Thursday, June 28, 2007

Limitation Period for Constructive Trusts in British Columbia

[Since I wrote this post, a new Limitation Act, has come into effect which significantly changes the law. I summarized the new legislation here.]

As I wrote in my post Limitation Periods in British Columbia, there are different limitation periods for different kinds of claims. Sometimes how you characterize a claim can make the difference between finding that you are out of time, and being permitted to pursue the claim.

In Smith v. Vancouver City Savings Credit Union, 2007 BCSC 771, the plaintiff, Marcia Smith, started a proposed class action suit against Van City on behalf of herself and others whom, she says, Van City overcharged prior to February 1997. Her claim is that Van City's overdraft charges were interest charges exceeding the maximum allowable interest rate of 60 % per year under section 347(1) of the Canadian Criminal Code.

Van City sought to have the claim dismissed on the basis that it was brought after the limitation period expired for filing the suit. Van City argued that the limitation period was six years pursuant to section 3(5) of the Limitation Act, RSBC 1996, c. 266.

Ms. Smith argued that because she was seeking an order declaring that Van City holds the overcharges as a constructive trustee for her and the other members of the proposed class, the limitation period is ten years. Section 3(3)(c) and (d) of the Limitation Act provides that the limitation period for claims against trustees to recover trust property is ten years.

Van City argued that the ten year limitation period for trust claims were for those claims where there was a pre-existing trust. Ms. Smith claim, Van City argued, was not really based on an existing trust. Rather she was asking the court to impose a trust as a remedy for the alleged overcharge.

In her reasons for judgment released on June 2, 2007, Madam Justice Gray held that Ms. Smith could proceed with her claim on the basis that if she is successful in her constructive trust claim, the longer ten-year limitation would apply. Section 1 of the Limitation Act defines “trust” to include a “constructive trust.” Madam Justice Gray applied the reasoning in another recent case, Sun-Rype Products Ltd. v. Archer Daniels Midland Co., 2007 BCSC 640. In Sun-Rype, Mr. Justice Rice held that constructive trusts included remedial constructive trusts.

If Ms. Smith had just asked for an order that Vancouver pay a monetary damages, instead of asking for a constructive trust, her claim might very well have been dismissed on the basis that the limitation period had expired. Even though the facts are the same, by asking for the right legal remedy, she can proceed with her claim. She has not proven that Van City acted wrongfully, and she has not won her case, but she can still have her day (or week or month) in court.

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