In Ontario, the Limitations Act, 2002 establishes a general two-year limitation period for initiating some civil actions from the date a claim is discovered. A common question arises when parties are engaged in settlement negotiations before a proceeding is commenced: does the limitation period prescribed under this Act continue to run during these discussions?
Generally, this limitation period does continue to run during settlement negotiations. The law prioritizes timely resolution and legal certainty, so merely negotiating a settlement does not automatically pause or extend the limitation period. However, there are exceptions within the Act to be aware of.
One significant exception is section 11. This provision states:
11 (1) If a person with a claim and a person against whom the claim is made have agreed to have an independent third party resolve the claim or assist them in resolving it, the limitation periods established by sections 4 and 15 do not run from the date the agreement is made until,
(a) the date the claim is resolved;
(b) the date the attempted resolution process is terminated; or
(c) the date a party terminates or withdraws from the agreement. 2002, c. 24, Sched. B, s. 11.
Same
(2) For greater certainty, a person or entity that provides resolution of claims or assistance in resolving claims, on an impartial basis, is an independent third party no matter how it is funded.
If the parties intend to invoke this section, it’s crucial that this agreement is formalized and clearly documents the intention to engage in third-party dispute resolution. As noted in, Robert Salna v 741980 Ontario, 2023 ONSC 3728, a party later seeking to establish the postponement of the limitation period must show: 1) an agreement; 2) to have a third party resolve or assist them in resolving the claim; 3) that the third party is independent; and 4) that the third party is impartial.
Another mechanism is found in section 22, which allows parties to agree in writing to suspend or extend the limitation period. This is often referred to as a “tolling agreement”. This offers flexibility for parties who wish to negotiate without the pressure of an impending deadline but are not involving a third-party mediator. The agreement must be explicit and specify the terms and duration to be effective.
It is important to remember that estate litigation engages a number of different limitation periods such as under the Family Law Act or the Succession Law Reform Act. Parties must remain vigilant about limitation periods even while attempting to avoid commencing a proceeding by negotiating a settlement.
Thanks for reading,