Canada: Alberta Court Of Appeal Expands Availability Of Equitable Limitations Defence

In a recent decision, Weatherford Canada Partnership v. Artemis Kautschuk und Kunstoff-Technik GmbH (Weatherford), the Alberta Court of Appeal (Court) upheld the dismissal of the plaintiff's claim against two defendants on the basis of the equitable limitations defence of laches.

Historically, laches has been used as a defence to late-brought equitable causes of action and remedies, to which statutes of limitations and repose typically did not apply. Whereas statutes of limitations and repose are concerned only with the passage of time between damage and the filing of a suit, the doctrine of laches focuses on the reasonableness of a plaintiff's delay in bringing suit. In Weatherford, however, the plaintiff's claim against the two defendants involved both equitable and common law causes of action and remedies. Accordingly, the Court's ruling in Weatherford may lead to the wider use of laches as a defence.

LACHES AND LIMITATIONS STATUTES

A court may dismiss a claim because of laches if it would be unjust to permit a plaintiff to pursue its claim against a defendant because the plaintiff acted in a way that waived its rights or caused the defendant to change its position. In that regard, laches is associated with the maxim of equity, "Equity aids the vigilant, not those who sleep on their rights."

Laches was developed because statutes of limitation and repose typically did not apply to equitable causes of action and remedies (e.g., injunction, breach of fiduciary duty, declaratory relief, specific performance, accounting, rescission, etc.). Alberta, like many other Canadian provinces, has reformed its limitations statute to apply to both common law and equitable causes of action and remedies. Alberta's reformed limitations statute (the Limitations Act) provides that courts may apply equitable limitations defences even if the claim was filed within the limitations period stipulated by the Limitations Act. The limitations statutes of British Columbia, Saskatchewan, Manitoba, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories, and Nunavut have similar provisions. Nevertheless, even following the reform of limitations legislation, Canadian courts have continued to apply laches to equitable, not common law, causes of action and remedies.

WEATHERFORD CASE

In Weatherford, Weatherford Canada Partnership (Plaintiff) alleged that two of its employees quit to establish a competing business. The Plaintiff initially sued those employees and a number of people and corporations involved in the competing business. The Plaintiff later successfully applied to add two suppliers to the competing business, Artemis Kautschuk Und Kunstoff-Technik GmbH and Wilhelm Kaechele GmbH (Suppliers), as defendants. The Plaintiff alleged that the Suppliers had used the Plaintiff's confidential information to provide components to the competing business that were identical to the components that the Suppliers had been providing to the Plaintiff. The Plaintiff's claim against the Suppliers included both common law and equitable causes of action and remedies.

The Suppliers applied for summary dismissal of the Plaintiff's claims against them, arguing that the claims were limitations-barred. The chambers justice held that the Plaintiff's claims against the Suppliers were filed after the limitation period stipulated by the Limitations Act expired, but were not barred by the Limitations Act because section 6(4) of the Limitations Act applied. Pursuant to section 6(4) of the Limitations Act, new defendants may be added to existing actions after the limitations period has expired if the claims against the added defendants are related to the original claim and the added defendants received notice of the claim within a specified time.

The chambers justice nevertheless dismissed the Plaintiff's claims against the Suppliers on the basis of laches, holding that laches applied notwithstanding that the Plaintiff's claims involved both common law and equitable causes of action and remedies. The chambers justice stated that in Alberta "acquiescence and laches apply to legal [common law] as well as to equitable claims." Because the Plaintiff had deliberately delayed suing the Suppliers for business reasons, the chambers justice held that it would be inequitable to allow the Plaintiff to pursue its claim against the Suppliers.

The Court upheld the chambers justice's decision to dismiss the Plaintiff's claims on the basis of laches, but specifically declined to rule on whether laches may also apply to purely common law causes of action and remedies. The Court concluded that it was unnecessary to rule on this point, as it determined that the Plaintiff's common law causes of action and remedies were inextricable from the equitable causes of action and remedies.

IMPLICATIONS FOR LITIGANTS

Weatherford opens the door for litigants to raise laches as a full defence to claims involving inextricably bound equitable and common law causes of action and remedies. It remains to be seen whether Canadian courts will fully renounce the distinction between common law and equitable causes of action and remedies and permit the use of laches to claims involving only common law causes of action and remedies.

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