On June 1, 2013 the significantly revamped Limitation Act will come into effect in British Columbia. The Act imposes a tight two-year limitation period on most claims. Any company or person with business ties to British Columbia should closely monitor areas where litigation may be necessary, and review contractual provisions concerning potential litigation, to make sure that any potential claims are not statute-barred by the new Act.

We summarize below the main changes under the new Act. This is not an exhaustive review.

“ ...a claimant must sue within two years of the discovery of their claim”

BASIC TWO-YEAR LIMITATION PERIOD

Under the new Limitation Act, in most circumstances, a claimant must sue within two years of the discovery of their claim. For most claims, this is a significant shortening of the limitation period under the present Act.

A claim is “discovered” under the new Limitation Act when the claimant knows that injury, loss or damage has occurred as a result of the defendant’s actions, and that a court proceeding would be an appropriate way to address that harm. A claimant must exercise reasonable diligence in investigating, discovering, and acting on a potential claim.

Note that the new Limitation Act provides for special discovery rules for specific types of claims, including claims involving fraud. There are special rules relating to discovery of claims by successors, predecessors, principals and agents. The new Act also provides that if another statute provides a limitation that should govern, that other statute applies.

These rules should be reviewed carefully, as they alter the formula for determining limitation periods.

ULTIMATE LIMITATION PERIOD REDUCED TO 15 YEARS

Even if the two-year limitation period can be extended through late discovery, a claim must still be brought within the “ultimate limitation period”. The new Act sets this period at 15 years (cutting in half the current period of 30 years).

The ultimate limitation period “clock” starts ticking when the original act or omission takes place, regardless of whether damage has yet occurred or whether the claim has been discovered.

Once 15 years from the original act or omission has passed, all remedies, even private remedies (including arbitration rights and references to accountants and auditors), are extinguished, barring any claim.

This extinguishment, however, is modified in three important ways. First, if the defendant confirms that the claimant has a claim against the defendant, the limitation clock will be reset for both the basic limitation period and the ultimate limitation period.

Second, the basic limitation period and the ultimate limitation period do not run, subject to a under a disability or is under 19 years of age.

Finally, the new Limitation Act sets out specific types of claims (including fraud) where the ultimate limitation period “clock” does not start until the discovery of the claim, which is subject to special rules set out in the Act.

DOES THE CURRENT ACT OR THE NEW ACT APPLY?

The new Act does not provide for grandfathering or retroactivity. If the act or omission occurred and was discovered before June 1, 2013, the limitation period under the current Act will apply. If the act or omission was not discovered until after June 1, the limitation period under the new Act will apply.

This change may make a significant difference for litigants, as a claim discovered but not made before June 1, 2013 may have a limitation period of 6 or 10 years, while the same claim discovered after June 1 will only have a limitation period of 2 years.

SHORTENED LIMITATION PERIODS FOR CLAIMS FOR CONTRIBUTION AND INDEMNITY

The new Act will also significantly reduce a defendant’s right to bring claims for contribution and indemnity against third parties. Under the current Act, a defendant may wait and see whether he loses at trial before claiming against another party for contribution and indemnity. Under the new Act, the defendant will have to name a third-party or sue for contribution and indemnity soon after the start of the lawsuit against him.

ALL DISPUTES NOW IN REAL TIME

Claimants can no longer take a leisurely wait-and-see approach. All potential claims in all past and ongoing projects should be reviewed. Potential problem areas in ongoing projects and transactions should be anticipated, monitored, investigated, and swiftly acted upon. If in doubt, sue.

REVIEW CONTRACTUAL REMEDIES

When a limitation period expires, the claimant is not only barred from filing a claim in court.

All judicial and non-judicial remedies are extinguished. In other words, not only is the claimant prevented from suing, but also from things like demanding payment, carrying out rent distress, repossessing vehicles and other secured goods, and starting an arbitration. It is thus crucial to review all contracts with dispute-resolution provisions in light of the new Act.

IS IT POSSIBLE TO CONTRACT OUT OF THE NEW ACT?

The new Limitation Act does not expressly allow parties to contract out of the Act. The validity of provisions that attempt to shorten or lengthen limitation periods remains uncertain.

These are not the only provisions that will likely be of importance to you. You should review the entire new Limitation Act.