With impeccably awful timing, the City of Hamilton bought asset-backed commercial paper (ABCP) in July 2007, three weeks before the ABCP market collapsed. The paper was to mature in September 2007. In mid to late August 2007, banks and investors hammered out a deal to restructure the ABCP market which included a 60-day standstill, subsequently extended to January 2008.

In September 2009, the city brought a claim for negligent misrepresentation against the seller of the ABCP, on the grounds that the latter had not accurately disclosed the nature of the investment. Out of time, said the judge. The claim arose when the city realised its investment would go south, which was some time before the ABCP restructuring was concluded; not knowing the extent of the losses did not prevent the claim from accruing. The claim was for misrepresentation, not for default in payment at maturity (when the city said the claim arose). The city had also issued an almost identical claim that was clearly within time, suggesting it was alert to a limitations issue. The standstill did not suspend the running of the limitation period because it did not involve third-party dispute resolution between the parties, and did not prevent the city from suing.

The Ontario Court of Appeal agreed with the judge below on all counts: Hamilton (City) v Metcalfe & Mansfield Capital Corp, 2012 ONCA 156. Note the distinction made between damage (loss giving rise to a claim) and damages (quantification of that loss): the city’s claim arose when it became aware of damage (and not even the full extent of damage); the limitation period didn’t wait to run from the point at which there were damages.  

[Link available here].