|
Limitations Act - Discoverability - Demand Obligations [s.5(3,4)]. A & A Flooring Supplies Inc. v. Gardideh
In A & A Flooring Supplies Inc. v. Gardideh (Ont Div Ct, 2025) the Ontario Divisional Court extensively considered the limitation concept of a 'demand obligation' [under LA s.5(3)]:[29] With respect to the applicable limitation period, the Limitations Act provides as follows:4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
5 (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
[ ... ]
(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. [30] The Judge properly relied on the Limitations Act, and specifically s. 5(3) of the Limitations Act which provides that the day on which the loss occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. In this case, the last demand for payment was made in December 2020. A debt obligation that does not specify a date for payment is a demand obligation: see Uni Select Eastern Inc. v. 2067195 Ontario Inc., 2018 ONSC 2345, at para. 21.
[31] The appeal cannot succeed on this ground.
Did the Judge err by relying on Hare v. Hare?
[32] The Appellant submits that it was an error for the Judge to rely on Hare v. Hare. The legislation was amended in 2008 to provide that for demand obligations, the first day of failure to perform commences once a demand for performance is made. The Appellant submits that the Judge did not determine when the demand for payment was made.
[33] I disagree that the Judge erred by referring to the law in Hare v Hare. In Artisan Developments Inc. v. Navarretta, 2011 ONSC 6054, 288 O.A.C. 336, (Div. Ct.), the Divisional Court cited and followed the reasoning of the Ontario Court of Appeal in Hare v. Hare, and emphasized:[10] First of all, the law is clear that s. 5(3) applies to demand obligations: see Hare v. Hare. Time starts to run from the time that the demand is made, and the discoverability principle has no application. The new Limitations Act does not change the former law (Limitations Act, R.S.O. 1990, c. L.15) with respect to limitation periods applicable to demand obligations. [Emphasis added].
[11] Second, s. 5(3) precludes the application of the discoverability principle as far as demand obligations are concerned. [34] I find no error by the motion Judge. Further, the Judge correctly concluded that for demand obligations, the time starts to run from the time that the demand is made. As set out below, the Judge found that the invoices were demand obligations and the time began to run on the date of the last invoice, being December 3, 2020.
Were the invoices demand obligations?
[35] The Appellant submits that the invoices were not demand obligations because they were not signed, and therefore the discoverability principle applies, that is, the limitation period only begins to run when the Appellant discovered that the Respondent would not pay his obligation under the contract.
[36] I find the Judge correctly construed the invoices rendered as demand obligations.
[37] In Uni-Select Eastern Inc. at paras 21 and 22, the Court held that a debt obligation that does not specify a date for payment is a demand obligation, as contemplated by section 5(3) of the Limitations Act, and that this is in keeping with section 22(1) of the Bills of Exchange Act. Section 22(1) of the Bills of Exchange Act, RSC 1085, c.B-4, provides that a bill is payable on demand when no time for payment is expressed.
[38] The Appellant relies on three invoices, dated March 24, 2020, November 27, 2020, and December 3, 2020. The invoices did not specify a date for payment. As such, the money is due on the date of the invoice. The Appellant failed to show that there was an alternative payment agreement. Therefore, the Judge correctly concluded that the limitation period begins to run on the date the invoices were issued. . Bank of Montreal v. Bronfman
In Bank of Montreal v. Bronfman (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from a successful claim by a bank on it's "summary judgment ... for amounts due on a credit card and two lines of credit".
Here the court considers what constitutes a 'demand obligation', here for limitations purposes [LA s.5(3-4)] - and the applicable appellate SOR:[21] However, the motion judge’s determination of whether the relevant credit agreements created “demand obligations” involves the interpretation of a standard form contract largely independent of any specific factual matrix. Accordingly, we proceed on the basis that the motion judge’s finding on this issue should be reviewed on a correctness standard: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 24.
....
[23] We see no error in the motion judge’s finding that the credit agreements created demand obligations. Clause 11 specifically provides that BMO may demand repayment in the event that the borrower is in default, but BMO is not required to make such a demand, which may be issued “at any time”. Nor does the requirement to repay the entire outstanding amount automatically arise in the event of a breach of the agreement. Clause 11 draws a clear distinction between a breach of the credit agreements and a demand for repayment, with the former not necessarily leading to the latter.
[24] This interpretation of the credit agreements is supported by the various account statements issued by BMO between February and April 2018, which indicated that several monthly payments were “past due” and requesting minimum payments that would bring the accounts back into good standing. Notably, the account statements did not demand repayment of the entire balance outstanding, with such demands only being made when the accounts were cancelled in late April or May 2018.
[25] The motion judge’s interpretation is also consistent with the Divisional Court’s decision in Bank of Nova Scotia v. Mazin, 2010 ONSC 5827, which dealt with the commencement of the limitation period in respect of a debt due on a credit card. The Divisional Court found that the credit card debt became due and the limitation period began to run only when the credit agreement was cancelled and the entire outstanding debt became immediately payable. A mere failure to make a required payment on time did not trigger the running of the limitation period.
