Don’t let clients claim legal losses late

Some of the more mundane aspects of the law revolve around time: the calculation of notice periods; the periods in which court documents must be served and filed; the number of days before a trial that expert reports must be filed.

While not adhering to these deadlines can significantly impact a case ,missing one does not usually determine its outcome. An extension may be available. Yet certain time limits allow no latitude. If they expire, a case can end before it’s begun—partly because it did not begin on time in the first place.

The limitation period prescribed by statute requires a case to begin before its expiry date. Otherwise, the claim can be barred and dismissed. Each case, depending on the cause of action (facts that allow for a legal remedy) may have a different limitation period.

Undue delay

Not all causes of action have a prescribed limitation period. For those that don’t, passage of time may bring the equitable doctrine of laches and acquiescence (undue delay in asserting a right or consenting by remaining silent) into play. There are instances when a limitation period had not expired, yet the court barred action because the claimant’s delay amounted to laches or acquiescence.

A person who has suffered a loss by the act or omission of another, or hasn’t yet received an entitlement that’s due, should take steps early to remedy the situation.

The most common limitation period in Ontario is two years from the date a cause of action arose. This is for causes of action arising on or after January 1, 2004—the date the new Limitations Act came into effect. For causes of action arising before that date, the most common limitation period is six years—as per the prior act.

Certain limitation periods are subject to discoverability, which means the clock doesn’t start ticking until the claimant is aware of all elements of the cause of action. Others are not subject to the same concept. For instance, discoverability isn’t an issue in the application of Section 38 of the Trustee Act. The two-year limitations periods in that section govern actions by and against estate executors.

The doctrine of laches takes into account whether a claimant’s delay seemed to either suggest acquiescence with the defendant’s conduct; or caused the defendant to alter his or her position, relying on the situation as it stood; or permitted a situation to arise which it would be unjust to disturb.

A look at laches

For one part of the laches doctrine, a person’s knowledge of his rights is necessary to determine whether he appeared to agree with the defendant’s conduct. The standard is objective, i.e. whether it is reasonable for the claimant to not know his legal rights, given that knowledge of the underlying facts would be relevant to a possible legal claim.

For another part, laches doctrine does not depend on knowledge. Instead, it focuses on whether there is prejudice to the other party. For instance, the passage of time may have interfered with the ability of people to give evidence.

The death of witnesses or unavailability of documents are other examples of potential prejudice. In such cases, a delay in bringing a case forward may have permitted such situations to arise, and the case will not be heard.

A recent decision in Re Hipel suggests a beneficiary in an estate and/or trust may have a duty to inquire about the status of the administration and her entitlements. In other words, there’s a risk to staying idle for many years, when no or minimal distributions have been received. A claimant who steps forward later may find her claim barred.

Some have suggested imposing a duty upon a beneficiary to make inquiries is unfair. A trustee should apprise a beneficiary of the status of the administration at reasonable intervals. That trustee should advise the beneficiary of the basic nature and extent of entitlements, and the anticipated timing of their receipt, if possible.

And, if there is a legitimate issue or question about those entitlements, the beneficiary should seek independent legal advice. The doctrine of laches was applied in Re Hipel. The courts found the would-be claimant had sufficient knowledge as to her interest in the estate, and barred her subsequent late claim. The case is still under appeal.

The part of the laches doctrine not dependent on knowledge would be easier to apply objectively, by inquiring:

• Has there been a change in position by the person who raises laches, in taking steps that rely on the situation as it stood for years?
• Is the delay the result of the claimant’s conduct, or would it have resulted independent of that conduct?
• Is there prejudice? Is it great or small?
• Can the prejudice be dealt with by some means short of barring the claim?

It’s difficult to measure the concept of acquiescence with precision. Rather, a would-be claimant may have been misled or misunderstood. In not taking active steps to enforce legal rights, the claimant may have been led to understand, by the opposite party that it was not necessary to do so. Or, the claimant may have lacked some vital piece of information, without which there seemed no sense to proceed—not knowing what course best to take otherwise.

The objective assessment of such matters may be a difficult task for a court. Rather, considerable subjectivity may be involved, given that the outcome may depend on the available, and likely conflicting, testimony of the witnesses.

While a claimant may be barred by laches, so may certain defences to a late claim. This may level the playing field with respect to an allegedly late claim. Laches is an equitable defence, as are a number of countervailing claims to the assertion of a property right.

While there is case law on this, it has received scant recent judicial attention. If, however, the rights of parties are to be appropriately adjusted by the courts, it is not just the assessment of whether a late claim may be too late but whether the other side’s countervailing claim may also be too late. This would involve a multi-perspectival analysis both of the meaning and significance of each side’s acts and/ or omissions, and of the status quo that persisted before a claim was brought.

Daniel Dochylo, T.E.P., C.S. is a Partner at Borden Ladner Gervais LLP and National Chair of the Estate and Family Litigation Practice Group.