Limitation Act Reform: The Canadian Perspective Shortening The Time To Sue & The Impact On The Construction Industry

Transcription

1 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

2 Overview Limitation Act Reform in British Columbia Limitation Acts in other Canadian Provinces Impact on Construction Industry The good and the bad 2

3 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.) 3

4 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 4

5 Current Limitation Regime 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 5

6 Current Limitation Regime 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 6

7 Current Limitation Regime 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 7

8 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 8

9 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 9

10 New Limitation Regime 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) 10

11 New Limitation Regime 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 11

12 New Limitation Regime 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. Default Limitation Period Construction Claims OLD ACT NEW ACT 6 Years 2 Years Ultimate Limitation Period 30 Years 15 Years Discoverability Rule Exception Default Contribution and Indemnity After Trial At Trial 12

13 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 13

14 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 14

15 Canadian Limitation Acts 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 * 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. 15

16 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 16

17 Impact on Construction Industry Risk Management 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) 17

18 Impact on Construction Industry Risk Management 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 18

19 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 19

20 Please direct inquiries or comments to: Samantha Ip, Partner, Clark Wilson LLP direct: (604) THANK YOU