In the recent Ontario Court of Appeal decision of Huether v. Sharpe, [2025] O.J. No. 802, the court overturned the lower court's ruling and clarified the interpretation of a "continuous act or omission" under s. 15(6)(a) of the Limitations Act. This section provides an exception to the 15-year ultimate limitation period contained in s. 15(2).
Background
The respondents (plaintiffs), William Huether and Emily Huether, purchased a residential property in October 2021. Soon after, they discovered significant defects in the foundation of the dwelling on the property, which was constructed in 1987 by the original owner with a building permit issued by the Township of McMurrich Monteith in 1986.
The respondents commenced the action against the township, alleging it was negligent in supervising the construction of the dwelling and failed to conduct proper inspections, which resulted in the defects. The township moved for summary judgment on the basis that the claim was barred by the ultimate limitation period provided in s. 15(2) of the Limitations Act, as any alleged negligence occurred more than 30 years prior.
Central to the dispute was whether there was any ongoing act or omission on the part of the township, and specifically, whether it had properly closed the building permit in 1988 (i.e., rightly ceased its involvement with the property). The township's then-clerk and treasurer, Richard Gibb, testified that in the 1980s the township did not issue any document or formal declaration when a building permit was closed.
His evidence was that a building permit would be closed in two ways. First, after an inspector conducted a final inspection and confirmed that the construction complied with all applicable laws and regulations, the inspector would note this on the building permit. Second, if the construction was not in compliance, the inspector would issue a work order and the building permit would close by the inspector noting compliance on the work order.
In this case, documentation revealed that the township issued an order to comply in August 1986 that listed several violations. Although the order to comply had a handwritten note that stated "all complied with," it was unclear who wrote the note, when it was written or the basis for it. An important document was a treasurer's certificate, issued in February 1988, which confirmed that there were no outstanding work orders against the property.
While the treasurer's certificate may not have had the effect of formally closing the building permit, it was clear that after that point the township treated the permit as closed and no longer had any involvement in the construction of the dwelling. Further, there was no evidence showing that the dwelling underwent any further construction.
The motion judge's decision
The motion judge dismissed the township's motion and held that the ultimate limitation period had not expired by virtue of s. 15(6)(a) of the Limitations Act, as the township's negligence was continuous.
The motion judge's focus was that the building permit had not been properly closed because there was no evidence showing that the original owner provided notice to the township indicating that the construction had been completed, or that the chief building official carried out all inspections contemplated by the Ontario Building Code.
Relying on the Court of Appeal's decision Breen v. Lake of Bays (Township), [2022] O.J. No. 3862, the motion judge held that the township had a duty to "continuously monitor its open permit files and to follow up with the permit holder regarding the state of construction" until such time that the building was substantially completed and it satisfied the conditions for occupancy. The motion judge held that since the township had not taken these steps and formally closed the build permit, the township's duty to monitor remained in effect and its negligence was continuous.
Pursuant to s. 15(6)(a) of the Limitations Act, in the case of a "continuous act or omission," the 15- year ultimate limitation period does not commence until the day on which the act or omission ceases. Accordingly, the motion judge reasoned that since the township's duty to monitor the permit file remained in effect, its negligence never ceased and the ultimate limitation period had not expired.
The Court of Appeal decision
The Court of Appeal overturned the motion judge's decision and held that the motion judge erred in concluding that the alleged negligence was a "continuing act or omission." The court clarified that this requires "a repetition of actionable conduct on a continuous basis by a defendant."
The court noted that the central purpose of the enactment of the ultimate limitation period is to avoid litigation over latent defects in buildings constructed decades ago. The effect of the motion judge's decision is that no limitation period would apply to such proceedings. Homeowners could be justified in commencing a similar proceeding even 100 years from now on the basis that the township's failure to satisfy its duty to monitor constitutes a continuing act or omission. The court found that such a result would run directly in conflict with legislative intention.
In this case, the records were clear that the township had no role or involvement with the dwelling after February 1988 and treated the building permit as if it were closed. Whether the building permit file was actually closed or was mistakenly regarded as closed was irrelevant, because the township did not behave any differently as it viewed the file as dormant.
Further, even if the township had a duty to monitor open files, that alone was insufficient to toll the ultimate limitation period without some successive or repeated actionable conduct by the township. Therefore, the court allowed the appeal and held that the proceeding was barred by the ultimate limitation period as required by s. 15(2) of the Limitations Act.
In obiter, the Court of Appeal commented that the motion judge erred in concluding that the township had a duty to monitor open building permit files without conducting a duty of care analysis. The court found that such duty would be novel, and the established two-stage analysis must be undertaken to determine such duty in accordance with the framework provided in Anns v. Merton London Borough Council and Cooper v. Hobart, [2001] 3 S.C.R. 537. The Court of Appeal did not decide whether such duty would be appropriate in this case or in a future case, but it confirmed that a fulsome analysis must be conducted in order to recognize the duty.
Takeaways
This decision clarifies the correct approach to the interpretation of s. 15(6)(a) of the Limitations Act in relation to the 15-year ultimate limitation period. It is a significant decision for municipalities. The Court of Appeal confirmed that an intention of the section is to limit municipalities' exposure to lawsuits concerning long-term latent defects in building construction.
As the court declined to answer whether municipalities have an ongoing duty of care to monitor open building permit files, that is a question left for another day. However, it may be a best practice for municipalities to actively document the closure of building permit files in order to reduce the risk of this type of claim.
Originally published by Law360.
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