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.

There are important implications for environmental matters, including a special provision that will eliminate limitation periods but only for the statutory remediation cost recovery action.  

We set out below the main changes under the new Act. However, this ALERT is not intended to be an exhaustive review of the new Act.

BASIC TWO-YEAR LIMITATION PERIOD

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

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.  

Readers should note that the new Limitation Act provides for special discovery rules for specific types of claims, including claims involving fraud. There are also special rules relating to discovery of claims by successors, predecessors, principals and agents. These rules should be reviewed carefully, as they alter the formula for determining the running of the limitation period.  

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 ultimate limitation 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 few exceptions, while the person with the claim is under a disability or is a minor (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 are subject to special discovery rules set out in the Act.  

DOES THE OLD 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 the new Act comes into force (i.e. before June 1, 2013), the limitation period under the current Act will apply. If the act or omission occurred prior to the new Act coming into force, but was not discovered until after June 1st, the limitation period under the new Act will apply.  

This change may make a significant difference for litigants, as some claims discovered but not brought prior to June 1, 2013 may have a limitation period of 6 or 10 years, while that same claim, if discovered after June 1, 2013, will only have a limitation period of two 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 statute, a defendant may wait and see whether he loses at trial before claiming against another party for contribution and indemnity. Under the new Act, however, the defendant will have to name as a third-party, or sue for contribution and indemnity, soon after the start of the initial lawsuit.  

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. Instead, all judicial AND non-judicial remedies are extinguished. In other words, not only is the claimant prevented from suing, but is also prevented from demanding payment, carrying out rent distress, repossessing vehicles and other secured goods, or starting an arbitration. Many contracts, such as joint-venture agreements, will set out processes for dealing with disputes. If those processes take longer than 2 years, the aggrieved party may be out of luck in pursuing a remedy. 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, AND SHORTEN OR LENGTHEN LIMITATION PERIODS?

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 time periods for litigation remains uncertain, and whether they are upheld will depend on the circumstances.  

That being said, contracts that set down a shorter (or longer) limitation period should be reviewed and potentially redrafted to better permit alteration of a time period for dispute resolution.  

IMPORTANT IMPLICATIONS FOR ENVIRONMENTAL MATTERS

It is important to realize that a single act of pollution may be subject to several limitation periods – the period that applies will depend on the claim advanced. For example, a leak of chemicals onto a neighbour’s property that causes business or health-related claims will be governed by the two year limitation period in the new Limitation Act for those claims. Claims relating to property may take several forms - each subject to different limitations. Certain kinds of claims relating to possession of land will not be subject to a limitation period as they are expressly carved out of the new Limitation Act, while other damage claims, including claims for diminution of property value due to contamination, will be subject to the two year limitation period unless another enactment governs.  

Very important for contamination situations, there is a special provision added to the Environmental Management Act, S.B.C. 2003, c. 53, so that the recovery of remediation costs under the statutory cause of action in subsection 47(1) of the Environmental Management Act will be governed by a new subsection 47(1.1) which provides that a legal proceeding may be brought at any time to recover such costs. This effectively means there will be no limitation period (no basic limitation and no ultimate limitation) for a statutory remediation cost recovery action. While this protects persons who incur remediation costs to clean up historical contamination, it has raised concern that once those remediation costs are incurred there is no finality for those responsible as no ultimate limitation applies to protect them. Lobbying is underway in an attempt to change the new Act to have limitation periods apply once remediation costs have been incurred.  

The exception for the remediation cost recovery action does not extend to other claims in a contamination situation, for example business interruption or property devaluation, where the new Act will apply. The transitional provisions will be particularly important in cases of historical contamination.  

Businesses should review applicable laws to determine what kinds of additional or alternate limitation periods may apply to them.  

It is also important to note that the change to the ultimate limitation period will have dramatic impacts to several types of environmental claims. Much will depend on whether the damage is “ongoing” or a one-time event. Three examples show how the ultimate limitation period will bar, or bar in part, claims depending on whether they are ongoing:  

Example 1:

  • One-time leak of underground storage tank on January 1, 2015.
  • Environmental damage to neighbouring property not identified until 2034 (a date past the ultimate limitation period of 2030 for initial damage). Claim brought immediately.
  • Result: Except for those liabilities not extinguished by other enactments or where limitation periods are governed by a different act (including the remediation cost recovery action under the Environmental Management Act), liability will be extinguished.

Example 2:

  • Ongoing leak of underground storage tank. Leaking starts on January 1, 2015.
  • Environmental damage to neighbouring property not identified until 2034. Claim brought immediatel.
  • Result: Except for those liabilities not extinguished by other enactments or where limitation periods are governed by a different act (including the remediation cost recovery action under the Environmental Management Act), damage from 2015 through 2018 is not recoverable (barred by operation of the ultimate limitation period). Damage caused 2019 through 2034 may be recoverable if discoverability applied (and plaintiff is successful in claim). Damage caused 2033 and 2034 recoverable if plaintiff is successful in claim.

Example 3:

  • One-time leak of underground storage tank on January 1, 1995.
  • Environmental damage to neighbouring property not identified until 2020. Claim brought immediately.
  • Result: Except for those liabilities not extinguished by other enactments or where limitation periods are governed by a different act (including the remediation cost recovery action under the Environmental Management Act), liability will be extinguished.

There are many variations of the above examples in dealing with environmental matters and you should get specific advice to consider your specific circumstances.  

From the above examples, two critical issues emerge for long-term (more than 15 year) damage claims:

  1. Whether a claim is barred fully or in part will depend on whether there is an “ongoing” or “one-time” act or omission that forms the basis of the claim.
  2. For claims that are based on “ongoing” acts or omissions, trial and expert witness time will likely be spent considering the appropriate apportionment of damage to the period that is barred by operation of the ultimate limitation period.

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