Canada: The New Limitation Act: Some Key Issues For Commercial Litigation

Last Updated: June 19 2013
Article by Gordon A. Buck

OVERVIEW OF THE NEW LIMITATION ACT

The new Limitation Act came into force on June 1st, 2013.  The new Act contains a number of substantive changes from the existing regime. Highlighted below are four key changes that are likely to have an impact on commercial litigation matters, as well as a brief summary of transition rules that will apply.

KEY CONSIDERATIONS FOR COMMERCIAL LITIGATORS

1. New 2-year basic limitation period

All actions are now subject to a 2-year basic limitation period from the discovery of the claim. Judgments are still subject to a 10-year limitation period for enforcement. Certain types of claims are exempted from the 2-year limitation period (for example, claims to redeem or realize collateral, claims for possession of land, limitation periods established under other enactments).

Of particular interest are new specific provisions with respect to the limitation periods that apply to demand promissory notes. Under the old Act, time started to run from the making of the note.  Now, a claim for a demand obligation is deemed discovered on the first day that there is a failure to perform the obligation after a demand for performance has been made.

Under the old Act, most commercial litigation matters (for example, actions for breach of contract, actions in debt, claims for unjust enrichment, or claims for negligent misrepresentation) were generally subject to a six-year limitation period.  The new, shorter limitation period means that claims will have to be dealt with and, if necessary, litigation commenced, much more quickly than in the past.  In many cases, individuals and corporations will not have the luxury of taking a "wait and see" approach to most claims.

2. New 15-year ultimate limitation period

A new 15-year ultimate limitation period applies to bar all claims once 15 years have passed from the event giving rise to the claim (subject to postponement for minors, wilful concealment, etc). Note that this time starts to run from when the original act or omission takes place, regardless of whether damage has occurred.

This change could have considerable implications for cases where an act or omission has occurred but the actual damage does not materialize until many years later - for example, in cases involving inherent construction defects. We anticipate that there may be considerable litigation over how this provision is to be interpreted, since a claimant could potentially lose a cause of action where the act occurred more than fifteen years prior to the damage materializing.

3. Discoverability rules

The clock on the 2-year limitation period starts to run from the date the claim is discovered.  As was the case under the old Act, there is still a subjective/objective test which applies to determine when a claim is deemed to be 'discovered', but with new language.  The clock starts to run when the person knew or ought reasonably to have known that:

  • Injury, loss or damage occurred;
  • The injury, loss or damage was caused or contributed to by an act or omission;
  • The act or omission was that of the person against whom the claim may be made; and,
  • Having regard to the nature of the injury, loss or damage, a Court proceeding would be an appropriate means to remedy the injury, loss or damage.

All four elements have to be established for the clock to start running. Under the language used in the Act, time arguably does not begin to run until damages have actually crystallized, which could be some time after the act or omission causing the damage occurred. One should not therefore assume that since two years have passed since a particular act or omission, any claim in relation to that act may be statute-barred.  Corporations will want to ensure that their document retention policies account for the possibility that the running of limitation periods may be postponed.

4. Limitation on claims for contribution and indemnity

This is a significant change from the old Act, which had no references to limitations on contribution and indemnity.  The B.C. Court of Appeal confirmed in OSP LMS 1751 v. Scott Management Ltd. et al., 2010 BCCA 192, that a defendant could wait until after judgment had been taken against them to commence an action for contribution and indemnity.

Under the new Act, no action for contribution and indemnity can be commenced after two years have passed from the later of:

  • When the claiming party was served with the pleadings commencing the claim against it; or,
  • When the claiming party knew or reasonably ought to have known it had a claim for contribution and indemnity.

Transition Rules

The new Act contains a number of transition provisions which govern whether the new or the old Act will apply.  The key point is when the claim was discovered.  If the event giving rise to the claim occurred and was discovered before June 1st, 2013, the old limitation periods still apply.  If the event giving rise to the claim occurred before June 1st, 2013 but is discovered after June 1st, 2013, the new limitation periods apply.  If the event giving rise to the claim occurs after June 1st, 2013, the new limitation periods will apply.

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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Gordon A. Buck
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