Legal Matters—Hurry up—Ontario law: 2 years to sue
Written by: Reena Basser, Licensed Paralegal, phone; 416 888 2390
This column will be addressing the major issues in small claims court in Ontario.
You supplied the person or the business with your product. You invoiced them diligently after 30 days, then again at 60 days and after two phone calls and one reminder letter, 90 days appears. More times goes by and their payment, or partial payment has not arrived.
Can you keep this up? Can you sue three years after the date the funds were due?
The answer is normally NO. The Limitations Act, 2002, in Ontario, has limited the amount of time one can sue after the “anniversary date” of the money owing. Ontario used to give people six years to sue, but they have limited the time dramatically. This implies that whenever the “anniversary date” is established (normally net 30 days after the money is due), you have two years to submit your claim into court. You can then take six months (180 days) to serve the claim and commence the proceedings. Small claims court in Ontario (monetary jurisdiction of $25,000.00) considers proceedings started when you pay and submit the claim to court, but then you have some time to serve properly to the debtor.
I cite the law as it reads. Notice the term “discovered” which implies that if the debt only was discovered at a later date, the limitations date is extended.
5(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a)
Exceptions? Of course. Section 11 of the Limitations Act does permit the claim to be extended if you have hired a mediator (funded by either party). In addition, if some debt has been paid, or the debtor recognizes (normally through a letter) and acknowledges the debt owed, the limitations period may be extended.
Being “statute barred” is very harsh in Ontario. It certainly diminishes the stress of a potential lawsuits if you might be sued but it puts on enormous stress on the creditor. It protects those debtors from simply receiving “past due” notices without any action taken. The courts do not consider the payment reminder (even with interest accruing) as a significant factor in trying to collect funds. Funds are only considered paid, or partially paid, when they are paid!
Most case law (precedents and cases that have been in the court system and recorded) favour the debtor after the two year limit. The law feels that the creditor has the onus to collect their funds, make appropriate efforts to collect and grant the debtor a way to end the uncertainty of being sued for many years. Judges feel that companies or individuals must tend to their accounts receivable within good time, quickly and efficiently. It’s good business to commence action in a lawsuit quickly. Don’t wait because Judges have not been lenient (even by one week) in this regard.
Important Numbers
