When is it appropriate to contemplate a legal proceeding? It’s an important consideration that should not be overlooked when calculating the applicable limitation period. A recent decision of the Ontario Court of Appeal helps to clarify this issue.

Limitations 101

Ontario's Limitations Act, 2002[1] establishes a two-year limitation period for most proceedings. While missing a limitation period can be fatal to a claim, it's not always clear when the clock begins to tick.

The period begins to run from the date that a claimant "discovers" their claim, having knowledge that:

  • the injury, loss or damage had occurred,
  • it was caused, or contributed to, by an act or omission,
  • by a person against whom the claim is made, and
  • a proceeding would be a legally appropriate means to remedy it.

The Act presumes that a claimant has knowledge of these criteria on the date the act or omission giving rise to the claim takes place. However, the claimant can rebut the presumption, and delay the start of the limitation period, by proving that they could not have reasonably discovered the claim until some later date.

Clarke[2] is noteworthy because it turns on the fourth discovery criterion, the question of when a proceeding becomes legally appropriate, which has received little judicial treatment.

The facts

The case centres on Andrew and Gavin Clarke, who suffered soft tissue injuries in a car accident in April 2006. They retained a lawyer, Faust, to represent them in an action for accident benefits and tort damages.  Faust issued a claim in June 2008, more than two years after the accident.

Some weeks later, the Clarkes retained a new lawyer who assured them that the claim was not necessarily out of time since discovery may not have occurred until medical documents indicated that the injuries met the threshold for a claim under the Insurance Act.[3] 

Nonetheless, to be safe, the new lawyer wrote to Faust in July 2008, notifying him of the potentially missed limitation period. Faust replied that, in his view, the claim was issued in time given the Act's discovery provisions. The defendants were apparently of the same view, at least at first, because they did not initially plead a limitations defence.

However, the defendants soon amended their defence to assert that the claim was out of time. This led the Clarkes to issue a claim against Faust in December 2010, alleging professional negligence. Faust moved for summary judgment dismissing the negligence action on the basis that it had been issued more than two years after the Clarkes' second lawyer had identified the potential limitation problem in July 2008.

The motion judge agreed and dismissed the negligence action.

The appeal

The Court of Appeal set aside the dismissal, noting that the limitations clock only begins to run when a claimant, or a reasonable person in the circumstances the claimant, has good reason to believe that they have a claim for damages and commencing a proceeding would be appropriate.

In this case, the determinative issue was when a proceeding became an appropriate means to seek to remedy Faust's potential negligence. The Court held that until the defendants in the accident lawsuit raised a limitations defence, the Clarkes did not have good reason to believe that they had a legal claim against Faust. Until then, it was reasonable for the Clarkes' to have accepted the advice of their lawyers that discoverability had delayed the start of the limitation period and that the claim had been issued in time.

However, once the defence was amended and it became clear that Faust's potential negligence could result in a loss, it was legally appropriate for the Clarkes to contemplate a proceeding and the limitations clock began to tick.

Take away points

By its nature, the concept of discoverability creates some uncertainty in calculating the limitation period. However, Clarke is a reminder that discovery of a claim does not occur until claimants are in a position to reasonably believe that they have a legal claim for damages.

Often that will be when the claimant has knowledge satisfying the first three discovery criteria.  However, there are circumstances, particularly in professional negligence claims, where advice claimants receive will prevent them from believing that they have a legal claim or where it is not clear that a potentially negligent act will actually result in a loss. The question of when it first became appropriate to contemplate a proceeding is an important consideration that should not be overlooked when calculating the applicable limitation period.