The New Limitations Act: Key Changes And What You Need To Know (FULL VERSION) - Insolvency/Bankruptcy

The Limitations Act, SM 2021, c 44 (the "New Act") repeals and replaces the current legislation, The Limitations of Actions Act, CCSM c L150 (the "Old Act").

The New Act comes into force on September 30, 2022 and brings Manitoba in line with other provinces' legislation on limitation periods.

OVERVIEW

This article will outline 11 of the major changes in the New Act with reference to how these changes compare with the provisions of the Old Act. Those changes are summarized as follows:

The Old Act provided for limitation periods ranging from 1 to 10 years. The New Act replaces those with a limitation period of 2 years for most claims.
The 2 year limitation period under the New Act begins to run from the day the claim is discovered, not when the cause of action arose, as was the case for most claims under the Old Act.
Limitation periods under the Old Act generally prevailed over other acts, subject to certain exceptions. If a provision of the New Act is inconsistent with a provision of another Act, that other Act prevails.
The ultimate limitation period has been shortened from 30 years to 15 years under the New Act, subject to certain exceptions.
Under the New Act, a limitation period does not run during any time a stay of proceedings is in effect under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or the Farm Debt Mediation Act (Canada).
Certain assaults (sexual assaults or assaults where the claimant had an intimate relationship with the alleged assaulter or certain dependency on the alleged assaulter) continue to have no limitation period. However, the New Act broadens the language from "an action for assault" to "a claim relating to "an assault as described above as well as adds five other situations where the ultimate limitation period does not apply.
The complex provisions relating to charges on land under the Old Act have been done away with and these claims appear to now be caught by the 2 year basic limitation period under the New Act.
However, claims to recover possession of land are not subject to the 2 year basic limitation period under the New Act, but rather a period of 15 years.
The New Act contains more detailed provisions relating to the acknowledgement of debts and what is required to restart the limitation period.
The New Act specifically provides for the amendment of pleadings despite the expiry of a limitation period if certain conditions are met.
The New Act explicitly provides that the basic limitation period of 2 years may be extended, but not shortened, in writing. However, the ultimate limitation period of 15 years cannot be extended.

Importantly, proceedings commenced under the Old Act will still be governed by the Old Act. However, if a claim is discovered before September 30, 2022, and a proceeding is not commenced, then a proceeding must be commenced before the earlier of:

2 years after the New Act comes into force; and
the day the limitation period under the Old Act expires or would expire.

BASIC LIMITATION PERIOD

Under section 2(1) of the Old Act, specific causes of actions had differing limitation periods ranging from 1 to 10 years. The limitation period for any other action not specifically provided for in the Old Act was 6 years after the cause of action arose.

Under section 6(1) of the New Act, unless provided for elsewhere in the New Act, a proceeding must not be commenced more than 2 years after the day the claim was discovered. This change arguably simplifies limitation periods in Manitoba and brings limitation periods in line with the other provinces in Canada.

DISCOVERY PRINCIPLE

The discovery principle was only relevant in the Old Act under Part II, where a claimant could apply to extend the limitation period within one year after discovering the cause of action if the applicable limitation period had already expired. Otherwise, limitation periods under the Old Act were governed generally by when the cause of action arose, not when the cause of action was discovered.

The New Act relies on the discovery principle to determine when a limitation period begins to run. The discovery principle is present in several other provinces' limitation legislation. The test for when a claim is discovered is covered under section 7 of the New Act, which provides that a claim is discovered on the day the claimant first knew or ought to have known all of the following:

that injury, loss or damage has occurred;
that the injury, loss or damage was caused by or contributed to by an act or omission;
that the act or omission was that of a person against whom the claim is or may be made; and
that, given the nature and circumstances of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

