When does the limitation period commence in the context of a continuing breach of contract? Afresh each day a new cause of action accrues, so held the Court of Appeal in Pickering Square Inc. v. Trillium College Inc.
Trillium and Pickering were parties to a long-term lease of space in a shopping centre. Trillium covenanted to operate its business continuously. It didn’t. Pickering claimed for damages arising from the covenant’s breach.
Trillium moved for summary judgment on the basis that Pickering’s claim was brought outside the limitation period. Justice Mew held that Trillium’s breach of the covenant was of a continuing nature so that each day of the breach gave rise to a fresh cause of action. This meant that only the portion of the breach which occurred more than two years before the commencement of the action was statute-barred.
Trillium appealed. It argued that the breach of the covenant to operate its business continuously was complete on the first day it failed to resume occupation of the leased premises and operate its business, and that each subsequent day that it failed to operate its business was not a separate breach, but an instance of additional damages. It submitted that a continuing breach requires a succession or repetition of separate acts, whereas its breach was a single act with continuing consequences.
The Court of Appeal rejected this argument. Justice Huscroft found that Trillium’s argument that breach of its covenant to operate its business continuously established a complete cause of action the first day it failed to operate its business overlooked the consequence of its breach.
The breach entitled Pickering to cancel the lease or affirm it and require performance. Pickering affirmed the lease, and so it remained in effect and Trillium was required to perform its obligations under it as they fell due. Trillium could have resumed performance of its obligations at any time prior to the end of the term of the lease by carrying on its business in accordance with the covenant. Had it done so, Pickering would have been required to accept Trillium’s performance and would have been unable to terminate the lease in the absence of a further serious breach or repudiation. Trillium would have been liable for damages from the date of its breach until the date it resumed the performance of its obligations, but it would not have incurred liability beyond that date.
The proper approach to calculating the limitation period in the context of a continuing breach occurs on a “‘rolling’ basis”. It commenced afresh each day a fresh cause of action accrued and ran two years from that date.
This isn’t a particularly revelatory decision from a limitations perspective. The difficulties are in defining the breach, which is really a matter of contract. If the breach is continuing, there are multiple causes of action, each attracting its own limitation period. If anything, it’s misleading to describe the limitation period as rolling, because it’s the cause of action which rolls over each day, not the limitation period.
The more interesting aspect of the decision is how it highlights the tension between a “cause of action” and a “claim” in the Ontario limitations schem. Justice Huscroft links the commencement of the limitation period to the accrual of a cause of action. This is problematic, because the Limitations Act links the commencement of the limitation period to discovery of a “claim”. The words “cause of action” do not appear once in the Act, and arguably, the Limitations Act rejects the concept of the cause of action entirely.
For example (one of several), under the common law, discovery is of a cause action and turns on knowledge of the material facts giving rise to it. Under the Limitations Act, discovery is of “claims” and turns, in part, on whether a proceeding is an appropriate remedy, which is not an element of or a material fact giving rise to any cause of action.
Justice Huscroft’s statement in obiter about that when a cause of action is determinative of a limitation period is a perfect example:
[34] But accrual of a cause of action is not determinative for limitation purposes in the context of a continuing breach of contract and an election by the innocent party to affirm the contract.
The accrual of a cause of action is not determinative of anything under the Limitations Act. These are the questions that are determinative: whether a proceeding has been commenced in respect of a “claim”, on what day the act or omission giving rise to the claim occurred, and on what day the claimant first ought to have discovered her “claim”.
The conceptual difficulties arising from the Limitation Act’s rejection of the cause of action has become an interest of late. Expect a terrifically illuminating paper in, oh, a year or so.
