Stop the Clock: Mediation and Limitation Periods

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The case of Sandro Steel Fabrication Ltd. v. Chiesa is another reminder of the many benefits of mediation.

As I have written in the past (see this post, among others), mediation can save both parties time, money, and stress; but there is one bonus of mediation that may not be top of mind.

As our friend and colleague, Mitchell Rose, mentioned at a recent seminar, mediation can stop the clock on a limitation period, allowing them more time to file a claim.

What does that mean?

If you’re thinking about starting a claim and the deadline to file your suit may run out before you decide, entering into a mediation agreement could buy you some time. In Ontario, the Limitations Act, 2002, sets out how much time a party has to file a lawsuit against another party. It is generally two years (but you should speak to an expert to confirm the time limits for your specific situation).

That’s what happened in the case between Sandro Steel and Edward Chisea and Edward Engineering.

Sandro Steel filed a claim against Edward Chisea and Edward Engineering (or “Edward” for both) after Edward pulled out of mediation. Edward argued that Sandro couldn’t sue them, because the time period ran out, and brought a motion to have the claim dismissed. The motions court Judge agreed with the Plaintiffs that the agreement to mediate effectively stopped the clock, and the Ontario Court of Appeal agreed. As a result, the claim was allowed to proceed.

What happened?

The case dates back to June 2007, when construction on the Faculty of Education building at Laurentian University in Sudbury came to a halt because of the “failure” of certain steel connections. This “failure” cost Sandro Steel $323,000 in remedial work. The company’s insurer went after Edward Engineering to recoup its costs, saying it found a mistake in drawings that the engineering company had approved. The issue with the steel connections on top of the halted construction set off a string of lawsuits, counterclaims and crossclaims.

Stopping the clock

In April 2009, all parties except one verbally agreed to mediation and scheduled a date in November that year. But two days before mediation was to begin, Edward pulled out, saying it didn’t know that Sandro Steel’s remedial costs would be part of the process. That move prompted Sandro Steel to recommence its lawsuit, and in December 2010 the company filed a statement of claim against Edward to recoup its remedial costs on the construction work.

Edward argued that because there was never an expressed written agreement to go to mediation, the clock never stopped on Sandro’s time limit to file its claim. Edward contended that if the clock never stopped, then Sandro’s claim had expired and the company could no longer sue them to recoup its costs.

But the Ontario Court of Appeal disagreed.

Mediation can help buy you time

If you’re thinking about commencing litigation but aren’t sure whether you should proceed, entering into mediation could buy you some time. In some cases, an individual may be uncertain as to the merits or value of their claim, or whether the cost and risk will be worth the potential reward.

The Limitations Act, 2002, is meant to protect a party from unexpected claims that are filed years after the incident in question. It should allow parties the comfort of knowing that if a claim is not filed within a certain period, they do not have to worry about one arising “out of the blue”.

This exception, when the parties agree to mediate, is not inconsistent with that notion. After all, if the parties have agreed to mediate, then obviously they are aware of a potential claim.

If you’re an employer, though, this should serve as a warning: agreeing to mediation could extend the time an employee has to bring a claim. Then again, agreeing to mediation is almost always better than proceeding with litigation.

Check out my previous blog post for more tips on what else you can do to have a successful mediation.

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