large fraction of Mr. Boyd's funds were likely lost.
Mr. Boyd sued Mr. Cook on June 16, 2011. In turn, Mr. Cook brought an application seeking to have Mr. Boyd's claim summarily dismissed because it had been brought after the two year limitation period had expired.
Generally, in order for the Court to summarily dismiss an action due to a limitations issue, it must be "plain and obvious" that the claim is barred by the Limitations Act. Under s. 3(1)(a) of the Act, the two year limitation period only starts to run when the plaintiff knows (or in the circumstances ought to have known) all of the following: (i) that the plaintiff has sustained an injury; (ii) that the injury was attributable to the conduct of the defendant; and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding.
Master Hanebury dismissed Mr. Cook's application for summary dismissal, which was upheld on appeal to a Chambers Justice.
On further appeal, the Court of Appeal held that it was clear that Mr. Boyd knew, before June 16, 2009, that he had sustained an injury and that the injury was attributable to the conduct of Mr. Cook. Therefore, the appeal hinged on whether, by June 16, 2009, Mr. Boyd knew, or in the circumstances ought to have known, that the injury, assuming liability on the part of Mr. Boyd, warranted bringing a proceeding.
The Court of Appeal reversed the decision and summarily dismissed Mr. Boyd's action on the basis that it had been commenced beyond the expiration of the limitation period.
The Court of Appeal began by emphasizing the importance of limitation periods, stating at paragraph 4:
...Limitations statutes exist for a purpose. They are not mere tidiness, nor a trick to give defendants windfalls or bargaining points. Limitations legislation, so-called "statutes of repose" exist to give some certainty in their lives to all those who may at some time be sued. That is not only true of businesses and professional people, but also ordinary citizens who can ill afford the mental and emotional stress of threats or lawsuits. It is a nuisance and an expense to have to keep voluminous records in perpetuity. Allowing large potential threats to hang over heads for a generation sterilizes capital and impoverishes businesses. What is worse, it is unjust to sue people once their former ability to defend themselves has evaporated...
Turning to the merits of the particular case, the Court of Appeal then underscored that, under s. 3(1)(a)(iii) of the Limitations Act, all the plaintiff had to know, or in the circumstances ought to have known, is that the injury warranted suing. Liability, on the other hand, is not something that the plaintiff had to know; it is assumed.
Mr. Boyd argued, and the evidence showed that, by June 2009, he 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 of Appeal did acknowledge that there may be a number of factors which might make a lawsuit unwarranted, such as where the lawsuit is, or appears to be, uneconomical – namely, where the costs of bringing the action are likely to exceed the likely recovery.
At the same time, however, the Court noted that the legal test is not whether the plaintiff actually knew that the situation warranted suing. Rather, the test involves two branches: whether the plaintiff knew or whether in the circumstances the plaintiff ought to have known that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding.
In addition, while the test is largely objective, as signaled by the words "ought to have known", the Court affirmed that there is also a small objective element – the "circumstances" require an assessment of the knowledge and interests of the particular plaintiff. In short, the test is that of the reasonable person in the same circumstances.
As a result of the subjective component of the test, the Court focused on the particular knowledge and circumstances of Mr. Boyd, including the fact that he was an experienced, knowledgeable and sophisticated businessman. In these circumstances, the Court found that Mr. Boyd had ample information, prior to June 16, 2009, to allow him to determine that the amounts likely lost would be large enough to warrant suing.
The Court of Appeal's decision in Boyd is important to both claimants and defendants alike. For those considering filing an action, the following points are key from the decision:
- To determine whether an action is statute barred, the Court will look not only into what a reasonable person ought to have known, but also into the plaintiff's particular circumstances. In Boyd, the Court of Appeal's decision turned on the particular knowledge and expertise of Mr. Boyd. Had Mr. Boyd been inexperienced in business, or unsophisticated, the result would have likely been different.
- The Court of Appeal has clearly signaled that plaintiffs cannot avoid a limitations defence by arguing that they were unclear on exactly how much their claim was worth - such certainty is not necessary. Rather, potential claimants are expected to determine whether the likely recovery exceeds the potential litigation costs and, therefore, warrants bringing an action.
- Where the expiry date of a limitation period is in doubt, potential claimants should err on the side of caution and file a Statement of Claim to preserve their rights and to avoid a limitations defence and the potential of having their claim summarily dismissed.
- While not addressed in the Boyd decision, not all types of actions are governed by the Limitations Act, but rather by other statutes which impose much shorter limitation periods. Potential claimants should speak with legal counsel to determine which limitation period applies to their particular matter.
The Boyd decision is equally important to defendants named in a lawsuit. The Court of Appeal has clearly emphasized the significance of limitation periods and has reaffirmed that Courts should be prepared to deal with limitations issues and, in appropriate cases, summarily dismiss statute barred actions at the preliminary stages of litigation.
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.