May 18, 2021

Authors: Michael Bokhaut and Lauren Garvie

In large construction projects, many contractors and sub-contractors issue progress billings over the course of the project. For particularly long and complex projects, a single contractor may issue progress billings for many years. 

If you are issuing progress billings, especially for a multi-year construction project, many common questions can arise:

• How long do you have to sue for non-payment of invoices?
• Can you wait until the end of the Project to sue, or must you sue during the Project?  

Alberta’s Limitations Act¹ establishes a two-year window (the Limitation Period) to sue. The Limitation Period begins when the plaintiff knows, or ought to know, that the damage or loss has occurred and that the damage or loss was caused by the act or omission of the defendant.²

The key question becomes: When does the Limitation Period begin?

For large construction projects with progress billings, the answer can be complicated but the Limitation Period generally starts after work is complete and the final invoice has become due. While it is expected and likely necessary for progress billings to paid promptly, the law generally does not expect a subcontractor to sue while a multi-year construction project is still in construction.

For smaller construction jobs where a single invoice is issued, the Limitation Period usually starts within two years of when the invoice comes due.

In Ontario, the Court in Newman Bros. Ltd. v Universal Resource Recovery Inc. looked at when the Limitation Period begins to run.³ The Defendants argued the limitation clock began to run for each individual invoice shortly after each invoice was issued. The Court rejected this argument, stating the idea was:  

• not commercially reasonable;
• unduly onerous on the parties; and
• a potential waste of judicial resources.⁴

The Court held that the Limitation Period began to run from the date of the last partial payment made by the defendants.  

The Limitation Period also restarts whenever the liable party acknowledges the debt or makes a partial payment in respect of the debt.⁵ As such, if you receive a payment of some, but not all of your outstanding invoice, that payment may restart the two-year clock. It is advisable to keep all records in respect of promises to pay and partial payments in the event that a limitations defence is advanced. 

In Alberta, the Court held the two-year Limitation Period begins after the work was completed, and the invoice became due.⁶ In this particular case, the Plaintiff should have commenced an action within two years and 45 days from completion of work because it was a term of the contract between the parties that invoices would be paid by the defendant within 45 days of receipt.⁷

Key Takeaway: If you are issuing progress billings, your two-year window to sue for unpaid work likely begins very soon after you finish the work. It is important not to delay for too long. If payment is not forthcoming after several months, you should question the benefit gained by waiting any longer to press for payment. Further, keep track of all partial payments or promises to pay, as these may restart the clock.

Warning: When the Limitation Period begins (or expires) depends on the facts of the case and each case is different. The construction lawyers at Carbert Waite can help you in collecting unpaid invoices and advising you of your limitation periods. If you need assistance to collect on unpaid invoices or to determine your limitation period, please contact any of the construction lawyers at Carbert Waite LLP.

¹ Limitations Act, RSA 2000, c L-12.

² Limitations Act, RSA 2000, c L-12 at s. 3(1).

³ Newman Bros. Ltd. v Universal Resource Recovery Inc., 2018 ONSC 4019

⁴ Newman Bros. Ltd. v Universal Resource Recovery Inc., 2018 ONSC 4019 at para 26.

⁵ Limitations Act, RSA 2000, c L-12 at s. 8.

⁶ Royal Well Servicing Ltd. v Murphy Oil Company Ltd., 2018 ABQB 514 at para 30.

⁷ Royal Well Servicing Ltd. v Murphy Oil Company Ltd., 2018 ABQB 514 at para 36.