Debtor’s Actions Can Interrupt the Limitation Period – Lawsuits, Appeals and Compensation

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In Ontario, generally, a party has two years to bring an action from the date they discover a wrong. This is called a claim. A claim is considered discovered, for the purposes of initiating a lawsuit, on the day the person knew that: (1) An injury or damage has occurred (2) it was caused by a act or omission (3) of the person against whom the party seeks to bring legal action; and, (4) taking legal action would be appropriate to remedy the loss.

Normally, the limitation period begins on the day the person became aware of the act or omission that caused the loss. However, this is not always the case, as the case shows Thermal Exchange Service Inc. c. Metropolitan Toronto Condominium Corporation No. 12892022 ONCA 186.

Thermal Exchange provided HVAC service to Condo Corporation units. Thermal Exchange was thinking of contracting with the Condo Corporation. The Condo Corporation, however, operated on the basis that it was only obligated to pay if it was able to collect payment from the unit owner.

Between 2002 and 2015, Thermal Exchange performed work and provided invoices to the Condo Corporation. The invoices stated that payment was due within 30 days, but payment was often more than 300 days late. When Thermal Exchange received the payment, it was credited to the account. The Court decided that Thermal Exchange operated on the basis that the Condo Corporation had a checking account.

Thermal Exchange has made several follow-ups with Condo Corporation regarding unpaid invoices. The Condo Corporation assured them that the matter would be settled and that they were “working on it”.

On November 4, 2016, for the first time, the Condo Corporation notified Thermal Exchange that it was not responsible for paying bills and that bills are being charged back to unit owners. Prior to this date, Thermal Exchange reasonably believed that payment was a follow-up matter with the Condo Corporation since there had been no refusal to pay or suggestion of an inability to pay.

The central issue in this case was when Thermal Exchange first determined that legal proceedings would be an appropriate means of redressing its loss. The Court of Appeals said the Condo Corporation’s actions affected Thermal Exchange’s ability to determine whether legal action was appropriate. The Court of Appeal decided that the statute of limitations did not begin to run until November 4, 2016, when the condominium corporation first communicated that it was not required to pay.

Conclusion

In certain circumstances where a debtor promises to pay and leads the creditor to the conclusion that payment is coming and that legal action is not necessary, he can interrupt the limitation period. The determination of when the limitation period begins to run is a factual analysis. If you need a litigation attorney to bring a civil action for debt collection or other contract litigation, contact Walker Law.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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