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Negotiation During Limitations: The Question of Whether Clocks Stop During Settlement Discussions
Question: Does the limitation period pause during settlement negotiations in Ontario?
Answer: No, the limitation period typically continues even during settlement negotiations unless an independent mediator is involved, as outlined in the Limitations Act, 2002, S.O. 2002, Chapter 24. Understanding this helps you safeguard your rights while negotiating. For tailored legal guidance, contact Caruso Legal Services at (289) 271-0488 to ensure your claims stay on track.
Limitation Clocks Generally Continue During Negotiations
When parties engage in settlement negotiations to resolve a legal dispute, it is easy to assume that the clock on the limitation period, often referred to as a statute of limitations by laypeople, might pause; however, such is an inaccurate presumption. Generally, the limitation period continues to run, even while parties are actively negotiating a resolution, and failure to commence legal proceedings within the prescribed timeframe can result in the loss of the right to pursue a claim. Understanding this principle is essential for ensuring that while settlement discussions are ongoing, the limitation clock needs attention so as to avoid the inadvertent compromising of legal rights.
The Law
Generally, a limitation period beings when the cause of action, or reason for suing, becomes known to the harmed person, being a potential Plaintiff, who thereby holds the legal right to sue. This status is known as the discovery principle and is enshrined in, among other limitation laws, the Limitations Act, 2002, S.O. 2002, Chapter 24, Schedule B, whereas it is said:
Basic limitation period
4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
Discovery
5 (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
Presumption
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
Suspension During a Proper Mediation
Limitation periods may be suspended during settlement negotiations when such resolution discussions are conducted via a third-party person or entity who is acting in an impartial and unbiased manner such as per the services of an independent mediator. In this circumstance, section 11 of the Limitations Act, 2002, is operative whereas it prescribes:
Attempted resolution
11 (1) If a person with a claim and a person against whom the claim is made have agreed to have an independent third party resolve the claim or assist them in resolving it, the limitation periods established by sections 4 and 15 do not run from the date the agreement is made until,
(a) the date the claim is resolved;
(b) the date the attempted resolution process is terminated; or
(c) the date a party terminates or withdraws from the agreement.
Same
(2) For greater certainty, a person or entity that provides resolution of claims or assistance in resolving claims, on an impartial basis, is an independent third party no matter how it is funded.
The suspension of limitation periods during settlement discussions ensures fairness and timely resolution of disputes. By employing an independent third-party mediator and adhering to legal frameworks outlined in the Limitations Act, 2002, parties can safeguard legal rights while fostering more productive negotiations.
Challenges
As above, a potential Plaintiff will often engage in settlement discussions, prior to commencing litigation with the hope of resolving a matter without taking legal action. Unfortunately, many potential Plaintiffs will let the clock run out during resolution discussions. The potential Plaintiff will then attempt to argue that the clock runs from the time the settlement negotiations failed to remedy the issue in dispute rather than when the issue in dispute was initially discovered. Generally, this argument will fail. This viewpoint is found in Bryenton v. 7017103 Canada Inc.,2014 CanLII 100257, wherein it is stated:
[28] Further, I should note that in this case all the defects that are now subject to this lawsuit were discovered and identified by the plaintiff prior to closing on August 8, 2012. The action was commenced on October 28, 2014, more than two years after the defects were first discovered. While I recognize and accept that there were discussion between the plaintiff and the defendant seeking to remedy the problems including the several e mail exchanges and in particular the e mail dated June 8, 2013 where the defendant appears to accept responsibility at least for some of the defects, I am not of the view that these discussions tolled the limitation period. In Toronto Standard Condominium Corp. No. 1789 v. Tip Top Lofts Development Inc., 2011 ONSC 7181 (CanLII) DM.R. Dambrot J. who held that absent a contractual obligation post discovery discussion of remediation does not toll the limitation period. I also rely on the judgement of the Supreme Court of Canada in Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC) , [1991] 2 SCR 61, for the proposition that unless I can conclude that there is evidence from which a promise not to rely on the limitation period could be inferred, the Limitation period should not be extended. I cannot reach that conclusion and therefore, I find that and claim based on the negligence of the defendant numbered company is statute barred.
Promissory Estoppel
Furthermore, and despite all of the abovesaid, the principle of promissory estoppel, as affirmed by the Supreme Court of Canada in both Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50, as well as Marchischuk v. Dominion Industrial Supplies Ltd., [1991] 2 S.C.R. 61, may toll the running of a limitation period when a party makes a clear and unequivocal promise or representation to refrain from enforcing a limitation period and the other party relies upon that promise. In such cases, the promisor is precluded from insisting on the strict application of the limitation period, as doing so would be inequitable. This principle upholds fairness by preventing a party from acting inconsistently with a previously extended assurance, thereby ensuring that the reliance interests of the promisee are protected.
