Court of Appeal Decision of the Week

Are Landlord’s Claims Barred by the Limitations Act?

Case: 926 Capital Corp. v Petro River Oil Corp., 2016 ABCA 393 (CanLII)

Keywords: “Modern Approach”; Limitations Act, RSA 2000, c L-12; Landlord/Tenant

Synopsis:

This action involves a claim by a landlord, 926 Capital Corp., against a tenant, Petro River Oil Corp. The landlord sues for unpaid rent under a lease. The statement of claim is filed over 4 years after the last payment of rent, over 4 years after the tenant vacated the premises, and over 3 ½ years after the landlord served its written notice of default under the lease.

The landlord initially decided not to pursue a claim for rent because a legal dispute would be expensive, and any potential recovery would be minimal or speculative. A change in the tenant’s financial circumstances caused the landlord to re-evaluate.

The tenant applies for summary dismissal, arguing it is entitled to immunity from liability pursuant to s. 3 of the Limitations Act, RSA 2000, c L-12. Pursuant to Smiechowski v. Preece, 2015 ABCA 105 (CanLII), a Master in Chambers grants partial summary judgment; dismisses the landlord’s claim for unpaid rent.

The landlord applies to add a separate claim for damages against the tenant. It claims to have suffered damages because the rent it eventually received was less than the rent it would have received from the original tenant. In the result, the Master in Chambers allows this action to proceed (despite barring the first action for unpaid rent).

An appeal to a Q.B. Judge (Madame Justice Strekaf) is dismissed.

The Court of Appeal finds no reviewable error in the Master’s approach.

Importance:

For Slatter J.A., just because a defendant is “immune from liability” on the original claim does not mean the proceeding is void or beyond amendment. This conclusion is reinforced by the wording of s. 3(1) and s. 6(1) of the Limitations Act which focus on the defendant being immune from liability:

3(1) Subject to subsections (1.1) and (1.2) and section 11, if a claimant does not seek a remedial order within

(a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known,

(i) that the injury for which the claimant seeks a remedial order had occurred,

(ii) that the injury was attributable to conduct of the defendant, and

(iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding,

or

(b) 10 years after the claim arose,

whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

6(1) Notwithstanding the expiration of the relevant limitation period, when a claim is added to a proceeding previously commenced, either through a new pleading or an amendment to pleadings, the defendant is not entitled to immunity from liability in respect of the added claim if the requirements of subsection (2), (3) or (4) are satisfied.

Citing Frank v King Estate (1987), 1987 ABCA 244 (CanLII) at pp. 300-301; Stout Estate v Golinowski Estate, 2002 ABCA 49 (CanLII) at paras. 76- 82; Pearson Finance Group Ltd. v Takla Star Resources Ltd., 2002 ABCA 84 (CanLII) at para. 21; and Kopr v Kopr, 2006 ABQB 405 (CanLII) at paras. 21-2, Slatter J.A. found the “modern approach” is that procedural shortcomings, even those of a fundamental nature, do not render proceedings a nullity. (See para. 3).

With respect to the landlord’s initial hesitation and decision to proceed after the tenant’s financial situation went from “dire to flush”, as the Master below said (see 926 Capital Corp v Petro River Oil Corp, 2015 ABQB 431 (CanLII) at para. 36), Slatter J.A. found the possibility that the defendant is insolvent or judgment proof does not extend the limitation period: Smiechowski v Preece, 2015 ABCA 105 (CanLII) at para. 2; Boyd v Cook, 2013 ABCA 27 (CanLII) at para. 16.

For a Majority of the Court of Appeal (judgment was delivered from the bench), it is consistent with the public interest that they be allowed to put old obligations behind them, and get on with their economic lives: “If participation in that type of corporate reorganization had the effect of reviving statute barred debts, no such re-organizations would be practical, and the whole purpose of the limitation statute would be defeated.” (See para. 5). As Slatter J.A. stated (also para. 5), “Statutes of limitation are statutes of repose”.

In concurring reasons (concurring with the result), O’Ferrall J.A. emphasized agreement with the Majority view with respect to the dismissal of the unpaid rent claim. The tenant’s financial situation is not a circumstance which warrants the landlord refraining from seeking a remedial order or orders. (See para. 8).

Counsel for the Respondent/Cross-Appellant: Theodore Stathakos (McCarthy Tétrault LLP, Calgary)

Counsel for the Appellant/Cross-Respondent: Eugene Bodnar (Norton Rose Fulbright Canada LLP, Calgary)

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Posted: Tuesday, December 20, 2016