[26] Accordingly, the motion judge did not err in accepting BMO’s position that the credit agreements established “demand obligations” within the meaning of s. 5(3) of the Act. As a consequence, the limitation period for each loan account only began to run when BMO issued a demand for repayment of the entire outstanding balance, and not when the appellant began to miss her monthly payments. . T.O. Estate v. D.O.
In T.O. Estate v. D.O. (Ont CA, 2024) the Ontario Court of Appeal considered a s.5(3) Limitations Act demand obligation issue:[24] First, it asserts that the trial judge failed to apply the correct provision of the Limitations Act. The trial judge proceeded on the basis that the two-year period began to run when the debt was incurred in 2013, or at the latest, upon marriage breakdown in 2018 when the husband should have known that an action would be required to obtain repayment. The Estate argues that the 2013 advances were demand loans. By virtue of s. 5(3) of the Limitations Act, the trial judge should have used the date of demand, as opposed to the dates he used, as the start of the two-year period for commencing an action. As any demand occurred within two years of the Amended Application, the claim was not statute barred.
....
[27] I agree with the Estate’s first argument, making it unnecessary to consider the second.
[28] The two-year period for commencement of an action runs from the date on which the claim is discovered: Limitations Act, s. 4. A component of the discovery of a claim is knowledge[6] that “injury, loss or damage had occurred”: Limitations Act, s. 5(1)(a)(i). For a demand obligation, the “day on which the injury, loss or damage occurs ... is the first day on which there is a failure to perform the obligation, once a demand for the performance is made”: Limitations Act, s. 5(3) (emphasis added).
[29] In other words, for a demand loan, “a demand is a condition precedent for the commencement of the limitation period”: Bank of Nova Scotia v. Williamson, 2009 ONCA 754, 97 O.R. (3d) 561, at paras. 18-19. The claim is not considered to be discovered when the loan is created. Section 5(3) of the Limitations Act “require[s] a demand before the limitation period can commence in the case of demand promissory notes and other debt instruments where, at common law, the debt is owed as soon as the moneys are advanced”: Bank of Nova Scotia, at note 1. Nor, in the absence of a demand, does the limitation period commence because it appears unlikely repayment without an action will occur: Skuy v. Greennough Harbour Corporation, 2012 ONSC 6998, 10 B.L.R. (5th) 146, at paras. 32-33.
[30] The only evidence of a demand for repayment was either the original application in July 2019 (albeit it was issued only against the wife), the letter demanding payment which was sent by the husband’s lawyer in December 2020 (albeit the demand was to the wife and 201), or the Amended Application itself (claiming payment from the wife, 201, and Ridgeway). Accordingly, if the 2013 advances are properly considered to be demand obligations, each demand was within two years of the Amended Application in January 2021 making the claim for repayment by Ridgeway.
[31] I do not accept Ridgeway’s argument that the Estate, in relying on s. 5(3) of the Limitations Act, is raising a new issue. The onus of raising a limitation period defence is on the defendant. The Amended Answer pled the Limitations Act in general terms. It was incumbent on the trial judge, as a matter of law, to apply the correct provision of the Act relating to when a claim is discovered and therefore when the limitation period commenced running.
....
[38] In any event, even if the evidence did not establish a meeting of the minds about the terms of repayment, the legal result would still be that 2013 advances are treated as if the parties had agreed they were payable on demand. “Where no time is fixed for repayment of a loan, and no other terms are mentioned, the loan is repayable on demand”: Urbas v. Home Savings, 2015 ONSC 6399, at para. 51; Skuy, at para. 31. . MacLean v. Askew
In MacLean v. Askew (Div Ct, 2021) the Divisional Court illustrated the nature of a demand loan in the context of limitations law:[2] Ms. Askew lent Mr. MacLean, a friend and former romantic partner, $20,000 in February 2008 because he was in financial difficulty. The money was an inheritance from her grandfather. She asked for repayment in August 2010, as she needed the money for university tuition. Mr. MacLean promised to send a certified cheque. When it did not arrive, he suggested the cheque was lost in the mail, and promised to send another. No payment was made.
[3] In June 2015, the parties met at a conference. Mr. MacLean acknowledged the debt and promised to repay it, with interest at 2%, at $200 per month. No payment was made, and so Ms. Askew sent a formal demand letter for payment in July 2015. As no payment was made, she commenced a Small Claims Court action in November 2016. The proceeding was brought in Thunder Bay where Mr. MacLean was then living.
....
[12] Second, the motion judge concluded that the limitations defence that Mr. MacLean relied on was bound to fail. He correctly stated, “Limitations law distinguishes between requests for payment of a loan and demands triggering a limitations period.” Given the findings of fact made by the Small Claims Court judge, which were available on the record, and the absence of any palpable and overriding error of fact by the judge, the limitations defence was bound to fail.
|
