ALBERTA CONSTRUCTION COMMUNIQUÉ October 2006 A publication of Miller Thomson LLP s Construction Law Practice Group THE TIME LIMIT FOR MAKING CLAIMS: THE LIMITATIONS ACT PART I The current Alberta Limitations Act 1 came into force on March 1, 1999. Limitation periods are designed to set a period of time within which a party may commence a claim. The Limitations Act sets time limits on when a claim may be made to provide certainty for all parties. After the limitation period has expired, a party need no longer be concerned about old claims haunting them. The most dramatic feature of the current Act is the Drop Dead Rule, a first for Canada. A drop dead rule provides for a certain final date within which all actions must be commenced. Prior to March 1, 1999, and to a certain extent today as well, one of the concepts that affected the certainty granted by limitations legislation was the concept of discoverability. This means that the time period within which a party may sue does not start to run until the problem (in general terms) is discovered. The current Limitations Act affects claims in Alberta with two general rules: Two years after Discovery Rule: Note: This Communiqué is provided as an information service and is a summary of current legal issues of concern to the Construction Industry. Communiqués are not meant as legal opinions and readers are cautioned not to act on information provided in this Communiqué without seeking specific legal advice with respect to their unique circumstances. Your comments and suggestions are most welcome. Please direct them to: ConstructionLaw_AB@millerthomson.com Claims must be brought within 2 years from the date the claimant knew, or ought to have known, that: (i) the injury, (personal injury, property damage, economic loss, non-performance of an obligation, or breach of duty) occurred; (ii) the injury was attributable to the conduct of the defendant; and (iii) the injury, assuming liability on the part of the defendant, warrants commencing an action and, in any case Ultimate Rule or Drop Dead Rule: Claims must be brought within 10 years from when the claim arose - normally when the conduct causing the injury occurred. 1 R.S.A. 2000, c. L-12 (Act).
Barring a few exceptions, all claims are governed by both the Two Years after Discovery Rule and the Ultimate Rule or Drop Dead Rule, whichever expires first. If a claim is commenced after the expiry of these periods, then the defendant is entitled to immunity from liability for the claim. There are two principal exceptions to the above rules. The first exception is where there is other legislation setting a specific limitation period which will govern the generic provisions of the Limitations Act. For example, the Municipal Government Act 2 stipulates that actions against municipalities must be brought within a shorter time period. The second exception is where the parties agree in writing to extend a limitation period. (For example: a written lifetime warranty on equipment or materials.) However, limitation periods set out in the Act cannot be shortened (section 7). Comparison of the Old and New Limitation Periods Prior to the 1999 coming into force of the current Limitations Act, limitations legislation in Alberta differentiated between tort and negligence claims. The former limitations legislation provided for a six-year limitation period which commenced at different times depending on the nature of the claim. As discussed above, the current Limitations Act does not differentiate between tort and negligence claims, as it applies the Two Years after Discovery Rule and the Ultimate Rule or Drop Dead Rule to all claims. The Winnipeg Condominium Case In Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 3 an action was brought by the owners of a condominium after some stone cladding fell off the side of a building. In 1972, a developer contracted with Bird Construction to build a large apartment building. Bird Construction entered into a subcontract for the masonry work, including the stone cladding, with Kornovski & Keller Masonry Ltd. The building was substantially complete by December 1974. In 1978, the building was converted to condominiums. In 1982, the Condominium Board was concerned about the stone cladding and contacted the architect and other consultants. On their advice, the Condominium Board arranged for repairs to be done at a cost of $8,100.00. On May 8, 1989, a storey-high section of the cladding fell from the ninth storey of the condominium. The Condominium Corporation eventually had all of the cladding replaced at a cost of over $1.5 million. The Condominium Corporation commenced an action in negligence against Bird Construction, the architect and Kornovski & Keller. Considering the limitation period aspect of the case only, if these facts had occurred in Alberta before the current Limitations Act came into force, the Condominium Corporation would have been able to commence an action within 6 years from discovering the defect. This date would appear to be 6 years from the day the stone cladding fell off the building (May 8, 1989) because no structural defects were found in 1982. Accordingly, the Condominium Corporation would have had until May 8, 1995 to commence its action. If these facts occurred under the current Alberta Limitations Act, the Condominium Corporation would have the earlier of: (a) (b) Two years after Discovery Rule: Discovery: May 8, 1989; Limitation: May 8, 1991; and Ultimate Rule or Drop Dead Rule: Claim arose when work performed: December, 1974; Drop Dead Date: December 1984. Under the current Act, Bird Construction's exposure would be reduced because an action would have to have been commenced before December 1984, almost 11 years earlier than under the old Act. On the facts of this case, because no defects were discovered before 1984, Bird Construction would probably not 2 R.S.A. 2000, c. M-26. 3 [1995] 1 S.C.R. 85 (Winnipeg Condominium). 2
have been sued before the limitation period expired and thus would have been protected from exposure for this claim. Summary: As illustrated by the Winnipeg Condominium case, the current Limitations Act is very effective in limiting exposure to long term liability. For those doing business in Alberta, internal business practices should be monitored to ensure that the appropriate systems are in place to commence or respond to claims in a timely fashion before the limitation period expires. ABOUT THE AUTHORS: The article was written by E. Jane Sidnell, Partner, who practices construction law and by Erin Viala, Articling Student, both whom are located in our office. E. Jane Sidnell 403.298.2435 jsidnell@millerthomson.com Erin Viala 403.298.2428 eviala@millerthomson.com ALBERTA REGIONAL CONTACTS Our Construction Law Practice Group is dedicated to providing comprehensive and integrated legal services to construction industry clients. For more information about our group, visit our website at www.millerthomson.com or contact one of our regional contacts listed below. Edmonton Debra Curcio Lister 780.429.9763 dcurciolister@millerthomson.com Kent H. Davidson 780.429.9790 kdavidson@millerthomson.com Geoffrey N.W. Edgar 780.429.9760 gedgar@millerthomson.com Scott J. Hammel 780.429.9726 shammel@millerthomson.com Darin J. Hannaford 780.429.9714 dhannaford@millerthomson.com Sandra L. Hawes 780.429.9787 shawes@millerthomson.com William J. Kenny, Q.C. 780.429.9784 wkenny@millerthomson.com Bryan J. Kickham 780.429.9713 bkickham@millerthomson.com Monique M. Petrin Nicholson 780.429.9704 mpetrinnicholson@millerthomson.com Daniel C.P. Stachnik, Q.C. 780.429.9761 dstachnik@millerthomson.com David N. Thomlinson 780.429.9778 dthomlinson@millerthomson.com Michael D. Aasen 403.298.2438 maasen@millerthomson.com Michael J. Bailey 403.298.2411 mbailey@millerthomson.com Philip A. Carson, Ph.D 403.298.2403 pcarson@millerthomson.com Paige Coulter 403.298.2450 pcoulter@millerthomson.com Fred R. Fenwick, Q.C. 403.298.2421 ffenwick@millerthomson.com Kathleen J. Kendrick 403.298.2455 kkendrick@millerthomson.com E. Jane Sidnell 403.298.2435 jsidnell@millerthomson.com Nicole T. Taylor-Smith 403.298.2453 ntaylorsmith@millerthomson.com NATIONAL CONTACTS Toronto 416.595.8500 Kitchener-Waterloo 519.579.3660 Vancouver 604.687.2242 Guelph 519.822.4680 Whitehorse 867.456.3300 Markham 905.415.6700 London 519.931.3500 Montréal 514.875.5210 3
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