Ontario: the limitation of unpaid invoice claims

In Newman Bros. v. Universal Resource Recovery Inc., the defendant ventured a dubious limitations defence based on the argument that a plaintiff who delivers multiple invoices has to commence a separate action in regards of those invoices.  The court rejected it:

[26]      The defendants submit that the limitation period begins to run under this particular contract 16 days after the delivery of each invoice, and therefore separate actions would have to be commenced at different times whenever there was a delay in the payment of a particular invoice. I reject such an argument as not commercially reasonable, unduly onerous on the parties, and a potential waste of judicial resources.

[27]     As was stated in 407 ETR at para. 39:

A civil action becomes appropriate when 407 ETR has reason to believe it will not otherwise be paid – in other words, when the usually effective license plate denial process has run its course. Thus the date when a vehicle permit expires for failure to pay a toll debt is the date a civil action is an appropriate means to recover a debt. This date starts the two-year limitation period.

 [28]      I accept the position of the plaintiff that it trusted the defendants, it did not want to jeopardize a long standing business relationship and it believed, from the promises made, that payment would be forthcoming and in fact some were. That in my view was a reasonable basis, and reasonable consideration to forebear on issuing the claim to see if further payments would be forth coming.

[29]       I conclude that I have not been persuaded by the defendants, based on the record before me, that the legally appropriate time to sue was two years after the August 2009 payment. Indeed, I find the argument of the plaintiff has merit. It was promised further funds, there were no objections to the invoices submitted or the work done, and it received further funds in May 2011after receiving such promises of payment.

[31]     Based on this record one would have difficulty thinking that the defendants thought the May 31, 2011 payment was all they potentially owed, or that, the plaintiff thought that that payment had satisfied the debt (see s. 13(1) of the Limitations Act, 2002; see also Buik Estate v. Canasia Power Corp., 2014 ONCA 2959 at paras. 13-15).

This seems like a sound analysis, and one which underscores that a plaintiff doesn’t necessarily discover a claim arising from unpaid invoices on the date the invoices become due and aren’t paid (though note that the impact of s. 13—an acknowledgment—is unrelated to discovery).

Ontario: Acknowledgments of liability must be clear, unequivocal

Section 13(1) of the Limitations Act applies to acknowledgments of liability:

Acknowledgments

13. (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.  2002, c. 24, Sched. B, s. 13 (1).

What type of acknowledgement will engage this provision? One that is clear and unequivocal.  A mere proposal for a settlement plan that doesn’t acknowledge an amount owing won’t suffice.  The Court of Appeal decision in 1702108 Ontario Inc. v. 328331 Canada Inc. reiterates the principle:

[5]         The language of the statute sets out the applicable test: s. 13(1) is engaged when a person acknowledges liability in respect of a claim for payment of a liquidated amount. In Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 (CanLII), this court held, at para. 1, that s. 13(1) requires a “clear and unequivocal acknowledgement of the debt claimed.” In that case, the court upheld the motion judge’s finding that a mere offer to settle a claim, without acknowledging that any amount remained owing, did not amount to an acknowledgement of liability for the purposes of s. 13(1).

[6]         In the present case, Mr. Durrani’s March 14 email did not acknowledge liability for the liquidated sum of $296,700 demanded by the appellant in its March 14 correspondence. At most, the respondent’s March 14 email proposed negotiating a settlement plan, without acknowledging that any amount remained owing. When the appellant subsequently pressed for an acknowledgement of liability for the liquidated sum, the respondent refused to give one. Accordingly, we see no basis to interfere with the motion judge’s conclusion that the March 14, 2013 email was not an acknowledgement. We would not give effect to this ground of appeal.