Real Estate

Proceed with caution with looming limitation periods

By AdvocateDaily.com Staff

Condo corporations should err on the side of caution when it comes to limitation periods in disputes with service providers, says Toronto condominium lawyer John De Vellis.

De Vellis, a partner with Shibley Righton LLP, says a recent Ontario Court of Appeal (OCA) case revolving around a couple’s problems with their $60,000 HVAC system should serve as a warning to condos that hesitate to sue for fear it may interfere with a professional relationship.

After entering a service contract with the company that installed the system in their house, the plaintiffs in the case eventually claimed that the defendants were responsible for the issues, but a motion judge dismissed their claim summarily after finding they waited too long to sue.

In its judgment, a panel of the province’s top court ruled by a 2-1 majority to uphold the motion judge’s decision, rejecting the plaintiffs’ arguments that the limitations period should have been extended further because they were still relying on the “superior knowledge” of the defendants.

“The result seems a bit unfair to the plaintiffs because they were kind of lulled into a false sense of security that the defendants would deal with the problem,” De Vellis tells AdvocateDaily.com. “Condos have these kinds of issues all the time with contractors or developers, and the message to them is that they need to be really careful with limitation periods because the law in this area is very convoluted.

“You can’t necessarily rely on the fact that people are still doing work for you, and if there’s any doubt at all, they should err on the side of caution and start a claim,” he adds.

According to the OCA decision, the couple had problems with the HVAC system almost immediately after its installation in 2006. After complaining to the defendant installer, it convinced the plaintiffs to enter a two-year maintenance program starting in June 2007, but the problems continued.

The maintenance contract expired in May 2009, but in late 2010, the plaintiffs received information from the system’s manufacturer suggesting the defendants had failed to install other customers’ products properly. They finally launched their claim in February 2012, just days after an environmental report pinpointed faulty HVAC installation as a possible reason for mould growth in their home.

A motion judge accepted that the limitation clock was stopped during the term of the maintenance contract under section 5(1)(a)(iv) of the Limitations Act because the plaintiffs were “relying on the superior knowledge and expertise” of the defendants during that time, but still found the claim statute-barred after finding the plaintiffs should have been aware of their claim more than two years before February 2012.

A majority of the OCA panel agreed with that assessment, though dissenting Justice Kathryn Feldman would have sided with the plaintiffs after noting inconsistencies in the motion judge’s decision that suggested the plaintiffs were still seeking help from the defendants as late as the fall of 2010.

According to De Vellis, an unfortunate side effect of the decision is that it incentivizes parties to launch a lawsuit without having all the information they may need to prosecute it.

“You don’t need to know for certain, just that you have a ‘reasonable basis’ for a claim,” he says. “I’m not sure many laypeople would understand the distinction, but what it means is that you may have to start a claim before you have enough evidence.”

Still, De Vellis says there are ways for prospective plaintiffs to protect their legal rights without entering full-blown litigation immediately.

For example, he says when a claim is filed and issued by the court, the plaintiff still has six months to serve the defendant. Even after that date, a plaintiff may be able to obtain an extension of the time to serve if a judge agrees it is necessary.

In some cases, De Vellis says the existence of a claim does not prevent continued co-operation between the parties, who may agree to hold off on proceeding any further while they attempt to resolve their differences.

“The costs of preparing and filing a claim are relatively low,” he says. “The action can remain outstanding, but you have preserved your limitation period.”

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