The Saskatchewan Court of Appeal recently released a decision dealing with statutorily imposed deadlines for commencing lawsuits in Saskatchewan. This decision will directly impact when a party must commence a lawsuit, particularly in the context of disputes arising during long-term construction projects.
In Saskatchewan (Highways and Infrastructure) v Venture Construction Inc., 2020 SKCA 39 [Venture Construction], the Saskatchewan Court of Appeal reversed a lower court decision on a limitations period issue, concerning whether a claim had been brought in time.
The specific facts of the case were fairly straightforward:
- Venture Construction contracted to perform road construction for the Ministry of Highways.
- Venture Construction hired a subcontractor, Johnston Bros, to lay down the subgrade.
- The contract contained subgrade specifications and oversight, control of the work, and payment approval was delegated to an engineer designated by the Ministry.
- Johnston completed its work in December 2010, at a time when Venture was not on site at all. Venture was paid in full by the Ministry for the work performed by Johnston in 2010, and Johnston was paid by Venture.
- When Venture arrived at the project site in May 2011, it discovered that the subgrade work required remediation. The Ministry argued that the subgrade work was initially satisfactory, but deteriorated due to Venture’s failure to properly prepare for winter, and that Venture had to take responsibility for remediation. Venture remediated the subgrade at its own expense.
- Venture suspected in May 2011 that the Ministry had not properly tested the subgrade and knew it had not received test results. In December 2012, Venture received records from the Ministry that it said demonstrated the subgrade testing in 2010 had not been properly conducted.
- There was back and forth between Venture and the Ministry as to requested payment for the remediation work through 2013 and 2014, but Venture commenced a lawsuit on April 7, 2014. Venture sought damages of more than $4 million, alleging negligence and breach of contract by the Ministry.
The Ministry brought a summary judgment application to have the claim dismissed for being brought after the two-year limitation period under The Limitations Act. The application was initially rejected, and the Ministry appealed.
The Court of Appeal’s Decision
The Court of Appeal determined that the claim was brought outside of the two-year limitation period and dismissed Venture’s lawsuit. The case was decided on the following two legal issues:
- When Venture “knew or ought to have known” that it suffered the injury, loss or damage?
- When Venture knew or ought to have known that a legal proceeding was the appropriate means to remedy the injury, loss or damage?
On the first point, the Court concluded Venture was aware that it had suffered the damage in May 2011, when it first discovered the deficient subgrade. The Court of Appeal relied on the fact that Venture was aware who had caused the loss, being either Johnston (for improperly laying the subgrade) or the Ministry (for improperly testing it), and had begun incurring costs relating to the loss in May 2011.
On the second point, the Court considered the application of section 6(1)(d) of the Limitations Act which requires that a legal proceeding be appropriate in the circumstances in order for the limitation period to begin. Venture argued that a proceeding was not appropriate in 2011 due to the possibility of compensation for the subgrade remediation under the extra work provisions of the contract and the public interest of having the highway project completed without disruption due to legal proceedings.
The Court rejected both arguments. On the first argument, the Court noted that Venture had not taken steps required by the extra work provisions, and therefore they did not qualify as an “alternative dispute resolution process” that would extend the time to bring a claim.
The Court also was not convinced that the specific facts of the case supported the public interest in keeping the highway open and completed on time as a sufficient reason to extend the time to bring a claim, as there was no evidence to support the conclusion that bringing the claim within the limitation period would have impacted the completion of the project. However, the Court did not close the public interest argument off in totality, leaving it open for future cases on different facts.
The Court of Appeal’s decision in Venture Construction is likely to have far-reaching impacts on the timing of court proceedings or proceedings such as arbitration, particularly in the context of long-term construction projects. Although the Court’s decision in Venture Construction is highly specific to the particular facts of the case, a few key principles emerge for parties to consider in their own situations:
- The Court will continue to view limitation periods strictly, and parties must bring their claims within the proper time (The Limitations Act generally requires that claimants initiate a claim within two years of discovering the injury, loss or damage).
- Just because a project or engagement is long or the root cause of a construction issue is not certain, does not mean that the time for bringing a legal proceeding only begins at the end of a project – if a known damage, loss or injury occurs early in a long project, proceedings may need to be initiated before the completion of the project.
- Parties can manage the risk of being forced to bring legal proceedings prior to project completion by ensuring that the contract contemplates and deals with the matter accordingly, for example, by extending limitation periods.
- Protracted discussions of responsibility and entitlement to compensation are not uncommon on construction projects, so the parties will need to be aware that the limitation clock may be ticking and consider agreements suspending the limitation period to allow discussions to continue.
- If there are alternative dispute resolution mechanisms in contracts, such as arbitration, a party must actually take the required steps under these provisions to successfully argue that the limitation period has not expired.
The MLT Aikins construction team has the experience to assist you with respect to construction-related disputes, including limitation period issues. If you have any questions regarding limitations issues or the potential implications of the Venture Construction decision on your projects or contracts, please contact us.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.