The Second Opinion: Appellate Court Applies Brakes to “Rolling” Limitation Periods

Some causes of action are “continuing” in nature.  Historically, torts such as trespass or nuisance have in some instances fallen into this category.  More recently, Canadian courts have recognized that breaches of contract can also be continuing in nature, particularly in cases where the agreement calls for periodic payments that are dishonored.  In essence, Canadian Courts have generally held that the failure to honor each of the scheduled periodic payments gives rise to a discrete, independent cause of action with its own limitation period.

The practical result of this approach has been that even if a claim for breach of contract was initiated beyond the limitation period as measured from the first missed payment, a plaintiff could nevertheless recover all of the amounts that were owed in the portion of the period (corresponding to the applicable limitation period) immediately prior to the commencement of the action.  For instance, if a contract called for periodic payments was breached in 2010 but the breach continues to 2014 and the applicable limitation period is two years, and a claim is ultimately initiated in 2014, the claim is normally regarded as not being totally barred but rather recovery is limited to the payments owed in the two year period (per the limitation period) before the claim was filed in 2014.  A recent decision of the Alberta Court of Appeal, however, rejects  this approach to “continuing” contractual breaches:  Halter v. Standard Life Assurance Company of Canada, 2014 ABCA 57.

In Halter, the plaintiff’s long-term disability insurer terminated coverage at the end of 2001.  The plaintiff did not commence his claim until March of 2006.  The applicable limitation period was two years under Alberta’s Limitations Act (the Court of Appeal ruled that the limitation period under the Insurance Act did not apply).  The plaintiff claimed that because his disability was ongoing, his insurer’s obligation to make monthly periodic disability payments was also ongoing.  Accordingly, the plaintiff asserted that he was entitled to all of the monthly disability payments which he was owed between March of 2004 and March of 2006.

The Alberta Court of Appeal, departing from a well-established corpus of jurisprudence, ruled that the plaintiff’s entire claim was time-barred.  The Court of Appeal held that the limitation “clock” began to run as soon as the insurer “no longer accepted that [the plaintiff] had a continuing disability” and indicated it would no longer make monthly payments (at para. 15).  Thus, the Court rejected the plaintiff’s argument that he could “hoard his claim indefinitely” (at para. 14).  As soon as the insurer communicated its views, the plaintiff “had to decide whether he wanted to have a court overrule the insurer’s decision and he had to take steps to get the court involved” as his claim had “now become concrete” (at paras. 15 and 18).

In so ruling, the Court distinguished earlier cases which involved limitation periods which began to run from the crystallization of a “cause of action” (such as Ontario’s former Limitations Act) or from the date when payments became “payable”.  Alberta’s Limitation Act, in contrast, refers to an “injury” as the event triggering the commencement of a limitation period.

The decision in Halter has wide-reaching implications.  As Ontario’s current Limitations Act also uses the word “injury” (along with the words “damage” and “loss”) as a relevant event which triggers the running of a limitation period, it will no longer be safe to assume that a breach of an obligation to make periodic payments under a contract gives rise to a series of causes of action which in effect extends the limitation period and permits partial recovery of the total amount owing.  Rather, an innocent party to a contract will be well-advised to ensure that a claim is commenced within the limitation period as measured from the date that the first of a series of payments was missed in situations where the contract-breaker evinces an intention not to make future payments.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.

breach of contract Continuing Breaches Continuing Causes of Action Halter v. Standard Life Assurance Company of Canada 2014 ABCA 57 limitation periods Limitations Act Periodic Payments Recurrent Breaches

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