In Ontario, most civil actions must be commenced within two years of the date the claim was “discovered”, which is presumed to be the date that the underlying injury, loss, or damage occurred.
However, Ontario’s Limitations Act, 2002 provides for several circumstances in which that presumption can be rebutted. One such circumstance that has been the subject of recent judicial consideration is in s. 5(1)(a)(iv) of the Limitations Act, providing that a claim is not discovered until a reasonable person in the claimant’s position first ought to have known that a proceeding would be an appropriate means to remedy the loss.
The Ontario Court of Appeal recently considered the application of s. 5(1)(a)(iv) in Thermal Exchange Service Inc. v Metropolitan Toronto Condominium Corporation No. 1289,[1] finding that a debtor’s assurances as to the eventual payment of a debt may serve to postpone the running of a limitation period on a claim for the debt.
In the case, the plaintiff HVAC servicing company sued the defendant condominium corporation for unpaid invoices issued between 2008 and 2015. At trial, the condominium corporation’s sole defence was that the action, brought in mid-2017, was barred by the Limitations Act, 2002.
The trial judge rejected that defence, finding that the plaintiff had brought the action as soon as it knew that an action would be an appropriate means to remedy the non-payment. In particular, the parties had engaged in several conversations about the non-payment of invoices, and the condominium property manager made assurances that she was “working on” the invoices.
The trial judge found that these assurances reasonably led the plaintiff to believe that the issue could and would be remedied without recourse to the courts. With reference to the nature of the parties’ commercial relationship (involving a single running account over time), the plaintiff sincerely believed the condominium corporation had been dealing with them in good faith, and that they could rely on the property manager’s assurances. As a result, a person in the plaintiff’s position would not reasonably have known that a legal proceeding would be an appropriate means to seek a remedy until October 2015, when the plaintiff realized he would have to instruct counsel to send a demand letter threatening legal action. Since the action was commenced within two years of that date, the action was not barred.
On appeal, the Ontario Court of Appeal found that the trial judge did not err in her analysis. This case was not distinguishable from other case law on when a proceeding becomes an appropriate means to seek a remedy. The salient aspect of those cases is that the defendant created a problem, the remedy for which was beyond the reach of the plaintiff’s understanding and led the plaintiff to rely on it for the remedy. These circumstances were present here: the condominium corporation created a barrier to the plaintiff receiving payment, prevented the plaintiff from understanding the nature of the problem, and led the plaintiff to believe it would take care of the problem.
The Court of Appeal also found that the trial judge did err in finding that the limitation period started in October 2015. However, this did not affect the outcome of the case because the limitation period actually began to run later than that – in November 2016, when the condominium corporation first communicated its position that it was not obligated to pay the relevant invoices (on the basis that payment was conditional on receiving payment from the affected unit owners).
This decision suggests that a debtor’s communications may influence a creditor’s limitation period for commencing a claim for an outstanding debt, depending on the particular circumstances of the parties’ dealings with each other. Parties should be cautious of their representations to each other in respect of a debt and document any discussions to protect themselves should a dispute arise.
[1] 2022 ONCA 186.
