Limitation Periods

(This is an edited version of our Client Guide which provides general information and is made available to our clients to assist them to understand limitation periods and the provisions of the new Ontario legislation dealing with limitation periods applicable to claims arising under Ontario law. This is not intended to constitute legal advice, which by its nature is situation specific. If you have questions about a specific legal problem, you should consult a lawyer who will provide legal advice only after reviewing all the facts relevant to your situation before providing that advice, rather than relying on the general information provided in this Guide. Limitation periods are governed by a complex variety of statutes and a mistake in failing to commence your legal action in time may result in your losing your right to make a claim forever. Do not make any decision about commencing or delaying the commencement of any legal action based solely on the information in this Guide without first speaking with a lawyer. Certain legal terms contain hyperlinks to our on-line legal lexicon. Simply click on a term in blue to see a short definition or description of that term as it is used in Ontario litigation.)

 

What is a limitation period?

If you do not commence a legal proceeding within the time period prescribed by law, your right to make that claim is forever lost. Even the very best claim disappears simply because of the expiry of that period of time. This time period is called a limitation period. It is also often called a prescription period.

 

Can an extension be granted?

Certain statutes specifically permit a claim to be made after the expiry of the time period with court permission given on a discretionary basis but most do not. Even where an application to the court for an extension is permitted by a statute, there usually must be some evidence of a good reason for the delay. In cases where the other party will suffer some prejudice because of the delay in proceeding, a court will usually decline to grant the extension.

 

What limitation period applies to a claim?

The nature of a claim or cause of action determines the length of time permitted to bring the claim.

Currently, there are two principal statutes which set out limitation periods in Ontario. The Real Property Limitations Act, as its name suggest, deals with real estate and other interests in land, such as mortgages. Other limitation periods are found in the new Limitations Act. The Limitations Act preserves several separate limitation periods found in other statutes. These are all conveniently described in a schedule to the Limitations Act. Formerly, there were at least one hundred specific limitation periods spread among various Ontario statutes, some as short as three months!

 

A new regime in Ontario

The new Limitations Act proposes to partially eliminate this labyrinth of differing periods for claims which arise under Ontario law. There are two new types of limitation periods.

Almost all claims are subject to a general two year limitation period, called the basic limitation period.

There is also a maximum fifteen year period, called the ultimate limitation period, after which the claim will be barred, even if the person did not ever become aware of the circumstances giving rise to the claim.

The limitation period applies despite any purported agreement to vary or exclude it, subject to certain exceptions. This may affect many commercial arrangements where a shorter period to commence claims may be provided for in an agreement. It is unclear at this early date whether or not an agreement not to raise or rely upon a limitations defence (which itself does not purport to vary or exclude the statutory limitation period, but has the same practical effect) will offend the new act. Similarly, the validity of tolling or standstill agreements while settlement or mediation discussions occur is in doubt. Legislation to amend the statute is underway that would permit exceptions to the prohibition to vary or exclude the statute where:

1. an agreement to do so was made prior to January 1, 2004;

2. an agreement to do so is made on or after the effective date by parties who are all acting for business purposes; or

3. an agreement is made on or after the effective date to suspend or extend a limitation period.

The effective date is the date that the amendment is proclaimed in force.

Care must be used in drafting commercial agreements that include representations and warranties that are intended to survive the closing. Such survival periods in excess of two years may be impossible to enforce until the amendment is in force.

One possible arrangement to avoid such consequences is to provide for the laws of a jurisdiction with longer limitation periods in the choice of law clause in the agreement.

Claims arising under federal law are still governed by the limitation periods prescribed by the federal legislation applicable to that claim.

 

Exceptions

There are always exceptions. Specific limitation periods in approximately fifty statutes are being retained.

Where there is a claim for sexual assault against a person in a position of trust, there is no limitation period. The liability is indefinite which reflects the policy that such persons in a position of trust must take all possible steps to carry out their duty appropriately and remain liable forever for failure to do so.

The other major exception is for environmental claims that have not been discovered. Such claims have no limitation period until the claim is discovered.

A number of less frequently encountered situations are also exempted from a limitation period:

• judicial review proceedings;
• proceedings for a declaration if no consequential relief is sought;
• proceedings to enforce court or arbitration orders;
• proceedings to obtain support under the Family Law Act or to enforce a provision for support or maintenance under a domestic contract;
• proceedings by debtors in possession of collateral to redeem it; or, actions by creditors in possession of collateral to realize on their security;
• Crown proceedings to recover taxes or fines; and
• actions by the Crown to recover welfare overpayments, student loans, awards, grants and the like.

 

 When does the period start to run?

The general rule is that the limitation period begins to run on the earlier of:

• the day on which the person with the claim knew:
  • that the injury, loss or damage occurred,
  • that the injury, loss or damage was caused by or contributed to by an act or omission of the person against whom the claim is made,
  • having regard to the nature of the injury, loss or damage, a legal proceeding would be an appropriate means to seek to remedy it; and
• the day on which a reasonable person with the abilities and in the circumstances of the claimant, first ought to have known of these matters.

Technical rules also ensure that minors and mentally incapable persons have an extension during their periods of minority or disability until a litigation guardian is appointed to protect their interests.

Similarly, where there are negotiations with the assistance of an arms-length third party dispute resolution officer, the time periods are extended.

An acknowledgement of the obligation by a party generally re-starts the limitation period against that party.

Concealment or wilful misleading by a party will stop the limitation period from running against that party.

Often, parties are added to existing litigation as third parties based on a claim for contribution and indemnity. The limitation period against such persons does not commence until the first defendant or alleged wrongdoer is served with notice of a claim in respect of which contribution and indemnity is sought.

The status of demand promissory notes is unclear. While the definition of "claim" in the Act seems to nullify the prior law that the limitation period commenced running at the time of the making of the note, care should be used with demand notes until there is a definitive court decision on this point.

Guarantees, where the principal obligation does not generally arise until the default of another person, do not seem to be affected by the new statute, except the period of time is reduced.

Some claims, such as claims based on sexual assault where the accused was in a position of trust, claims for support under the Family Law Act and proceedings to enforce awards and judgments have no limitation periods.

Although the Act purports to exempt student loans from any limitation period, the federal government, which is responsible for the program, has recently amended the legislation to provide for a limitation period of six years from the day on which the money becomes due and payable. It is likely that the federal period would be applicable.

Time does not run in environmental claims until the claim is actually discovered.

 

What about notice periods?

Generally, existing notice periods, such as under the Libel and Slander Act or the Proceedings Against the Crown Act are not affected and notice must still be given to preserve the cause of action. However, the brutally short seven day period under the Municipal Act for snow and ice claims has now been extended to ten days. There is power in the court to extend that time where there is a reasonable explanation for the delay in giving notice and the municipality has suffered no prejudice.

Since this is a substantial overhaul of the limitations period regime, there are a series of transitional rules to claims until expiry of all former limitation periods. Generally, the new Act does not revive an expired claim. However, undiscovered claims, even if the claim existed prior to January 1, 2004 are governed by the new Act provisions. Claims discovered prior to January 1, 2004 where the prior limitation period has not expired are governed by the prior limitation period. Prudence suggests that the most conservative, shortest possible limitation period be considered when assessing a claim.