In Canada, the obligation to investigate claims and identify responsible parties prior to the expiration of the limitation period is placed squarely on the plaintiff. While other courts generally strictly construe and apply limitation periods, in certain limited circumstances, there may be opportunities to extend a limitation period.
The Court of Appeal reasoned that because limitation periods are designed to provide certainty to litigants, Courts would no longer be permitted to extend limitation periods beyond the times prescribed by statute. |
In general, Canadian Courts have held that the expiry of a limitation period creates a rebuttable presumption of non-compensable prejudice for defendants. This presumption is based on traditional policy considerations. The balance of policy considerations goes as follows. On one hand, plaintiffs are expected to act diligently and not "sleep on their rights," and, on the other, the courts recognize that, at some point, defendants should not be forced to defend claims that may affect their economic, social or personal interests.
Until recently, in Ontario, the Courts permitted the extension of a limitation period if the plaintiff could show that there was no prejudice to the defendant and that there were "special circumstances" justifying the exercise of the Court's discretion. Special circumstances included a reasonable explanation for the delay in issuing a claim, the presence of prima facie grounds for relief, and whether the potential defendant was aware of the claim prior to the expiration of the limitation period.
However, all of this changed last year when the Ontario Court of Appeal released its decision in Joseph v. Paramount Canada's Wonderland,1 a case in which, under Ontario's new Limitations Act, the plaintiff's attorney failed to issue the statement of claim within the limitation period.2 The Court of Appeal unanimously eliminated any discretion that the court had to extend limitation periods based on "special circumstances" and held, subject to only a few exceptions, that the expiry of the two-year limitation period in Ontario is a complete bar to a lawsuit. The Court of Appeal reasoned that because limitation periods are designed to provide certainty to litigants, Courts would no longer be permitted to extend limitation periods beyond the times prescribed by statute.
For most subrogation professionals in the Province of Ontario, the Court of Appeal's holding initially appeared to be a potentially overwhelming hurdle. Yet, at second glance, the Joseph holding may not be at all.
The relatively short limitation periods in Canada have important implications for subrogation professionals. |
The Ontario legislature codified the principle of "discoverability" in the new Limitations Act. The "discoverability" test provides that a cause of action arises, for purposes of the limitation period, when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff with the exercise of reasonable diligence. A cause of action arises when the plaintiff learns that some damage has occurred and the defendant has been identified. This may not occur for some time after the date of loss.
To satisfy the discoverability test, a plaintiff must act with due diligence in acquiring the material facts upon which to base the claim. Courts require the plaintiff to show that efforts have been made to obtain information in support of the claim. Be aware that, merely sending a letter will not constitute due diligence unless it can be shown that the letter was followed by appropriate and diligent follow-up. The defendant, in turn, can attempt to show that the plaintiff did not take reasonable steps to learn that the information was, in fact, discoverable with due diligence within the limitation period.
The relatively short limitation periods in Canada have important implications for subrogation professionals. The failure to act quickly and investigate claims thoroughly could result in the loss of potential recoveries.
1 Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469.
2 Limitations Act, 2002,S.O. 2002, c24,Sch B.
