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: the Court of Appeal on the limitation of unpaid invoice claims

In Collins Barrow Toronto LLP v. August Industries Inc., the Court of Appeal has held that the limitation period for a claim arising from an unpaid invoice does not run until a reasonable period of time has expired for payment of the invoice:

[5]         The other two invoices in dispute are dated April 9, 2014 and April 11, 2014.  The application judge pointed out that the engagement letters expressly provided that invoices only became delinquent once 45 days had expired from their delivery.  The application judge concluded that the limitation period for these two invoices did not commence until 45 days after they were delivered.  We agree with her conclusion in that regard.  It is consistent with the express wording of the engagement letters and also with existing case law that provides that the limitation period on an invoice does not begin to run until a reasonable period of time has expired for payment of the invoice:  see, for example, G.J. White Construction Ltd. v. Palermo[1999] O.J. No. 5563 (S.C.J.).

The decision cited by the Court was decided under the former Limitations Act, in which the accrual of the cause of action determined the commencement of time.  In contrast, time commences under the Limitations Act on discovery of the claim.  It would have been more helpful had the Court explained what impact the passage of a reasonable amount of time has on the plaintiff’s discovery of the claim, and framed the analysis in the language of Limitations Act.  In the absence of such a s. 5 analysis, I assume the principle is that a plaintiff cannot really know that she has suffered a loss until a period of time expires after payment became due.