Limitation Periods and the Design Professional

Brian G. Kapusianyk and David C. Bishop
Gowling Lafleur Henderson LLP

On March 1, 1999 the old Limitations of Actions Act was repealed and the new Limitations Act came into force. The new Act contains significant changes to the law concerning limitation periods in Alberta.

The Limitations Act attempts to simplify the provisions of the old Limitations of Actions Act which provided for:

A six year limitation period for claims based on breach of contract - a claimant was obligated to advance a claim within six years from the date of breach of the contract.
A two year limitation period for claims based in tort where the claim was for damage to persons or property with the limitation period starting to run only when the potential claimant knew or ought to have known of the constituent elements of the cause of action.

The new Act stipulates only two limitation periods: the earlier of

two years from the time the claimant knew or ought to have known of the claim (the date of "discovery"), or
ten years from the time the claim arose.

The limitation period of two years from the date of discovery will apply now in the vast majority of all professional liability claims. However, the new Act limits the possibility of actions in respect of claims which might lie undiscovered for long periods of time by virtue of the absolute limitation period of ten years after the claim arises. Under the new Act, if the claimant does not discover the existence of a claim for ten years, that claim is barred, with some limited exceptions such as fraud and/or concealment.

This is very significant for design professionals. Without this limitation period, a design professional could be held liable to a party with whom the design professional had no contractual or other relationship years or even decades after the professional services were rendered. In the Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al (1995), 176 N.R. 321 decision, the Supreme Court of Canada held that where a professional error gave rise to a defect which could threaten the safety of the public, a design professional could be held liable to a subsequent purchaser of the property notwithstanding that there was no privity of contract or any relationship whatsoever as between the design professional and the subsequent purchaser.

For example, let us assume that ABC Architects & Engineers Inc. designed a building in 1970 for Owner 1 Co. The design included a stone veneer but did not specify soft joints to permit contraction/expansion of the building envelope. Ten years after the project has been completed, Owner 1 Co. sells the building to Owner 2 Co. After an additional ten years of occupancy by Owner 2 Co., a section of the masonry veneer falls off the building. Owner 2 Co. purports to sue ABC Architects & Engineers Inc. for negligent design of the building on the basis that they did not discover the defect until the cladding actually failed. Under the old Limitation of Actions Act, ABC Architects & Engineers Inc. could face a significant claim decades after the work in issue had actually been completed. This causes obvious difficulties for design professionals, insurers, adjusters and for defence counsel in that the individuals involved in the project, the records and field notes from the project and the original contract documents may no longer be in existence.

The new Act clearly intends to bar these types of claims on the basis that a potential claimant has no right to sue ten years after the date of the tortious conduct in issue, irrespective of whether the claimant knew or ought to have known of the constituent elements of the cause of action. As the law presently stands, it will be very difficult, if not impossible, for any claimant to successfully advance a claim ten years after the date at which the professional services rendered were completed.

Of course, as with all statutes, we will need to see whether the Court is inclined to interpret the statute in accordance with its clear wording and intent. Imagine the following scenario. An engineer provides a negligent home inspection for an 87 year old widow pensioner. Ten years and two days after the date of the inspection, the widow's home collapses due to a rotting wood foundation basement. The engineer was specifically instructed to inspect the foundation design but failed to do so. The loss is expressly excluded under the widow's homeowner policy of insurance. This claim should, on the express wording of the new Act, be barred by operation of the statute. Whether a sympathetic judge may be inclined to interpret the Act in a manner inconsistent with its clear wording and intent in view of a sympathetic Plaintiff remains to be seen.

The new Act also sets out the principle of discoverability expressly in the statute. The discoverability test has three components. A claimant must bring a claim within two years from the date upon which the claimant knew or ought to have known:

That the injury has occurred;
That the injury was attributable to the conduct of the Defendant;
That the injury, assuming liability on the part of the Defendant, warrants bringing a proceeding.

Final Note:

Limitation periods can be suspended where a Defendant fraudulently conceals the fact that the injury for which remedial order has occurred.
Further, the two year and ten year limitation periods are suspended during any period of time that the claimant is a person under disability. Persons under disability include minors who are not under the actual custody of a parent or guardian and dependant adults.
An agreement may expressly extend the limitation period as long as the agreement is in writing and signed by the person adversely effected by the extension.

We anticipate that the New Limitations Act will generate significant litigation over the next few years. While the new Act does considerably simplify the timing for the advancement of first party claims, the Act also contains more complex provisions with respect to third party claims, adding claims but no new parties, adding new claimants, and adding claims and new defendants.

This précis is not intended to provide legal advice with respect to any specific situation and is not intended to be relied upon for that purpose. It is intended to provide general information only. Readers are encouraged to seek legal advice regarding specific issues and particular facts scenarios.