The Limitation Clock: Which Way Is The Pendulum Swinging?

The Court of Appeal for Ontario recently released two decisions involving limitation period issues. In both Ali v O-Two Medical Technologies Inc1 and 948298 Ontario Inc v Penretail II Ltd and Bentall Retail Services LP2, the court overturned lower court decisions that found actions were commenced outside the two-year limitation period. Both cases turned on the issue of discoverability.

In Ali, the decision was based on well-established principles of contract law. However, in Penretail, the court seemed to depart from its earlier decision in Lawless v Anderson3 and its recent decision in Beaton v Scotia iTrade4 that a claim is discovered when a prospective plaintiff knows "enough facts" to assert a claim and that the extent of the loss need not be known.

Both of these decisions may be of great interest, as limitation period defenses are potentially robust tools in a defendant's arsenal.

Ali v O-Two Medical Technologies Inc.

The claim in Ali involved an employment relationship in which the plaintiff employee, Ali, brought a claim against his employer for unpaid commissions. In December 2006, Ali made a sale pursuant to his commission agreement, but one week later O-Two informed Ali that it was unilaterally changing the commission rate.

In November 2007, Ali became entitled to receive his commission but was paid the lower rate. Ali brought a claim against his employer in September 2009.

The lower court was asked to determine whether the limitation period commenced when the employer changed the contract, or when it actually paid the commission at the lower rate. The Ontario Superior Court of Justice dismissed Ali's claim at the summary judgment motion, finding that his claim was discovered when the agreement was unilaterally changed, or, at the very latest, early in 2007 when his employer told him he would be paid at the lower rate. Either way, the court found Ali commenced his action beyond the two-year limitation period. Ali's claim was dismissed.

The Court of Appeal reversed the lower court's decision and held that the limitation period did not begin until payment of the commission came due and the employer tendered payment at the lower rate. The court held that this was a case of anticipatory breach. In such cases, the innocent party has two options: (i) accept the anticipatory breach and sue for damages; or (ii) continue to press for performance.

In this case, Ali did not accept the breach. He pressed for performance. As a result, the...