The New Limitations Act
By Sean Sullivan

What are Limitations Periods?

Generally, an individual or corporation cannot delay indefinitely in taking steps to enforce their legal rights. Limitations periods indicate how long a person has to commence legal action to address a certain wrong. The general rule is that if a person waits until after the expiration of the applicable limitation period, he or she is barred from commencing a court proceeding to address the wrongdoing.

In the past, the length of the limitation period depended on the cause of action alleged or the identity of the Defendant. For example, a Plaintiff had 6 years to bring an action for negligence. However, if the Defendant was an engineer, the Plaintiff only had 1 year to commence his or her claim. The numerous different limitations periods detailed in various statutes resulted in confusion and occasionally a prospective Plaintiff would inadvertently miss a limitation period and therefore be unable to advance a legitimate claim.

The New Act

The new Limitations Act, which came into force in January 2004, seeks to address this problem. The New Act provides broad sweeping reforms to the existing law regarding limitations periods.  It applies to all claims and court proceedings except where the Act has expressly stated otherwise.

The Basic and Ultimate Limitation Period

A claimant now has two years to bring a claim from the date that the claim was discovered. This is called the "Basic Limitation Period". A "claim" is defined in the Act as a "claim to remedy an injury, loss or damage that occurred as a result of an act or omission". It is presumed that a claim is discovered on the date it occurred but it is possible for a claimant to demonstrate otherwise.

However, if a claimant has not commenced legal proceedings after 15 years from the date that an event occurred, even if the claim has not been discovered, the claimant loses his or her right of action. This is called the "Ultimate Limitation Period". For example, if a purchaser buys a machine in January 2004 but does not discover a defect that existed at the time of purchase until January 2019, the purchaser cannot bring a claim.

Stopping or Resetting the Clock

There are exceptions in the Act for when the limitations period begins to run (i.e.; special rules apply for minors, the disabled and assault victims). In addition, the clock does not run during the period of time when parties are attempting to resolve a dispute with the assistance of a mediator, arbitrator or other independent third party. It is also possible for a debtor to start the clock running afresh by acknowledging in writing to a creditor that he or she owes the money. The 2-year limitation period runs anew from the date of the written acknowledgement.

Contracting out of a Limitation Period

It is no longer possible to contract out of a limitation period. This provision of the Act will have profound implications for commercial agreements. For example, if a contract stipulates that a party cannot bring a claim against another party after 1 year from the date the contract is signed or after 3 years, in either case, the clause will be unenforceable as it is a violation of the Limitations Act. It is unclear what effect this provision will have on so called "survival" clauses in contracts.

Don’t Worry about Claims and Contracts before January 2004!

For all causes of action or contracts arising or entered into before the new Limitations Act came into force in January 2004, the old limitations rules still apply.

Conclusion

This article is meant to provide only a very brief and cursory summary of the new limitations regime. For specific questions, it is recommended that the reader review the act or consult with a legal professional.  

The Commercial Litigation Group at Gowling Lafleur Henderson´s offers specialized areas of practice including: commercial contract claims, banking litigation, shareholder and partnership disputes, claims against Directors and Officers, Professional liability claims, product liability and product recall claims, technology litigation and more.

Sean Sullivan is an Associate with Gowling Lafleur Henderson LLP in Waterloo Region. He can be reached by email at sean.sullivan@gowlings.com or by phone at (519) 575-7515.