Canada: The Time Limit For Making Claims

The Alberta Limitations Act¹ sets time limits within which a party may commence an action. After a limitation period has expired, potential defendants need no longer be concerned about stale claims haunting them because the claim will be time-barred. Subject to a few exceptions, if a court action or arbitration proceeding is not initiated before the earlier of:

(a) two years after the claimant knew, or ought to have known, that: (i) an injury occurred; (ii) the injury was attributable to the conduct of the defendant; and (iii) the injury, assuming liability on the part of the defendant, warrants commencing an action; or

(b) ten years after the claim arose.

then the claim is likely time-barred.²

The first rule in point (a) can be described as the Discovery Rule, in the sense that the two-year clock starts ticking not when the claim arises but when the claimant discovers it. For example, in Penhold (Town) v Boulder Contracting Ltd,³ although the allegedly defective work had been completed in September 2001, Master Laycock found that the claim had only been discovered when the town's engineer found and reported on the problem in June 2005, and therefore the limitation period only expired in June of 2007.

The ten-year period in (b) can be described as the Drop Dead Rule because it is an absolute time period that bars a claim if it is not brought within ten years after it arose, regardless of discovery. This Drop Dead Rule suffers from no exceptions except those outlined at section 3.1(1) of the Limitations Act, which concern various claims for sexual assault, misconduct, or battery and those outlined in sections 4, 5 and 5.1, which may pause the limitation period if the claimant is disabled or a minor, or if the defendant fraudulently conceals the injury that they caused. A striking example of the powerful effect of the Drop Dead Rule is Bowes v Edmonton (City),⁴ where a claim regarding homes which suddenly collapsed into the riverbank 12 years after they had been built was found to have expired two years prior to the collapse occurring.

The Limitations Act also permits parties to agree in writing to extend a limitation period, as is commonly done through what are referred to as "tolling agreements". However, the limitation periods set out in the Limitations Act cannot be shortened.⁵

Third Party and Contribution Claims

A defendant named in an action may wish to claim against another party, either because they believe the new defendant is the entity which is legally obligated to pay, or because they believe the new defendant shares responsibility for the damage caused. The Alberta Court of Appeal in Whitecourt Power Limited Partnership v Elliott Turbomachinery Canada Inc⁶ stated the common law rule that the two-year clock for contribution claims starts ticking "when the Defendant knew or ought to have known that the Third Party had a duty to contribute to any damages suffered by the Plaintiff, for which the Defendant might be held jointly liable with the proposed Third Party." Thus the Discovery Rule moves from focus on the plaintiff, in the original action, to the defendant. In essence, the defendant takes the role of plaintiff in regards to the third party.

The Limitations Act also provides specific limitation periods for contribution claims, where a new defendant is being sued by a defendant for statutory contribution under the Tort-Feasors Act.⁷ Section 3(1.1) of the Limitations Act sets out that the limitations period for a claim for contribution is the earlier of:

(a) two years after the later of, the date the original defendant was served with the statement of claim, and the date the date the original defendant knew or ought to have known that the new defendant was liable or would have been liable if sued,

(b) 10 years after the claim for contribution arose.

However, in 2013 the Court of Appeal in Arcelormittal Tubular Products Roman S.A. v Fluor Canada Ltd found that a claim under the Tort-Feasors Act was dependent on the limitation period of the plaintiff against the new third party defendant not having expired.⁸ So a third party defendant could not be held liable under the Tort-Feasors Act if they could show that the plaintiff had discovered its claim against it more than two years prior to when it was added to the claim.

Often the earliest that a claim against a new defendant can be discovered by an original defendant is the date that pleading was served on that original defendant. The effect of Arcelormittal was that defendants could lose their ability to seek contribution against a third party under the Tort-Feasors Act even before they knew they were a defendant themselves.

As a result, the Alberta Legislature amended the Limitations Act by adding subsection 3(1.2), which states that a contribution claim against a defendant in respect of damage referred to in the Tort‑Feasors Act is not barred by the expiry of a limitation period within which the plaintiff who suffered the damage could seek a remedial order.

