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Limitations Act - Discoverability - Demand Obligations [s.5(3,4)]. 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.
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[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.
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[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.
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[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.
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