Limitation periods are the time in which a party must start their claim against another party. If a party fails, they lose the right to commence the claim and all or benefit from its accompanying remedies. In Ontario, the Limitations Act outlines the basic two-year limitation period which applies to most claims.
The limitation period is generally triggered to start on the date the claim was discovered or reasonably could have been discovered. For example, in a personal injury claim, the date the accident occurred would trigger the 2-year limitation period clock to start ticking. However, there are special considerations when there are multiple potential days on which a claim could have been discovered, and the court may be asked to determine the appropriate triggering date. This can be particularly important when substantial funds go unpaid and a party seeks to collect outstanding debt.
Plaintiff Seeks Payment for Overdue Invoices
In the case of Anderson Sheet Metal Ltd. v. Comtract Air Compressors Inc., the parties were involved in a dispute over unpaid invoices. The plaintiff is a sheet metal fabricator who provided services to the defendant. The plaintiff sent several invoices to the defendant for parts and labour. However, those invoices went unpaid. The parties exchanged several e-mails regarding the unpaid invoices between November 2013 and August 2014.
The plaintiff commenced a claim in May 2017 seeking payment of the outstanding invoices. However, because all invoices were sent by the plaintiff either in or before August 2014, there was an issue of whether the action commenced within the limitation period.
Plaintiff Argues Email Chain Refreshed Limitation Period
On June 14, 2016, the plaintiff emailed the defendant asking for confirmation on “when the next payment will be available.” As such, the plaintiff argued that this “refreshed” the limitations period. However, the defendant argued that this correspondence did not refresh the limitations period, except for one invoice.
The claim came before the Court on a summary judgment motion in April 2023, when the Court determined that evidence was needed regarding the June 2016 email. The parties were also told that if the limitations period was refreshed, the claim had a reasonable prospect of success.
Defendant Purchased Materials and Installation Services From Plaintiff
In 2013 and 2014, the defendant purchased materials and installation services from the plaintiff relating to louvres, ducting and dampers for their customers. Most jobs were for different clients, and invoices were issued for each job. Only one client was involved in multiple projects.
The plaintiff’s statement of claim was served in 2017, and the pleadings were closed by November 19, 2017. The action was brought under the Simplified Rules, and the Court noted that the “five-and-a-half year delay between the closing of pleadings and the summary judgment motion” was not explained. The primary issue before the Court was whether the June 16, 2016, email refreshed the discovery date, extending the limitation period to June 16, 2018.
Acknowledgment of a Debt
In reviewing the Limitations Act, the Court noted that section 4 provides the general two-year limitation period, which would normally apply to the case. It acknowledged that section 5 outlines the discoverability principles which help determine when a claim is reasonably discoverable. In these circumstances, the Court determined that the plaintiff’s claim would be discoverable 30 days after the invoice was rendered or when it was considered overdue.
The Court also reviewed section 13, which outlines the law on acknowledgments of a debt. Section 13(1) provides that when a party acknowledges a claim for payment of a debt, the date on which the acknowledgment was made is considered the date on which the claim is discovered. However, additional considerations within section 13 state that the acknowledgment must be in writing and signed by the party making it; it must be made before the expiration of the limitation period, and this applies even if the person making the acknowledgment does not promise to pay the debt.
What Constitutes an Acknowledgment?
The Court noted that the June 14, 2016, email included an account statement with the same date showing the outstanding amounts from various unpaid invoices. One of the defendant’s employees responded to this email on June 16, 2016, stating, “…we have obviously been having some difficulties in paying off this account. I will see what I can send you in the next week or so.”
The Court outlined the test for determining an acknowledgment of liability under section 13 of the Limitations Act, which was summarized by the Ontario Court of Appeal in 1702108 Ontario Inc. v. 3283313 Canada Inc., which requires:
- A person acknowledges a liability for a debt;
- A “clear and unequivocal” acknowledgment of the debt claimed by the other party; and
- More than a mere offer to settle the claim.
Defendant Provided Acknowledgment
In this case, the Court determined that using the words “this account” in addition to the statement of accounts in the parties’ email exchange clearly acknowledged the outstanding debt. The email also acknowledged the defendant’s agreement to make monthly payments to clear the account. Further, the Court confirmed that the June 16, 2016, email was sent by an employee of the defendant and could, therefore, bind the company. Based on these elements, the Court determined that the email exchange satisfied the requirements under section 13 of the Limitations Act and refreshed the limitations period such that it would begin to run from June 16, 2016.
The final question before the Court was whether the refreshed limitation period occurred before the expiration of the original limitation period in accordance with section 13(9). In this case, the debt claimed involved five different invoices, three of which were due more than two years before June 16, 2016. As such, the acknowledgment of liability did not refresh the limitations period applicable to these invoices.
Limitations Period May be Refreshed
The Court held that the acknowledgment refreshed the limitations period for two of the five unpaid invoices. Further, the Court determined that aside from a Limitations Act defence, the defendant had no basis to defend against the unpaid invoices where the limitations period was refreshed. The Court also held that the plaintiff was entitled to a 5% interest rate on the applicable outstanding invoices.
The decision reminds parties seeking to collect unpaid debts and those who acknowledge the debt that the limitations period can be refreshed if certain conditions are met. Plaintiffs who seek to commence a claim for unpaid debts must consider whether they have a timely claim. Working with an experienced commercial litigation lawyer means parties can determine whether they have satisfied the criteria to commence a claim within a refreshed limitation period.
The Corporate Commercial Litigation Lawyers at Milosevic & Associates in Toronto Provide Trusted Advice on Debt Collection Enforcement
If you are involved in a complex commercial dispute or seek to enforce a debt collection or foreign judgment, contact the skilled corporate litigation lawyers at Milosevic & Associates in Toronto. Our team works closely with corporate and individual clients to ensure that their rights and reputations remain protected and that they recover outstanding funds owed to them. To schedule a consultation regarding your business dispute, contact us at 416-916-1387 or online.