Limitation periods should always be on the mind of a litigator. Getting caught on the wrong side of a limitation can derail a lawsuit or court application: no matter how strong your case is, if you are out of time, it won’t even get off the ground. Often the first thing a lawyer will do when speaking with a new client will be to compile a list of all relevant dates and events, and immediately diarize all possible upcoming limitations in his or her calendar.
There are a few different limitations that can apply drawn from legislation. The most well-known limitations are the basic limitation period of 2 years and the ultimate limitation period of 15 years , both set out in the Limitations Act. The Trustee Act, elections for equalization of net family property brought under the Family Law Act and the Real Property Limitations Act all contain limitations as well. These can be subject to exceptions at times, some enumerated in the relevant legislation, and others made on ad-hoc basis by a Court, often due to the application of equitable principles. As well, most are subject to a principle known as “discoverability”. This means that the clock will only start ticking down toward the end of the limitation period, beginning when the event for which the litigation is being commenced was or could reasonably have been discovered by the would-be-litigant. If, for example, one had no way of knowing that his or her property had been damaged for a year after it happened, the 2-year basic limitation period would commence only at the time that the damage was or could reasonably have been discovered – not the earlier point in time when the damage actually occurred.
As noted above, it is important to make note of what all possible limitations may be when considering commencing legal action. It is often considered best practice for lawyers to establish a timeline and diarize any possible limitations and for clients to come prepared with a list of all relevant dates at the initial meeting between the two.
One way to minimize the risk of missing a limitation agreement is for a “tolling agreement” to be signed by all parties to the litigation. This agreement provides that the limitation will instead apply on a later date that the parties agree to, often 6 months or a year away. Tolling agreements can be signed more than once, with a new extension taking effect when the prior one was set to expire.
The purpose of the tolling agreement is to maintain the right or the option of pursuing a legal claim at a later without the risk of it expiring, rather than rushing to bring a claim sooner. Paradoxically, signing a tolling agreement can be beneficial to the defendant or respondent to the likely lawsuit or application, and not only to the party bringing it: if the party that is commencing the litigation has only a short period of time left to launch his or her claim, after which point it will be too late, he or she will feel pressured to do so right away. By contrast, if a tolling agreement is signed, the parties can engage in patient and unrushed settlement discussions, without deadlines or the added pressure of an impending limitation hanging over them. In many cases this allows the parties to be more flexible in coming to an agreement and can avoid the hardening of positions and of feelings that often occurs once pleadings or an application has been served and significant legal fees racked up.
Takeaway
Both clients and lawyers need to make sure that claims are commenced within the limitation period. When a law firm is first retained, all possible limitations should be diarized in the calendars of all lawyers that will be doing work on the file right away. If there is an impending limitation, it may be worth discussing a tolling agreement with opposing counsel, especially if the litigation is still in the early stages, and if doing so would provide the time and opportunity needed for a settlement to be achieved.