The Supreme Court of Canada in Grant Thornton LLP v New Brunswick, 2021 SCC 31, recently addressed the test for discoverability in the context of New Brunswick legislation, which contains the same first three steps of the test under the New Act above.¹ The SCC stated that in order to trigger the running of a limitation period, a claimant needs to have a "plausible inference" of liability on the part of the defendant. This plausible inference of liability requires more than mere speculation, and less than certainty of liability.² However, suspicion on the part of the claimant may trigger a requirement to investigate further.³ Further, a claimant need not know the exact extent or type of harm if has suffered, or the precise cause of its injury, in order for a limitation period to run.⁴

Subsection 7(d) of the New Act is unique to some provinces.⁵ Courts have frequently held that this requirement does not relate to a plaintiff's subjective understanding of the law. However, s. 7(d) may apply in two scenarios: 1) where the plaintiff relies on ameliorative efforts by a defendant, particularly if the defendant has superior knowledge or expertise, or 2) where an Alternative Dispute Resolution process has been invoked, and not exhausted. This is because in these scenarios, the claimant may not know, or ought to have known, that a proceeding would be an appropriate means to seek a remedy. Further, where damages are trivial, a limitation period may not start to run as a prudent plaintiff would not bring an action yet.

Section 8 expands on 7(a) by outlining when the day an injury, loss or damage occurs in certain circumstances:

in the case of a continuous act or omission, the day the act or omission ceases;
in the case of a series of acts or omissions respecting the same obligation, the day the last act or omission in the series occurs;
in the case of a claim to realize on collateral under a security agreement, the day the default first occurs;
in the case of a claim to redeem collateral under a security agreement, the day the creditor takes possession of the collateral;
in the case of a default in performing a demand obligation, the day the default occurs, once a demand for performance is made;
in the case of a claim for contribution or indemnity by one alleged wrongdoer against another, the day the liability of the claimant, in relation to the matter for which contribution or indemnity is sought, is confirmed by a court judgment, arbitration award or settlement agreement.

RELATIONSHIP TO OTHER ACTS

Limitation periods under the Old Act generally prevailed over limitation periods set out in other acts, unless the limitation period was contained in one of the acts listed in the Schedule attached to the Old Act.⁶

Section 4 of the New Act states that if a provision of the New Act is inconsistent or in conflict with a provision of another Act, the provision of the other Act prevails. However, certain provisions with respect to the suspension of limitation periods under the New Act prevail over other Acts.⁷

ULTIMATE LIMITATION PERIOD

Under section 14(4) of the Old Act, an action could not be brought or continued more than 30 years after the occurrence of the acts/omissions that gave rise to the cause of action.

Under section 10(1) of the New Act, even if the basic limitation period has not expired, a proceeding must not be commenced more than 15 years after the day the act/omission on which the claim is based took place.

CLARIFIES WHEN AN ACT/OMISSION TAKES PLACE

Section 11(1) of the New Act provides that for the purposes of section 10, an act or omission on which a claim is based takes place as follows:

in the case of a continuous act or omission, the day the act or omission ceases;
in the case of a series of acts or omission respecting the same obligation, the day the last act or omission in the series occurs;
in the case of a claim to realize on collateral under a security agreement, the day the default first occurs;
in the case of a claim to redeem collateral under a security agreement, the day the creditor takes possession of the collateral;
in the case of a default in performing a demand obligation, the day the default occurs, once a demand for performance is made;
in the case of a claim for contribution or indemnity by one alleged wrongdoer against another, the day the claimant, in relation to the matter for which contribution or indemnity is sought,
- is served with a claim or with a notice that commences an arbitration, or
- incurs a liability through a settlement agreement;
in the case of a claim arising out of the conversion or wrongful detention of personal property, the day the property was first converted or wrongfully detained by any person.

EXCEPTIONS TO ULTIMATE LIMITATION PERIODS

The only exceptions to the ultimate limitation period under the Old Act were for actions grounded on accident, mistake, or other equitable ground of relief, or actions grounded on fraudulent misrepresentation, where the action is brought by or for a person who is or has been under a disability.⁸

The New Act contains two exceptions to the ultimate limitation period, one which increases the ultimate limitation period and one which decreases the ultimate limitation period.

