Lawsuit changes have their limits

British Columbia is about to change its limitation periods as of June 1.

This is an important development for anyone contemplating a lawsuit in that province. In fact, limitation periods are something all Canadian businesspeople need to consider should they ever want to take someone to court to collect on a debt.

David Crerar, a partner in the Vancouver office of Borden Ladner Gervais LLP, says the change in B.C. should prove helpful to businesspeople. The new regime replaces what used to be a complicated mishmash of time periods for different kinds of claims with a more general period of two years.

“It’s more cut and dried now than under the old Act,” Mr. Crerar says.

B.C. isn’t the only province to have made this change. In the past 10 years or so, several other provinces, among them Alberta, Saskatchewan, Ontario and New Brunswick, have revamped their limitation rules to address the confusion Mr. Crerar describes.

In those provinces that have updated their legislation, the standard rule seems to be that you have two years to file a lawsuit from when you discovered the claim. That might sound straightforward, but note that I’m generalizing things. Each province or territory has its own legislation, and each of those laws is packed with exemptions — even the ones that are supposed to have been simplified.

Indeed, getting your head around limitation periods is a little like learning high school French. You seem to spend one day learning a grammar rule, then spend several weeks learning all the exceptions to that supposedly simple rule.

The first catch is how you figure out when the limitation clock starts ticking.

The law recognizes that there are a lot of situations where something might go wrong, but a long stretch of time will elapse before you realize there’s a problem. Lawyers refer to this as the discoverability principle. The provinces that have updated their limitation rules have inserted language in their legislation to ensure the clock doesn’t start ticking until the claim is discovered.

Let’s say you would like to collect on a debt. There won’t be an issue if you have a written contract that plainly states that a debt falls due on a specific date. The limitation period is obvious in this instance. If your province mandates a two-year period, you simply count two years from that date.

Where it gets fuzzy is with what lawyers call a demand debt. These are casual loans, perhaps made between family or friends, in which the money changes hands without any specific agreement about when the debtor must repay the lender.

The old approach to limitation periods would start the clock running on the date that the money changed hands. The discoverability approach gives the lender a little more control over the timeline. “Under the new regime, the clock starts ticking when I say the debt comes due,” Mr. Crerar explains. “You can basically now say, OK, pay me on June 1, and then the two-year clock starts running on June 1.”

There is a second catch. This general two-year rule that some provinces use isn’t the full story at all. Each province has its own list of exemptions to that basic rule. Some of these impose very short windows of time during which you can sue. I’ve seen some situations where you get only a few days to launch a claim. It’s something you need to be very careful about. Some provinces might be simplifying their laws, but that doesn’t mean the end result is a simply understood rule. Be very careful about limitation periods.