An important legal milestone comes into full force on Jan. 1, 2019 and it will have major implications for almost all parties involved in construction.
Passed on Jan. 1, 2004, Ontario’s Limitations Act, 2002, limits the period a person or party may initiate court proceedings in Ontario in respect of a claim to 15 years.
What that means for the design, construction, and related professionals is that they won’t be subject to liability claims from an owner after 15 years “from when the work was done,” says Glenn Ackerley, a partner with WeirFoulds LLP who practices exclusively in the area of construction law.
“As of January 1 the door will have closed on claims pertaining to buildings or projects older than the 15 years.”
Before the Act came into in effect in 2004 an owner could launch legal action if they detected problems or defects even if the building or project was constructed and completed decades previously.
That placed an onerous burden and strain on design and construction firms in terms of record keeping and simply keeping track of a project, says Ackerley.
“Some of the people involved in a project may no longer be with the company and copies of the drawings may no longer be available.”
In part, the Limitations Act was enacted through the efforts of the design and construction industries, as well as the legal profession. A member of an Ontario Bar Association committee which provided input into the statue changes, Ackerley recalls thinking at the time 15 years was a long time for the Act to come into full effect.
“But now it is here.”
Although the ultimate limitation period is set at 15 years, it’s critically important to emphasize that plaintiffs in a construction dispute only have two years to launch a lawsuit after a problem, defect or issue has been “discovered,” he says. It’s known as the general limitation period.
And what constitutes discovery is determined by four criteria:
That the injury, loss, or damage was caused by or contributed to by an act or omission; that the act or omission was that of the person against whom the claim is made; that the act or omission was that of the person against whom the claim is made; and that a proceeding with a lawsuit, would be an appropriate means to seek to remedy the injury, loss, or damage.
But that discovery criteria, especially the fourth, are subject to nuance and legal interpretation, he says.
“A contractor isn’t going to file a legal claim for a $90 defect or even two or three $90 defects, and the courts don’t look favourably on trivial claims. But what happens if there are 100 $90 defects? At what point is the line crossed?”
Resorting to legal action might not be appropriate when the plaintiff relied on the knowledge and expertise of the defendant, especially if the defendant took efforts to rectify loss or when an adequate alternative process is in place and that process, “hasn’t fully run its course.”
The two-year limitation period can also be extended, shortened, or suspended if there is an agreement by the disputing parties, if none is a consumer — in other words an individual — as defined under the Consumer Protection Act.
It’s also possible to enter into a “tolling agreement” in order to allow for negotiations to take place before litigation commences, he says.
Open to interpretation is when a party knows “or should have known” and this has been the subject of several Ontario Court of Appeal hearings this year.
One particular claim involved a dispute dating back to 2009 when two cottage owners first realized that one of their deck piers was sinking. A structural engineering firm recommended several expensive investigative and remedial steps. But the builder said the issue wasn’t serious but was due to the cottage settling and to simply monitor the situation.
As the problem continued, the owners investigated further and called an engineering firm in 2012 which concluded the retaining wall was falling and that it should be removed and reconstructed. The owners then filed a lawsuit against the builder in October 2013.
But the burden to prove discoverability rests with the plaintiff who must prove that their claim was not discovered and “was not capable of being discovered through the exercise of due diligence until some later date.”
It’s imperative that industry players contemplating a legal claim remain vigilant and “don’t let the clock run out” before the two-year period expires, says Ackerley.
“Two years goes by very quickly and if you haven’t filed a claim (within that period) you might be out of luck.”