Limitation Periods in Canada

LIMITATION
PERIODS IN
CANADA
BY STEPHEN BARBIER AND MARK MASON, MCCAGUE PEACOCK BORLACK
MCINNIS & LLOYD, TORONTO, ONTARIO
LIMITATION PERIODS VARY ACROSS CANADA, BUT GENERALLY RANGE FROM 1 TO
2 YEARS FOR MOST CAUSES OF ACTIONS. THE RECENT TREND IN CANADIAN
COURTS HAS BEEN TO STRICTLY ENFORCE LIMITATION PERIODS, MAKING IT
IMPORTANT FOR SUBROGATION PROFESSIONALS HANDLING CLAIMS IN CANADA
TO BE MINDFUL OF THE APPLICABLE LIMITATION PERIOD AND ACT TIMELY AND
EFFICIENTLY TO ENSURE THAT THE OPPORTUNITY FOR RECOVERY ON POTENTIAL
CLAIMS IS NOT LOST.
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The Court of Appeal reasoned that because limitation
periods are designed to provide certainty to litigants,
Courts would no longer be permitted to extend limitation
periods beyond the times prescribed by statute.
I
n Canada, the obligation to
investigate claims and identify
responsible parties prior to the
expiration of the limitation period is
placed squarely on the plaintiff. While
other courts generally strictly construe
and apply limitation periods, in
certain limited circumstances, there
may be opportunities to extend a
limitation period.
In general, Canadian Courts have
held that the expiry of a limitation
period creates a rebuttable presumption of non-compensable prejudice for
defendants. This presumption is based
on traditional policy considerations.
The balance of policy considerations
goes as follows. On one hand, plaintiffs
are expected to act diligently and
not “sleep on their rights,” and, on
the other, the courts recognize that,
at some point, defendants should
not be forced to defend claims that
may affect their economic, social or
personal interests.
Until recently, in Ontario, the
Courts permitted the extension of a
limitation period if the plaintiff could
show that there was no prejudice to the
defendant and that there were “special
circumstances” justifying the exercise
of the Court’s discretion. Special cir-
cumstances included a reasonable
explanation for the delay in issuing a
claim, the presence of prima facie
grounds for relief, and whether the
potential defendant was aware of the
claim prior to the expiration of the limitation period.
However, all of this changed last
year when the Ontario Court of
Appeal released its decision in Joseph v.
Paramount Canada’s Wonderland,1 a
case in which, under Ontario’s new
Limitations Act, the plaintiff ’s attorney failed to issue the statement of
claim within the limitation period.2
The Court of Appeal unanimously
eliminated any discretion that the
court had to extend limitation periods
based on “special circumstances” and held,
subject to only a few
exceptions, that the
expiry of the two-year
limitation period in
Ontario is a complete
bar to a lawsuit. The
Court of Appeal reasoned that because
limitation periods are designed to provide certainty to litigants, Courts
would no longer be permitted to
extend limitation periods beyond the
times prescribed by statute.
For most subrogation professionals
in the Province of Ontario, the Court
of Appeal’s holding initially appeared
to be a potentially overwhelming hurdle. Yet, at second glance, the Joseph
holding may not be at all.
The Ontario legislature codified the
principle of “discoverability” in the
new Limitations Act. The “discoverability” test provides that a cause of
action arises, for purposes of the limitation period, when the material facts
on which it is based have been discovered or ought to have been discovered
by the plaintiff with the exercise of reasonable diligence. A cause of action
arises when the plaintiff learns that
The relatively short limitation
periods in Canada have
important implications for
subrogation professionals.
some damage has occurred and the
defendant has been identified. This
may not occur for some time after the
date of loss.
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To satisfy the discoverability test, a
plaintiff must act with due diligence in
acquiring the material facts upon
which to base the claim. Courts require
the plaintiff to show that efforts have
been made to obtain information in
support of the claim. Be aware that,
merely sending a letter will not constitute due diligence unless it can be
shown that the letter was followed by
appropriate and diligent follow-up.
The defendant, in turn, can attempt
to show that the plaintiff did not
take reasonable steps to learn that the
information was, in fact, discoverable
with due diligence within the
limitation period.
The relatively short limitation periods in Canada have important
implications for subrogation professionals. The failure to act quickly and
investigate claims thoroughly could
result in the loss of potential recoveries.
Endnotes
1. Joseph v. Paramount Canada’s Wonderland, 2008
ONCA 469.
2. Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
52
Reprint Courtesy of the National Association of Subrogation Professionals. 2009 © NASP Subrogator® Fall 2009 Issue.
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NATIONAL ASSOCIATION OF SUBROGATION PROFESSIONALS
Reprint Courtesy of the National Association of Subrogation Professionals. 2009 © NASP Subrogator® Fall 2009 Issue.
NASP / 800.574.9964 / www.subrogation.org
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