Under subsection 10(2) of the New Act, the limitation period for proceedings respecting existing Aboriginal and treaty rights or equitable claims by an Aboriginal people against the Crown is 30 years from the day the act or omission on which the claim is based took place.

Under subsection 10(3) of the New Act, the limitation period for claims arising out of the conversion or wrongful detention of person property (where the defendant is a purchaser for value in good faith) is 2 years after the day the defendant purchased the property. The claimant must also have recovered possession of the property within those 2 years, otherwise the claimant's title to the property is extinguished.

SUSPENSION OF ULTIMATE LIMITATION PERIOD

There were no suspensions of the ultimate limitation periods provided for in the Old Act. However, section 5 of the Old Act provided that where the existence of a cause of action had been concealed by fraud, the cause of action was deemed to have arisen when the fraud was first known or discovered.

Under section 17 of the New Act, the ultimate limitation period and the limitation period under section 19 (discussed below) does not run during any time that a defendant:

wilfully conceals from the claimant the fact that an injury, loss or damage has occurred, that it was caused by or contributed to by an act or omission, or that the act or omission was that of the defendant; or
wilfully misleads the claimant as to the appropriateness of a proceeding as a means of remedying the injury, loss or damage.

SUSPENSION OF LIMITATION PERIOD (GENERALLY)

Sections 13 and 14 of the New Act provide that limitation periods do not run during the time the claimant is a minor or any time the claimant is a person under a disability (an adult incapable of commencing a proceeding because of physical, mental of psychological condition). This was comparable to sections 7 and 8 under the Old Act. Under section 15 of the New Act, a potential defendant may end the suspension by giving a notice to proceed, which must contain, among other things, a clear statement of the facts on which the claim may arise and a warning that the limitation period begins to run on the date the notice is given.

In addition, under section 25 of the New Act, a limitation period does not run during any time a stay of proceedings is in effect under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or the Farm Debt Mediation Act (Canada). This is somewhat similar to section 61 of the Old Act, which provided that the period during which proceedings are stayed and the period during which a debtor is not in default under a contract or judgment as affected by a proposal binding upon the debtor and their creditors under the Farmers' Creditors Arrangement Act (Canada) shall not be included in the calculation of time.

NO LIMITATION PERIODS

Under section 2.1(2) of the Old Act, there was no limitation period for actions for assault if:

the assault was of a sexual nature; or
at the time of the assault, the person commencing the action:
- had an intimate relationship with the alleged assaulter; or
- was financially, emotionally, physically or otherwise dependent on the alleged assaulter.

Section 18 of the New Act confirms the above two exceptions, and broadens the language to "a claim relating to" the above assaults rather than "an action for assault". Section 18 of the New Act also adds the following as having no limitation period:

a claim to recover possession of land, except as provided in section 19;
a claim by a debtor in possession of collateral that is personal property to redeem it;
a claim by a creditor in possession of collateral that is personal property to realize on it;
a claim to recover money owing to the Crown respecting taxes, fines or penalties, or interest on any of them;
a claim brought by the Crown relating to
- the administration of social, health, educational or economic programs, or
- the provision of direct or indirect support to members of the public in connection with social, health, educational or economic policy.

Section 18(3) of the New Act provides that clauses (1)(b) and (b) (relating to assaults) operate to revive a claimant's right to commence a proceeding if a proceeding brought by the claimant before the New Act came into force was dismissed for the sole reason that a limitation period that had previously applied had expired.

CHARGES ON LAND

The Old Act contained numerous complex provisions relating to charges on land, including mortgages, and the recovery of land. Under the New Act, a significant number of these provisions have been removed and those remaining have been simplified. Under the Old Act, the limitation period to make a claim for the recovery of money secured by a mortgage or otherwise was 10 years. Given that there are no specific provisions relating to charges on land in the New Act, the assumption is that these will be caught under the 2 year basic limitation period under the New Act.

