Not everything lasts, and this is true even in the country’s legal system. Legal actions by consumers and financial institutions may be barred under the law of limitation in banking.
What are limitation periods?
The limitation period is the time limit set by law for an aggrieved party (or plaintiff) to commence a claim against another (the defendant). These periods may differ for every specific cause of action (the legal claim or basis).
When this number of months or years has lapsed, a person is barred from filing a claim or case in court based on the injury or damage caused by the other party. In other words, the right to sue someone is now lost.
Every jurisdiction or country has its own laws of limitation applicable to either civil actions or criminal cases. Others also refer to it as statute of limitations, laws on prescription, or prescriptive periods.
It may also differ in every practice area of law, such as personal injury, class action, contractual obligations, and financing and banking sector.
Objective of law of limitations
It is a basic legal principle that plaintiffs in a case must exercise their rights. They are compelled by law to make their claims within a reasonable time frame.
As interpreted by the court, and depending on every jurisdiction, making a claim doesn’t mean that a case must be filed. It may also mean that the plaintiff must do some positive acts in imposing their right and in holding the other party liable.
After the period prescribed by law, there is now a presumption that the plaintiff really has no interest in pursuing an action.
The law of limitation is also to protect the alleged liable party. At some point, there must be an end to litigation and to making them accountable for their actions in the past.
What is the statute of limitations in Canada?
Under Canadian laws, most limitation periods are enacted through the provincial statute of limitations. Common law has provided some guidance on the interpretation of these statutes of limitations.
The statute of limitations for all Canadian provinces except Québec is called the Limitations Act. Québec’s prescriptive periods are found in its Civil Code.
While most provincial Limitations Acts provide for 1 to 2 years basic limitation period for most civil cases, some provinces have longer periods:
|
Province or Territory |
Basic Limitation Periods |
|
Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Saskatchewan |
2 years |
|
Quebec |
3 years |
|
Manitoba, Northwest Territories, Nunavut, Prince Edward Island, Yukon |
6 years |
Watch this video for a summary of what a law of limitation or statute of limitation is:
To know more about the law of limitation, contact a banking lawyer in your area. If you live in Toronto, contact one of the Lexpert-Ranked best banking lawyers in Ontario.
Discoverability
Under the provincial/territorial law of limitations, the basic limitation periods will start to run from the day that the claim was (or should have been) discovered.
For example, under Ontario’s Limitation Act, a claim is first discovered when:
- a person first knew that the injury, loss or damage occurred, or
- a reasonable person should have known about that injury, loss or damage
These periods are subject to the ultimate limitation periods. These periods will bar any action against a defendant, not from the day of its discovery, but from the day that it occurred.
What is the law of limitation in banking in Canada?
As for the law of limitation in banking, most causes of actions that arise out of banking transactions also follow the limitation periods set by the provincial/territorial statute of limitations.
This may include collection of debts that are acquired from banks and filing charges for investment-related concerns.
Debts
Debts, in general, are covered by the law of limitations in banking, as provided by the provincial/territorial statute of limitations. It means that, although debts do not expire, a person’s creditor (e.g. the bank) cannot pursue collecting a debt after the expiry of the limitation period.
However, there are circumstances when these periods will “reset” or will prevent the running of the limitation period:
- debtor acknowledges the debt
- debtor and creditor enter a payment agreement/plan
- a new charge is made on the debtor’s account
- debtor makes a promise to pay
Investments
Civil lawsuits arising out of investments that are handled by a bank, a financial advisor, or a financial institution are also covered by the law of limitations in banking.
Whenever there are concerns regarding one’s investment, it must be raised immediately or within a reasonable time. Otherwise, legal actions are barred after the applicable limitation period.
Limitations under the OBSI
As an exception, complaints by consumers brought to the Ombudsman for Banking Services and Investments (OBSI) are not covered by the law of limitations in banking.
The OBSI is an independent entity that resolves investment and banking disputes between banks and investment firms and their consumers.
For consumer complaints against banks and investment firms, the OBSI has a six-year limitation period. After this period, the OBSI will not investigate a complaint or will stop any investigation.
Like the law of limitations in banking, the limitation period of OBSI starts to run on the day that:
- the consumer first knew of the problem, or
- the consumer ought to have known about the problem
What is an example of a limitation period?
Let’s say a person (the debtor) made a loan or a debt from a financial institution in Ontario. The person then made initial payments according to the agreement or contract.
However, after a few months, the person stopped paying due to some personal constraints (e.g. lost a job, had an emergency, or got sick).
Depending on the circumstances, the financial institution will have 2 years to sue the person from the day of the last missed payment, as mentioned in their agreement or contract.
After the 2-year period, the financial institution cannot legally sue the debtor, but it can continue pursuing the debt.
If the person paid the debt after the limitation period, it is now a waiver of their right to be protected by the law of limitations in banking.
To know more about the law of limitation in banking, consult with the best banking lawyers in Canada as ranked by Lexpert.