After a property owner’s claim against a builder was deemed to have expired due to the operation of the Limitations Act, RSA 2000, c L-12 (the Limitations Act) and the Arbitration Act, RSA 2000, c A-43, the Court was tasked with determining whether the limitations period had a “spillover effect” which immunized a surety of the builder. The matter was heard as a Summary Trial.

First, Lema J. noted that the Defendant had previously applied to strike the Plaintiff’s claim pursuant to Rule 3.68, on the basis that the dismissal of the Plaintiff’s claim against the builder extinguished its claim against the builder’s surety. However, the Court (and later the Court of Appeal) held that the Defendant had not established that the Plaintiff’s claim plainly and obviously could not succeed. As such, the Plaintiff applied for a Summary Trial of the issue.

Next, Lema J. considered whether the issue was appropriate for Summary Trial pursuant to Rule 7.5 based on the test set out in SHN Grundstuecksverwaltungsgesellschaft MBH & Co v Hanne, 2014 ABCA 168 (CanLII). Since the parties both agreed that the issue was suitable for Summary Trial, and there were no disputes about relevant facts or issues regarding findings of credibility, the Court determined that Summary Trial was appropriate – but emphasized that the Summary Trial would only deal with the issue of whether the expiration of a limitations issue against the builder had a “spillover effect” which immunized the surety.

Lema J. ultimately held that the claim against the surety was not extinguished by virtue of the claim against the builder being time barred. Section 3(1) of the Limitations Act allows a defendant to obtain “immunity”, but does not extinguish the underlying claim. Rather, the ability to pursue the claim against the defendant ceases to exist. As such, the expiry of the Plaintiff’s limitation period against the builder, while providing immunity to the builder, did not extinguish its claim against the surety (which was not time barred). The Plaintiff had a separate and distinct claim against the surety, which was triggered by the builder’s defaults under the construction contract. The Court went on to consider and reject the surety’s position that surety law entitled it to “invoke any defence” available to the builder. As such it could not benefit from the expiry of the limitation period against the builder.