RECOVERY OF LAND

Under section 19 of the New Act, claims to recover possession of land are not subject to the 2 year basic limitation period. These claims cannot be commenced after the defendant (and any of the defendant's predecessors) have dispossessed the claimant (and any of the claimant's predecessors) for a continuous period of 15 years.⁹

Once the limitation period expires, the claimant's right or title to the land is extinguished.

ACKNOWLEDGEMENT OF LIABILITY

Under section 9 of the Old Act, the limitation period was extended by another 6 years any time the debtor: (i) promised to pay the debt; (ii) the debtor gave written acknowledgment to pay the debt; or (iii) where the debtor made part payment of the debt.

Section 20 of the New Act contains more detailed provisions on the acknowledgment of debts and what is required.

Under section 20(1), if, prior to a limitation period expiring, a defendant acknowledges the right, title, liability or obligation to which the claim relates, the limitation period restarts from the time of the acknowledgment. This applies regardless of whether the defendant making the acknowledgment refuses or does not promise to pay the debt owing¹⁰.

Section 20(2) sets out the requirements for an acknowledgment to be valid:

It must be made to the claimant, the claimant's agent or an official receiver or trustee acting under the Bankruptcy and Insolvency Act (Canada).
It must be in writing and signed by the defendant making it or the defendant's agent, unless the acknowledgment is of a kind described in subsection (3) or rule 2 or 3 of subsection (6).
It must be made before the limitation period that applies to the claim expires.

Under section 20(3), a partial payment of a debt has the same effect as an acknowledgment under subsection (1).

Under section 20(5), if a defendant acknowledges liability respecting a claim for interest, this is also an acknowledgment of liability respecting a claim for any outstanding principal and any interest that becomes due after the acknowledgment was made.

Section 20(6) sets out the following rules that apply for acknowledgments made in relation to a security agreement:

An acknowledgment of liability respecting a claim to realize on or redeem collateral under a security agreement (or to recover money in relation to the collateral), if made by a person in possession of the collateral, is an acknowledgment of liability respecting the claim by any other person who later comes into possession of the collateral.
A debtor's payment or performance of an obligation under a security agreement is an acknowledgment by the debtor of liability respecting a claim by the creditor to realize on the collateral under the agreement.
A creditor's acceptance of a debtor's payment or performance of an obligation under a security agreement is an acknowledgment by the creditor of liability respecting a claim by the debtor to redeem the collateral under the agreement.

AMENDMENTS OF PLEADINGS

The Old Act did not contain any provisions relating to the amendment of pleadings. However, the case law suggests that where special circumstances existed, pleadings could be amended, after the expiration of a limitation, under Queen's Bench Rule 5 or Rule 26 without resorting to a Part II application under the Old Act.¹¹.

Under section 22 of the New Act, a judge may permit pleadings to be amended despite the expiry of a limitation period if certain conditions are met:

the claim added by the amendment, or the claim by or against the new party, arises out of the same transaction or occurrence as the original claim; and
the judge is satisfied that no party will suffer actual prejudice as a result of the amendment that cannot be compensated for by costs or an adjournment.

NON-JUDICIAL REMEDIES

The limitation periods contained in the New Act are not exclusive to court proceedings and apply equally to non-judicial remedies, defined as "a remedy that a person is entitled, by law or by contract, to exercise respecting a claim without court proceedings."¹² This would include security enforcement by lenders such as commencing mortgage proceedings with the Land Titles Office.

EXTENDING THE LIMITATION PERIOD

While the Old Act did not contain a provision regarding extending a limitation period in writing, nothing prevented parties from entering into tolling agreements to suspend the running of limitation periods.

Section 24 of the New Act now explicitly provides that a limitation period may be extended in writing after the New Act comes into force. However, the ultimate limitation period under the New Act may not be extended by agreement. Interestingly, section 24 of New Act states that a limitation period may not be shortened in writing after the New Act comes into force.

