Canada: Dust Off Your Limitation Defence: Court Of Appeal Doesn't Apply Extended Limitation Period In Yarmouth (District) v Nickerson

On March 9, 2017, the N.S. Court of Appeal stopped building inspection claims in their tracks when it decided that a defence based section 504(3) of the N.S. Municipal Government Act imposes a firm six-year time limit for claims against N.S. municipalities for building inspections. That time limit starts on the building permit application date – and can't be extended under the former N.S. Limitation of Actions Act (LAA). McInnes Cooper's Ian Dunbar and Katie Archibald represented the successful party.

Defendants in N.S. facing claims subject to specific statutory limitation periods should dust off their limitation defence, and review whether the claim may be statute-barred. This is now the case for any claims for building inspections started six years after the date of the building permit application. And while this decision specifically deals with the time limit under the statute applicable to N.S. municipalities, there are many statutes in N.S. and elsewhere with legislated time limits; if the wording is sufficiently similar, this Court of Appeal decision might support the same argument – and lead to the same conclusion.

Limitation of Actions Statutes. Under section 3(2) of the former LAA, a claimant who missed the applicable limitation period could apply to a judge for leave to extend the time limit to start a legal claim by up to four additional years. This extension applied to many types of claim so practically speaking, the maximum limitation period was often 10 years: the six-year standard limitation period plus a potential four-year extension. The current LAA, which took effect on September 1, 2015, removed this extension opportunity for all but personal injury claims. However, the former LAA still applies to claims that were started before the new LAA took effect.

Statute-Specific Time Limits. In addition to the time limits under limitation of actions legislation, many individual statutes in N.S. and other Canadian Provinces and Territories also include time limits for claims against specific parties. Examples include insurance acts, defamation acts – and municipal acts.

The Question. The question is whether such statutory time limits are a "limitation period" within the meaning of limitation of actions statutes, and can be extended where extension is available. In the case of s. 504(3) of the N.S. Municipal Government Act, which states, "[n]otwithstanding the [N.S.] Limitation of Actions Act", municipalities are "not liable" for any losses if the claim was made more than six years after the permit application date, that question is now decided: it is not subject to any extension, at least in relation to claims for building permits. However, the precise scope of the immunity under s. 504(3), has yet to be determined.

The Decision. In Yarmouth (District) v. Nickerson, the purchasers of a house sued the vendors because their home was damaged by soil subsidence. In October 2014, more than six years after the building permit application date, one of the vendors brought a third party claim against the municipality of Yarmouth claiming the municipality was negligent in issuing a building permit and in inspecting the lot and the subsequent house construction. The municipality sought to end the claim by summary judgment based on s. 504(3) of the N.S. Municipal Government Act that states, "[n]otwithstanding the [NS] Limitation of Actions Act", municipalities are "not liable" for any losses if the claim was made more than six years after the permit application date. The judge relied on earlier decisions dealing with the N.S. Defamation Act, and decided a defence based on s. 504(3) is a limitation period that can be extended by four years at the judge's discretion. The municipality appealed that decision to the N.S. Court of Appeal, and won. The Court agreed there is a firm six-year limitation period for claims against N.S. municipalities for building inspections that starts on the building permit application date:

• Applying the principles of statutory interpretation, the phrase "[n]otwithstanding the Limitation of Actions Act" in 504(3) excludes the entire LAA – both the limitation periods, and the extension possibility under s. 3(2) of the former LAA.
• The Court decided it was not bound by earlier decisions that interpreted the same language as in section 504(3), in other statutes. It confirmed the Court must interpret each statute separately based on its own wording.
• The Court specifically rejected the claimant's suggestion it had decided the issue in its 2014 decision in Halifax (Regional Municipality) v. WHW Architects Inc. In that case, the municipality had conceded that a claim beyond the time limit under s. 504(3) was subject to extension. The Court confirmed it had not decided the point, but simply noted the parties' agreement.

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