Through the enactment of the Limitations Act, 20021 ["the Act"], which took effect on January 1, 2004, the Ontario Legislature intended to bring clarity to the issue of limitation periods in Ontario. The Act introduced a basic limitation period of two years and an ultimate limitation period of 15 years for certain types of claims. In doing so, the Legislature sought to simplify the previous Limitations Act,2which, combined with limitations provided for in various other pieces of legislation, resulted in multiple limitation periods.
Despite the intention to bring clarity and simplification, the Act left many unanswered questions. One particular issue that required clarification was how and when pleadings could be amended. In 2009, several Ontario court decisions addressed some of these questions. The issues in these cases included whether parties could add new parties to a claim, correct a misnamed party, or add additional facts to their pleadings; all after two years from the date of the cause of action.
In this article, we address three areas on the topic of amending pleadings in the context of the Act:
- The provisions of the Rules of Civil Procedure3 ["the Rules"] and the Act which govern amending pleadings;
- The Court of Appeal decision that addresses amending pleadings in accordance with the Act; and
- The test to be applied when determining when a party may amend its pleadings.
Under the Rules, amendments are presumptively approved. Specifically, under Rule 26.01, the Court shall grant leave to amend a pleading at any stage of an action on such terms as are just. Case law establishes that the Court should not refuse a pleading amendment as legally untenable except where it is clearly impossible that the claim will succeed or where prejudice would result that could not be compensated for by costs or an adjournment.
The burden lies on the moving party to show the absence of prejudice, or that costs or an adjournment will adequately compensate the responding party. Where the moving party meets that threshold, an amendment under the rule is mandatory, no matter how careless the omission or how late the application.4 The important exception is that an amendment to pleadings which has the effect of relieving against the operation of a limitation period, is not permitted.
As noted above, the Act provides for a basic two-year limitation period. Section 4 of the Act provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered, unless the Act provides otherwise. Also, section 21(1) of the Act prevents the amendment of pleadings in order to add parties to a claim following the expiration of a limitation period.
Case Law: Special Circumstances and Joseph v. Paramount Canada's Wonderland ["Joseph"]
In the past, the Court had discretion to extend limitation periods by applying the doctrine of special circumstances. This doctrine originated in the Supreme Court of Canada's 1972 decision in Basarsky v. Quilan5, and came to be increasingly applied to motions to add parties and to amend pleadings. This allowed parties to argue that special circumstances existed which permitted the Courts to allow amendments after the expiration of the limitation period, unless prejudice would result that could not be compensated for by costs or an adjournment.
Until the Ontario Court of Appeal's decision in Joseph6, many lawyers in Ontario still tried to rely on the Common Law doctrine of special circumstances. In Joseph, the cause of action arose on September 5, 2004, after the coming into force of the Act. Through a series of unfortunate events, the limitation period was missed by less then two months. On a motion brought by the defendant for a ruling on whether the action was statute-barred, Justice Day held that he had the discretion under the doctrine of special circumstances to extend the time to commence the action. The defendant successfully appealed to the Court of Appeal, which held that the action was statute-barred.
In its decision, the Court of Appeal unequivocally pronounced that the doctrine of special circumstances no longer applied. The Court of Appeal held that it was bound by the wording of the Act, such that the common law discretion to extend the limitation periods no longer existed. Joseph stands for the proposition that a "new cause of action" is to be governed by its own limitation period. If that new cause of action is subject to the Act (actions arising on or after January 1, 2004), the doctrine of special circumstances cannot apply. Thus, the first question that must be answered when an amendment is sought is whether that amendment raises a new cause of action. If it does, then the two-year limitation applies.
Amending pleadings after the two-year limitation period
In Ascent Incorporated v. Fox 40 International Inc.7, a 2009 motion before the Ontario Superior Court of Justice, the Court outlined the test to determine whether amendments plead "new causes of action". The Court affirmed that in order to determine whether an amendment is statute-barred, one must determine whether substantially all of the material facts giving rise to the new cause of action have previously been pled or whether new facts are sought to be added that are relied upon to support a new cause of action after the two-year limitation period.
In its decision, the Court outlined that "a new cause of action" was not asserted if the amendments:
- simply pled an alternative claim for relief arising out of the same facts previously pled and no new facts were relied upon [i.e. increase in damages];
- amount simply to different legal conclusions drawn from the same set of facts;
- simply provide particulars of an allegation already pled; or
- were additional facts upon which the original right of action was based.
As an example, the following would create new causes of action and, consequently, would be statute-barred if the two-year limitation period had expired:
- If the amendments added a markedly different and new set of facts to fashion liability. For example, if it turns a breach of contract claim into a fraudulent misrepresentation claim;
- If the amendments attempted to plead facts that could lead to personal liability on individuals acting in the capacity as officers or directors of a corporation, when none was previously alleged in the Statement of Claim against the corporation; and
- If the plaintiff sought to add a defendant to the claim.
Although this article has only addressed some of the key points with respect to amending pleadings, it appears clear that particular attention to the Act, is required. All new claims arising on or after January 1, 2004, to which the Act applies, will fall under the current regime, which means that parties can no longer rely on the doctrine of special circumstances to extend the limitation period. Also, there are various exemptions under the Act which a party must be mindful of, such as the discoverability rule (s.5) and actions involving minors (s. 6), incapable persons (s. 7) and assaults and sexual assaults (s. 10).
As the Act was intended to be a more comprehensive approach to the limitation of actions, the Court has taken a restrictive approach in its application. One must be more vigilant than ever when commencing an action or drafting pleadings, as amendments may be unattainable at a later date, especially after the expiration of the two-year limitation period. As a result, parties need to be diligent in taking steps to obtain and provide as much precise and detailed information at the outset of a claim. Moreover, a responding party served with a motion to amend a pleading should carefully analyze whether the moving party is attempting to plead a new cause of action, beyond the expiration of a limitation period.
1S.O. 2002, Chapter 24, Sch B.
2R.S.O. 1990, Chapter 24, L. 15.
3R.R.O. 1990, Reg 194.
4This, however, does not apply to Rule 5.04 which deals specifically with "misjoinder, non-joinder, and parties incorrectly named". Under these circumstances, the court has a residual discretion to deny any such amendments.
5 S.C.R. 380.
6 ONCA 469.
7 O.J. No. 2964.