Can A Corrective Invoice Restart The Limitations Clock? ABQB Clarifies Limitations Law Relating To Stale Billings

Here's a familiar scenario: A service provider that has been invoicing its client for several years at some point discovers that it has been calculating its services incorrectly and has missed billing for an item. The mistake goes back a number of years. The service provider then sends a "corrective invoice" containing the previously missed charges to the client, several years after the fact.

Can the service provider in this scenario expect to now be paid?

When does the limitation period start to run in relation to services for which no invoice was issued? Is it possible to effectively extend the limitation period by issuing a corrective invoice?

In the standard case, issuing a corrective invoice does not restart the clock

A recent Alberta Court of Queen's Bench decision—Royal Well Servicing Ltd v Murphy Oil Company Ltd, 2018 ABQB 514 (Murphy Oil)—highlights a number of important points to be considered by anyone seeking to recover amounts that were not previously invoiced but should have been. In these circumstances, issuing a "corrective invoice" now for past invoice errors and waiting until the corrective invoice is refused by the recipient will not restart the limitation period.

The decision in Murphy Oil clarifies what has been a murky area in limitations law, particularly in Alberta but also in other jurisdictions that have a modern limitation statute containing analogous provisions.

While the law is clear that knowledge of the exact quantum or extent of damages is not required in order to trigger the starting of the limitation period, the corrective invoice presents a situation where the limitations clock may be triggered (1) prior to any actual breach of contract occurring, and (2) prior to any actual economic damages being suffered (technically, there will have been no breach of contract or actual loss until the corrective invoice is issued and the recipient refuses to pay).

The facts of Murphy Oil

In Murphy Oil, the factual circumstances were along the lines of the scenario described above: a service provider (the Plaintiff, Royal Well Servicing Ltd., provided various services to the defendant, Murphy Oil Company Ltd. at various oil drilling sites in Alberta, pursuant to a long-term service agreement.

Throughout their relationship, Royal completed a daily work record that included checkboxes for the services provided on site. Royal would then invoice Murphy for each job, usually within a week of completing that job. The service...