The new Limitation Act, 2012

The British Columbia government recently announced a proposed new Limitation Act which will materially change the rules for limitation periods in the Province. Similar reforms have already taken place in Alberta, Saskatchewan, Ontario and New Brunswick. The new legislation is expected to be brought into force by regulation in 10 to 12 months.

Problems with the current Act – impetus for change

The current Limitation Act prescribes specified periods calculated from the date of the event giving rise to the claim. The period applicable depends on the nature of the claim: two years applies in the case of (for example) torts such as negligence; six years applies in the case of (for example) recovery of goods wrongfully taken or detained; and ten years applies for certain trusts and estate related matters. The current Act also sets out prescribed “discoverability” categories – i.e. a laundry list of scenarios where the running of time for the specified periods does not begin until the claimant is “fully aware”, or until certain facts and elements of the claim are known to the claimant.

A 1984 decision of the Supreme Court of Canada (which we can refer to as the Kamloops case) added what became known as the “common law discoverability rule” whereby the start date in certain cases would be postponed until the date of discoverability. The Kamloops case was a construction case involving a claim for negligence with regard to a building with concealed defective foundations. For a time, the Kamloops case created some uncertainty as to whether this common law discoverability rule would apply to the two, six and ten year periods. This uncertainty was eventually resolved, but subsequent cases (a leading example would be the Novak v. Bond decision in 1999) exposed other uncertainties.

The time was ripe for revamped legislation. In 2002 the British Columbia Law Institute produced a report recommending changes. In 2005 the Uniform Law Conference of Canada adopted a model Uniform Limitations Act. In 2010 the British Columbia Ministry of Attorney General published its “White Paper on Limitation Act Reform: Finding the Balance”. As noted above, changes were also afoot in other jurisdictions.

Simplification under the new Act

Under the new Limitation Act, most civil claims will be subject to a two-year limitation period. Instead of running from the date of the event giving rise to the claim (as is the case under the present legislation), the new two-year period will run from the date of discovery. The new legislation sets out that 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:

  1. that injury, loss or damage had occurred;
  2. that the injury, loss or damage was caused by or contributed to by an act or omission;
  3. that the act or omission was that of the person against whom the claim is or may be made; and
  4. 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.

The outside date – or “ultimate limitation period”

Under the current Limitation Act, the ultimate limitation period for all claims is 30 years (based on the date on which the act or omission occurred, regardless of when discovery occurs). The proposed new Limitation Act reduces this to 15 years. The new Act will still allow for the extension of the ultimate limitation period in special circumstances such as instances of wilful concealment, fraud, or the acknowledgment of liability.

Exceptions and special cases

Allowance is made under the new Act for exceptions and special cases, as would be expected. Exceptions will include the enforcement of monetary judgments, which will have a 10-year limitation period, and any statutes that set their own limitation periods.

Transition

The new Limitation Act includes transitional provisions, to bridge the application of the old rules to the new rules.

An illustration – University of Regina v. Pettick

In order to absorb the new rules, it may be helpful to consider the facts in University of Regina v. Pettick, summarised in the case report (which I have edited for brevity):

In 1964, the predecessor of the University of Regina engaged Pettick, an architect, to design a physical education building, including gymnasiums, for its Regina Campus. With the University’s approval, Pettick hired H Ltd. as structural engineer on the project. In 1965, drawings and specifications were completed, tenders were invited and PCL Ltd. was awarded the construction contract. The specifications for the gymnasiums called for a new type of roof truss space frame patented by T Ltd. This roof frame was to be supplied by a subcontractor, D Co., and its components were fabricated, under contract to that subcontractor, by F Ltd.

In 1979, it was discovered that the roof frame was coming apart. Upon expert advice, the University replaced the roofs. The incipient collapse of the gymnasium roofs, it was found, was due to the inadequacy of under-design of the hub assemblies connecting the metal members of those roofs. … Deterioration had been progressive, finally manifesting itself in 1979.

In 1980, the University commenced an action in negligence against the architect, the construction contractors, the patentee of the failed roof truss system, the subcontractors, and F Ltd. as fabricators of the failed components.

The trial Judge found F Ltd. solely liable for the University’s loss, in a sum finally quantified at $768,017.”

This fact pattern neatly frames the application of the rules. If the new British Columbia legislation were applied, then, since the claim was started within two years after the discovery of the problem, the claim would not be statute barred on that account. But the 15-year ultimate limitation period would come into play. There would be intense scrutiny as to who did what, and precisely when, in 1964 and 1965.

Finding the Balance

The above illustration frames the question: why is there a need to bar such claims? This is aptly answered in the 2010 White Paper referred to above (again, I have edited for brevity):

“The Supreme Court of Canada has repeatedly identified three rationales that underlie limitations legislation, which may be summarized as the certainty, evidentiary and diligence rationales:

Statutes of limitations have long been said to be statutes of repose… The reasoning is straightforward enough. There comes a time, it is said, when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations…

The second rationale is evidentiary and concerns the desire to foreclose claims based on stale evidence. Once the limitation period has lapsed, the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim…

Finally, plaintiffs are expected to act diligently and not “sleep on their rights”; statutes of limitation are an incentive for plaintiffs to bring suit in a timely fashion.

There are also economic reasons behind limitations legislation. …[A]t some point … potential defendants should be able to feel confident about arranging their affairs in the knowledge that a lawsuit can no longer be brought against them. This can benefit the economy, too. People may not choose to enter into business transactions if they face potential liability of uncertain magnitude. This is true not only for potential defendants but also third parties who want to know their dealings are not going to be disturbed by an old claim. As well, lengthy limitation periods increase recordkeeping obligations and insurance costs and can impact the cost of doing business.

In addition, there are rationales for limitations legislation based on the effective administration of justice. There are two judgmental reasons for limitation periods, the first of which is based on the traditional evidentiary justification: when the evidence is too unreliable, the court cannot make a sound decision with respect to a claim. The longer the delay before a claim is brought the more likely it is that the quality of the evidence will have deteriorated, which makes judges’ decision-making role more difficult. The second judgmental reason is {that limitations} law ensures that conduct giving rise to a civil lawsuit will be judged according to more or less current standards.

Reforms to the Act must not only take into account the varied rationales for limitations legislation, but also, in setting limitation periods, must strive to find the correct balance between the competing sets of rights found within each rationale: between a plaintiff’s need to be able to access the civil justice system and a defendant’s need for certainty and finality.”

CCDC and other standard construction industry documents

The interplay of the proposed new Act with the contractual limitation provisions in construction industry templates will have to be addressed on a case by case basis. For example, under CCDC 2 2008, the owner releases the contractor of claims six years after the date of substantial performance of the work. As illustrated in the University of Regina case above, the problem might not have manifested itself until much later, so this seems to me to be inordinately favourable to the contractor. The rules that would apply under the new legislation appear to me to be more reasonable.

Conclusion

Under the proposed new Act, the balance is generally shifted in the direction of shorter periods, and less litigation. Regardless of where the balance is drawn, the new legislation appears to be a step forward in terms of simplicity.