Limitation Act Reform: The Canadian Perspective

Limitation Act Reform: The Canadian Perspective

Shortening The Time To Sue & The Impact On The Construction Industry

USLAW Spring 2013 Client Conference

Presented by Samantha Ip, Partner

April 2013

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Overview

•Limitation Act Reform in BritishColumbia

•Limitation Acts in other CanadianProvinces

•Impact on Construction Industry– The good and the bad


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Introduction

•Canada’s new limitation regime– Sets out the time limits by which a legal claim must be

commenced– Comes into force in B.C. on June 1, 2013– Regime already in place in other Provinces– Significantly changes law on limitation periods– Represents a response to numerous calls for reform by

multiple stakeholders, including the building design and construction sectors (architects, engineers, builders, developers, etc.)


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Current Limitation Regime

•Variable system – 2, 6, 10, 30– Prescribes specified periods calculated from the date of the

event giving rise to the claim – subject to interpretation – leading to uncertainty

– Applicable period depends on the nature of the claim

•Most construction related claims – 6 year limitation period– Construction defects, delay claims, fee disputes, contract

claims


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•Liens – different rules apply (Builders Lien Act)– Must commence action 1 year from the date of filing a lien

(must also file Certificate of Pending Litigation)– For action against trustee (contractor or sub) for holdback -

must commence action not later than 1 year after the head contract is completed, abandoned or terminated or, if there is no head contractor, 1 year after completion or abandonment of the improvement

– For action to enforce lien on holdback – 6 year limitation period applies


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•Ultimate limitation period of 30 years– Clock starts running when all elements of a cause of action

have accrued

•Discoverability rule – common law– Running of limitation period is postponed until plaintiff knew

or ought have known of cause of action and identity of defendants

– Deficiencies claim – running of limitation period often delayed until expert report indicating clear “systemic failure”


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•Contribution and indemnity– Limitation period does not start to run until the main action is

determined– Defendant may wait and see whether it loses at trial before claiming

against third parties

•Adding parties – you get an extra year or more– In B.C. plaintiffs are entitled to the limitation period plus 1 year when

adding a party to an action (not commencing the action against the party for the first time)

– A party may be added as a defendant beyond the limitation period plus one year in certain circumstances, usually where no prejudice results

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Problems and Impetus for Change

•Uncertain application– Resulted in significant amounts of litigation and issues with

risk management

•Inconsistent application– Unfair balance between plaintiff and defendant’s rights

•Need for uniformity– Need to bring BC limitations law in line with other provinces

with which BC has the greatest economic connections


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New Limitation Regime

•Basic 2 year limitation period– Applies to all claims, except those in relation to debts owed to

the government

Subject to this Act, a court proceeding in respect of a claim must not be commenced more than 2 years after the day on which the claim is discovered.

• Construction related claims affected– All construction claims relating to defects, delay, and fee and

contract disputes must be brought within 2 years and not the current 6 year period


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•Lien claims partially affected– Actions to enforce liens on holdbacks will likely have to be

commenced within two years as opposed to the current six year period

•Ultimate limitation period of 15 years– Clock starts running at the time of the original act or omission,

whether damage has occurred or the claim has been discovered– Extends to private remedies (e.g. right to arbitration in a

construction contract)


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•Discoverability is central to the new regime– Subjective / objective test

…a claim is discovered by a person on the first day on which the person knew or reasonably ought to have known all of the following:

(a) that injury, loss or damage had occurred;(b) that the injury, loss or damage was caused by or contributed to by an act or

omission;(c) that the act or omission was that of the person against whom the claim is or

may be made;(d) that, having regard to the nature of the injury, loss or damage, a court

proceeding would be an appropriate means to seek to remedy the injury, loss or damage. Construction defects, delay claims, fee disputes, contract claims


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•Contribution and indemnity– Special discovery rules will apply to claims for contribution and

indemnity, effectively preventing defendants from waiting for a lose at initial trial before suing third parties

•Summary of key changes – B.C.


OLD ACT NEW ACT

Default Limitation Period Construction Claims

6 Years 2 Years

Ultimate Limitation Period 30 Years 15 Years

Discoverability Rule Exception Default

Contribution and Indemnity After Trial At Trial

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Transitional Provision

•When the new regime comes into force in B.C., the applicable limitation period will be based on discovery…

1. If the claim is discovered before the new regime comes into force the old regime will apply; and

2. If the claim is discovered after the new regime comes into force the new regime will apply, regardless of whether the act or omission giving rise to the claim occurred before the new regime

– The ultimate limitation period will start to run on June 1, 2013 for claims relating to all previous acts or omissions, with a few exceptions

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Rationale for Shortening the Limitation Periods

•Certainty– Potential defendants should not be held accountable for

ancient obligations

•Evidentiary– Claims based on stale evidence should be foreclosed

•Diligence– Plaintiffs should have to act diligently and not “sleep on their

rights”


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Canadian Limitation Acts

* O/S test = objective /subjective test, “knew or ought to have known” ** Nova Scotia and Manitoba are in the process of bringing in new limitations legislation with single 2 year limits, 15 year ultimate limitation periods, and codified discovery rules.


Provinces Basic Limitation Period Ultimate Limitation Period Discoverability Rule

British Columbia Single limit – 2 years 15 yrs All claims – O/S test*

Alberta Single limit – 2 years 10 yrs All claims – O/S test

Saskatchewan Single limit – 2 years 15 yrs All claims – O/S test

Manitoba** Variable limit – 2 to 6 yrs 30 yrs Common law

Ontario Single limit – 2 years 15 yrs All claims – O/S test

New Brunswick Single limit – 2 years 15 yrs All claims – O/S test

Nova Scotia** Variable limit – 2 to 20 yrs No prescribed limit Common law

Newfoundland Variable Limit – 2 to 10 yrs 30 yrs Common law

P.E.I. Variable limit – 1 to 10 yrs No prescribed limit Common law

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Impact on Construction Industry – Risk Management

1.Need for Investigation– If there are signs of a deficiency, then an owner should carry out an

investigation to determine the extent of the defect as the 2 year limitation period will likely have started to run

– There is greater emphasis and obligation on “discovering”

2.Record Keeping– There is a lesser need to keep project documents for extended

periods time


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3.CCDC 2008 – GC 12.1: Indemnification

– Requires notice in writing within 6 years from Substantial Performance of the Work but GC is subject to applicable limitation period, which means that a party who complies with this GC may still be prohibited from a claim by the statute

– The incompatibility of the CCDC with the new Limitation Act will create ambiguity and hence litigation (just kidding)


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4.CCDC 2008 – GC 12.2: Waiver of Claims– Owners’ claim against contractor for deficiencies limited to

local limitation statute (i.e. 2 years) despite requirement of notice within 6 years• Note that the B.C. Limitation Act (old and new) is silent on the

issue of whether a party can contract out of the statutory limitation periods

5.Overall shorter risk period– All parties in construction who may be sued will benefit in

terms of risk management from a shorter risk period


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Impact on Construction Industry

6.Higher risk for plaintiffs - latent defects– A serious systemic defect may not show itself until after 15 years

from construction

7.Insurance– Insurers can better assess the risk of underwriting professionals on

errors and omissions policies based on a shorter risk period

8.Project Costs– Construction project costs are likely to decrease as insurance

becomes more readily available and at better pricing given the ability of underwriters to better assess the risk


THANK YOU

www.cwilson.com

Please direct inquiries or comments to:

Samantha Ip, Partner, Clark Wilson LLPemail: [email protected]; direct: (604) 643-3172

News & Politics

Limitation Act Reform: The Canadian Perspective