C.A. Says s. 21(1) of Limitations Act, 2002 No Longer Permits Addition of Parties After Expiry of Limitation Period, Regardless of Whether “Special Circumstances” Exist

Today, the Court of Appeal released two decisions which address the problem of whether a limitation period can be extended on the basis of “special circumstances” when commencing proceedings or adding defendants to existing proceedings. The answer is a qualified “no”.

The two cases are Joseph v. Paramount Canada’s Wonderland and Meady v. Greyhound Canada Transportation Corp.

Joseph v. Paramount

In Joseph, the cause of action arose on September 5, 2004, after the coming into force of the Limitations Act, 2002 (January 1, 2004). The plaintiff had been injured at an amusement park. Through inadvertence of the plaintiff’s solicitor, no action was commenced within the two year limitation period prescribed by s. 4 of the Act. When he learned of the error, the solicitor caused a statement of claim to be issued on October 31, 2006, almost two months after the limitation period had expired.

The defendant moved under Rule 21.01(1) of the Rules of Civil Procedure, for a determination of whether the action was prescribed. The motions judge, Justice Gerald F. Day, concluded that he still had a discretion, under the common law doctrine of “special circumstances”, to extend the time for commencement of an action. He found that such circumstances existed here, since there had been inadvertence on the part of the plaintiff’s solicitor and no prejudice to the defendant.

Interestingly, the Court of Appeal not only said that the common law “special circumstances” power has been taken away by the new Act, it noted that even when courts had had that power, it only allowed defendants to be added to an existing action after the expiry of a limitation period. The discretion did not permit the commencement of a new action beyond the limitation period. In making the latter ruling, the Court seems to have overruled a series of cases in the last several years, in which judges have done exactly that: St. Denis v. TD Insurance Home and Auto Liberty Insurance Co of Canada (2005), 80 O.R. (3d) 76 (S.C.J.); Doyley v. York Condominium Corp. No. 487 (2006), 82 O.R. (3d) 629 (S.C.J.); and Munshaw v. Economical Mutual Insurance Co. (2007), 84 O.R. (3d) 785 (S.C.J.).

With respect to “special circumstances”, the Court of Appeal noted that neither Justice Day nor counsel arguing the motion before him had addressed the effect of the new Act; everyone seems to have assumed that the “special circumstances” power still existed. (There have been many cases decided since January 1, 2004 in which the same assumption has been made.) The Court noted that s. 4 of the Act “mandates a two-year limitation period ‘[u]nless this Act provides otherwise'”. As a result, relief from a limitation period imposed by that statute must derive from the legislation itself, not from common law.

The principal argument made on behalf of the plaintiff seems to have been based on s. 20 of the Act. It permits the extension, suspension or other variation of a limitation period “by or under another Act.” Counsel for the plaintiff argued that the “special circumstances” power has historically been applied by the courts in conjunction with Rules 5.04(2) (“adding, deleting or substituting parties”) and 26.01 (“amendment of pleadings”) of the Rules of Civil Procedure. Because the Rules are enacted under the authority of the Courts of Justice Act, so the argument went, the “special circumstances” power was still available by virtue of being an extension “by or under another Act”.

However, the Court rejected this submission. It said that it is not the Rules themselves that have incorporated the doctrine of “special circumstances”; it has been the overlay of a common law principle on the Rules. The Court pointed out that if the plaintiff’s argument were accepted, s. 20 of the Act would conflict with s. 21, which specifically prohibits the addition of parties to an existing action after the expiry of a limitation period.

In the result, the appeal was allowed and the Court declared that the plaintiff’s action was statute-barred.

Meady v. Greyhound

The second case considered by the Court involved a more typical fact situation. As a result of a motor vehicle accident that occurred on December 23, 2000, an action had been commenced within the two-year limitation period then provided for by s. 206 of the Highway Traffic Act. Four years after the expiry of that limitation period, the plaintiffs sought to add another defendant and relied on the principle of “special circumstances”. The proposed new defendant opposed the motion on the basis that s. 21(1) of the Limitations Act, 2002 had eliminated that discretion and, in the alternative, that no special circumstances existed in this case.

Mr. Justice George P. Smith accepted both of these arguments. He held that s. 21(1) precluded the addition of the new defendant and that, even if that were not the case, no special circumstances existed in this case.

The Court of Appeal said that Smith J. had been wrong in his first conclusion but correct about the second, and dismissed the appeal.

With respect to s. 21(1), the key point about which the Court of Appeal disagreed with Justice Smith was as to whether that section applied to acts or omissions where the transition provisions of s. 24 of the Act apply. Here, the act or omission occurred years prior to the Act coming into force on January 1, 2004 but the motion to add a defendant was brought after that date. Smith J. held that s. 21(1) nevertheless applied, but the Court of Appeal disagreed.

Therefore, the law as it existed prior to the coming into force of the Limitations Act, 2002 governed this case. That law included the common law discretion to extend limitation periods in special circumstances when new parties are being added to an existing action. For this reason, contrary to his own view of the case, Justice Smith had had a discretion to add the new defendant. But the Court of Appeal said that while His Honour had been wrong about whether or not he had the “special circumstances” discretion, he had not been wrong in his analysis as to whether special circumstances existed on the facts of this case. The plaintiffs had made a deliberate decision not to sue the new defendant during the limitation period and there were no circumstances which warranted an extension of that period.

Comment

These two decisions bring much-needed clarification to this area of law. The following is now clear:

  1. Even under the law as it stood prior to January 1, 2004, courts did not have discretion to extend the time for commencing an action. The cases in which that was done were wrongly decided.
  2. For claims arising on or after January 1, 2004, the former discretion to add defendants after the expiry of a limitation period no longer exists, unless that power arises “by or under another Act”.
  3. For claims governed by the transitional provisions of s. 24, the former law applies. For most limitation periods, that would include the discretionary “special circumstances” power.

All “new” claims (ones arising on or after January 1, 2004) to which the Limitations Act, 2002 applies will fall under the current regime, which means that courts no longer have the “special circumstances” power to extend the limitation period applicable to those claims.

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