Legal Blog

Limitations

You all know the usual limitation periods: six years for contract and tort, no limitation for breach of trust. Gone. As of January 1, 2004, there is a new Limitations Act.

It did not take long to change the old Act. It was modelled after English statutes enacted in 1588 and 1888 and was subject to efforts to bring it up to date starting in 1969. Bills to effect changes to the old Act were tabled in 1983, 1992, and 2000. None of these Bills were enacted. Finally, the legislature enacted Bill 213 in November 2002 for proclamation at the start of 2004.

New Era 

The standard limitation period for all actions (that are of interest to you) is now two years from the date that the claim was discovered.

A claim is discovered on the first date that the plaintiff knows all of the following:

a)   Damage has occurred.

b)   An act or omission caused the damage.

c)   The act or omission was that of the defendant.

d)   Having regard to the nature of the injury, an action is an appropriate means to seek a remedy.

The first three simply incorporate the rules that the courts have already laid down. You have to know that you have suffered damage and know someone caused that damage. The fourth is new and no one really knows what it means.

Claims for breach of trust are caught by the two-year limitation period, subject to discoverability. For example, until you find that a contractor is unable to pay, you may have no information upon which you could reasonably determine that there was a breach of trust.

Finally, there is now a 15-year absolute limitation period, regardless of discoverability. Once 15 years have passed, the fact that the owner never knew that there was inferior rebar in the concrete is irrelevant. Either the conditions manifested themselves within the first 15 years or the owner is out of luck.

There are also transitional rules; they are explained in an attachment to this newsletter.

Problems 

Like every new statute, the new Act will engender uncertainty until it has been interpreted.

One major problem is section 22. It states that a limitation period under the new Act applies “in spite of any agreement to vary, or exclude it.” What happens if the parties do not want the matter dealt with in court within 2 years? Rather, they want to continue to negotiate. They are now forced to go to court. What happens to the time limitations of various warranties set out in construction contracts? Are they valid?

What happens on a long construction contract when a claim is denied at the beginning? Normally, these claims are all dealt with at the end of the contract. Do contractors have to sue on the denied claims before the construction is even completed? This would not make for great contractual relations.

Until these answers are sorted out, contractors have to be aware of the passage of time and seek legal advice quickly, lest they find that that their claims have dissolved under the new Act.