TRANSITIONAL PROVISIONS

The New Act contains the following transitional provisions that are important to be aware of.

Under section 29, the Old Act applies to any proceedings commenced under the Old Act.

Under section 30, no proceeding can be commenced under the New Act respecting a claim if the limitation period that applied under the Old Act expired before the coming into force of the New Act.

Under subsection 31(3), if a claim was discovered before the coming into force of the New Act, and a proceeding was not commenced before the coming into force of the New Act, then a proceeding may be commenced if it is commenced before the earlier of:

2 years after the New Act comes into force; and
the day the limitation period under the Old Act expires or would expire.

Under section 31(4), if a claim is discovered after the New Act comes into force, the New Act applies as if the act/omission on which the claim is based occurred on the day the New Act comes into force (being September 30, 2022).

The transitional provisions could create a possible problem where:

a claim is discovered before the New Act comes into force;
the limitation period under the Old Act has expired; and
no application under Part II of the Old Act is commenced.

Section 30 of the New Act states, "no proceeding shall be commenced under [the New Act] respecting a claim if the limitation period that applied under [the Old Act] expired before the coming into force of [the New Act]." Under Part II of the Old Act, a claimant could bring an application to extend the limitation period if the limitation period expired and not more than 12 months had passed since the claimant knew, or ought to have known, all the materials facts upon which the claim is based. However, if a claimant does not commence a Part II application under the Old Act before the New Act comes into force, arguably that limitation period has expired and section 30 of the New Act applies, which could prevent a claimant from bringing a claim. While it is unclear how the Courts will interpret these transitional provisions, it would be prudent for claimants to commence an application under Part II of the Old Act where the claim is discovered before the New Act comes into force and the limitation period under the Old Act has expired.

CONCLUSION

The New Act represents a significant and much needed overhaul of the Old Act. The New Act provides for a basic limitation period of 2 years, which begins to run from the day the claim is discovered. The ultimate limitation period in the New Act is shortened from 30 years to 15 years, subject to certain exceptions. While a limitation period can be extended (but not reduced) in writing under the New Act, the ultimate limitation period of 15 years cannot be extended. Limitation periods under the New Act do not run during certain times, including during any time a stay of proceedings is in effect under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or the Farm Debt Mediation Act (Canada). Under the New Act, claims to recover possession of land will be subject to a limitation period of 15 years and claims relating to charges on land appear to now be caught under the basic limitation period of 2 years. The New Act now specifically provides for the amendment of pleadings despite the expiry of a limitation period if certain conditions are met.

In order to avoid possible problems, it will be important for counsel and parties to familiarize themselves with the applicable limitation periods under the New Act, and the transitional provisions to determine whether the Old Act or New Act will apply.

Footnotes

1. The New Brunswick legislation just does not have the condition that "given the nature and circumstances of the injury, loss or damage, [the claimant knew or ought to have known] a proceeding would be an appropriate means to seek to remedy it.

2. Grant Thornton LLP v New Brunswick, 2021 SCC 31, at para 46.

3. Ibid at para 44.

4. Ibid at para 46.

5. See e.g. this provision contained in the Saskatchewan, British Columbia, and Ontario legislation, however the wording in those statutes varies.

6. See s. 4 of Old Act.

7. See s. 4(1)(a), 13 and 14(1) of New Act.

8. Old Act, ss. 7(5), 7.1, 2(1)(j), 2(1)(k).

9. See subsections 19(4),(5) and (6) for additional provisions on the recovery of lands and specifics of when dispossession is considered to have begun.

10. See subsection 20(4).

11. See e.g. Abas Auto Inc. v Superior General Partner Inc., 2019 MBQB 46.

12. See subsections 23(1) and (2).

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.

Canada: The New Limitations Act: Key Changes And What You Need To Know (FULL VERSION)