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The Second Opinion: Anything to declare? The Alberta Court of Appeal addresses Limitation Periods and Declaratory Relief

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in The Second Opinion
Anthony Alexander

Many Canadian limitations statutes explicitly state that no limitation period is applicable to a proceeding in which the relief sought is a declaratory judgment.  In an attempt to bring themselves within this special rule, counsel facing an expired limitation period have been known to frame their claims as ones seeking declaratory relief.

In Joarcam, LLC v. Plains Midstream Canada ULC, 2013 ABCA 118, the Alberta Court of Appeal has confirmed the difficulty of attempting to rely on this strategy.

At issue was a dispute regarding the ownership of a pipeline system and related assets.  Because the plaintiff had first sought, unsuccessfully, to sue an alleged third-party fraudster in a separate action, the claim against the defendant was not commenced until well outside the standard two-year limitation period under the Limitations Act, RSA 2000, c L-12.

The plaintiff sought to circumvent this obstacle by framing its claim as one seeking two declaratory remedies – namely, a declaration that the plaintiff was the rightful owner of the assets and a declaration that the plaintiff was entitled to recover immediate possession of the assets.

The Court of Appeal noted that — in determining whether a particular claim was or was not subject to a limitation period — the test was whether the requested relief was merely “declaratory” or genuinely “remedial” in nature.  The Court accepted the following distinction between the two forms of order: (i) a declaratory order stands on its own, and provides the plaintiff with full satisfaction, even if the defendant refuses to comply with the declaration; in contrast, (ii) a remedial order will allow (and may require) the plaintiff to return for further judicial assistance if the defendant does not comply with the terms of the order.  In the latter case, the claim is subject to the standard two-year limitation period.

In concluding that the orders sought by the plaintiff were properly characterized as remedial relief in the guise of declaratory orders, the Court of Appeal provided the following explanation:

     A claim for declaratory relief is an exception to the usual remedial order sought in litigation. Indeed, the exception is as to “a declaration of rights and duties, legal relations or personal status,”: [Limitations Act], section 1(i)(i). It is construed narrowly so as to discourage litigants from claiming declaratory relief merely to avoid the limitation period. The task of the court is to characterize the remedy actually being sought. Here, the summary trial judge looked at the pleadings. She noted the wording of the amended statement which sought a declaration that the plaintiff was “entitled to recover immediate possession of the pipeline assets.” She characterized the claim as one in which the appellant sought to have possession of the Assets and that what the appellant was really seeking was an order that would require the respondent to transfer the Assets. In other words, she found that what the appellant was seeking was more than a declaration pronouncing on legal rights. It was seeking an order that would require coercive action, i.e., the transfer of the Assets. She made no error in her characterization of the remedy actually being sought.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions. The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.