The Court of Appeal in Whitecourt commented on the above sections of the Limitations Act as follows:

...subsection 1.1 creates a specific limitation period for tort-feasors' claims against each other, when previously the common law informed that issue. Subsection 1.2 clarifies that expiry of the limitation period as between the plaintiff and the third party no longer prevents the defendant from claiming contribution from another tort-feasor under the Tort-feasors Act. It gives the defendant two years from the later of the date served and discoverability to seek indemnity from other tort-feasors.⁹

Also of note is Rule 3.45 of the Alberta Rules of Court¹⁰ which states that a third party claim must be filed and served on the plaintiff and the third party defendant within six months of the original defendant filing a statement of defence. However, this six-month deadline is not absolute and a defendant may obtain a court order extending the time for filing a third party claim if such an order is justified in the circumstances.¹¹

New Parties added by a Plaintiff

Notwithstanding the time periods above, section 6(4) of the Limitations Act allows a plaintiff to bring in a new defendant to an action through a new or amended claim after the expiry of their limitation period when the following two criteria are met:

(a) The claimant must be able to demonstrate that the new claim is related to the events in the original pleading; and

(b) Within the limitation period (normally two years after discovery) plus the time for service (being one year), the new defendant must have received sufficient knowledge of the added claim, such that it would be not be prejudiced in maintaining a defence.

Stated differently, if a plaintiff wishes to add a new defendant to an already existing claim using section 6(4) of the Limitations Act, the plaintiff must be able to show that the new defendant is related to the original pleading and the new defendant must not be able to show that they did not receive sufficient knowledge/notice of the claim. Generally, sufficient knowledge of a claim would occur when the new defendant receives notice of the claim, either from the plaintiff's counsel or otherwise.¹² For example, in Condominium Corporation No 0213028 v HCI Architecture Inc.¹³ the case management judge found that the respondent obtained notice of the claim/sufficient knowledge when it received correspondence from the plaintiff's counsel of the claim. The defendant's sufficient knowledge of the claim must be received within three years of when the limitation period for the original pleading commenced, otherwise the plaintiff may be unable to add the new defendant to the action. Even without actual notice of the claim, courts in Alberta may impute knowledge of a claim upon a third party if the relationship between the original defendant and the new defendant is close. For example if there are overlapping directors or if the new defendant is a director and shareholder of the original defendant.¹⁴

Summary

As illustrated by Bowes, the current Limitations Act is effective in limiting exposure to long-term liability. Despite this, designers and construction companies doing business in Alberta need to be aware of the limitation periods for contribution claims and third party claims and how they differ from the standard limitation rules. It is possible to be added to a claim after the expiration of the plaintiff's two-year limitation period. The ten-year Drop Dead Rule, on the other hand, has very few exceptions and is not subject to discovery. The one-year time limit to serve a claim after it has been commenced should also be kept in mind. A claim against someone which was filed within the limitation period could exist even if they are not yet aware of it.

If doing business in Alberta, internal business practices should be monitored to ensure that the appropriate systems are in place to commence or respond to claims in a timely fashion before the limitation period expires, and to maintain records so that if a claim is brought you can defend the action.

Footnotes

1 Limitations Act RSA 2000, c L-12 [Limitations Act].

2 Note that the legislation focuses on when the claim is initiated, not when it is served on the other party(ies).

3 Penhold (Town) v Boulder Contracting Ltd, 2009 ABQB 550 (Alta. Master)  [Boulder].

4 Bowes v Edmonton (City) 2007 ABCA 347 [Bowes].

5 Limitations Act, supra, s. 7.

6 Whitecourt Power Limited Partnership v Elliot Turbomachinery Canada Inc, 2015 ABCA 252, para 32 [Whitecourt].

7 Tort-Feasors Act, RSA 2000, c T-5.

8 Arcelormittal Tubular Products Roman S.A. v Fluor Canada Ltd, 2013 ABCA 279, paras 33-34 [Arcelormittal].

9 Whitecourt, supra, para 36.

10 Alberta Rules of Court Alta Reg 124/2010.

11 As was the case in Whitecourt, see paras 50-55.

12 Condominium Corporation No 0213028 v HCI Architecture Inc., 2017 ABCA 375 [HCI Architecture Inc.].

13 Ibid, para 4.

14 Poff v Great Northern Data Supplies (AB) Ltd, 2015 ABQB 173 and 513320 Alberta Inc v Jean, 2015 ABQB 826.

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.