"...[55] The question is whether the new Act changes the commencement date for the limitation period for demand loans generally to the date of default following a demand, as opposed to the date the loan is made. I conclude that it does..."
[59] I would begin the process of statutory interpretation by employing the modern approach, as stated by Driedger and approved by the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42 (CanLII), [2002] 2 S.C.R. 559 at para. 26:
In Elmer Driedger’s definitive formulation, found at p. 87 of his Construction of Statutes (2nd ed. 1983):
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
Driedger’s modern approach has been repeatedly cited by this Court as the preferred approach to statutory interpretation across a wide range of interpretive settings. [Citations omitted.]
[66] At the outset, it is important to note that “[t]he law of limitations is wholly a creature of statute. Limitation periods were unknown to the common law, although equity developed the doctrine of laches”: Graeme Mew, The Law of Limitations, 2nd ed. (Markham: LexisNexis Butterworths, 2004) at 29.
[67] The general rule under the former Act was that the limitation period began to run on the date the cause of action accrued. Section s. 45(1)(g) of the former Act, which applied to demand notes, stipulated that the action “shall be commenced... within six years after the cause of action arose.” [Emphasis added.]
[68] In July et al. v. Neal 1986 CanLII 149 (ON C.A.), (1986), 57 O.R. (2d) 129 (C.A.), Morden J.A. adopted the definition of “cause of action” as espoused by Diplock L.J. in Letang v. Cooper, [1965] 1 Q.B. 232 at 242-43: “A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.”
[69] The common law authorities reasoned that since a demand loan is fully mature and repayable when it is made, a cause of action to collect on a demand note accrues as soon as the note is delivered. For example, in Royal Bank v. Hogg, [1930] 2 D.L.R. 488 (Ont. S.C. (A.D.)) the court wrote at 489:
Then, coming down to the note on demand, while no formal demand was made, it has been law certainly for nearly a century, since Norton v. Ellam (1837), 2 M. & W. 461, and probably for centuries before, that a promissory note on demand is due as soon as it is delivered.
[71] The point I emphasize is that while the common law came into play in identifying the date on which the “cause of action arose,” it was statute law that prescribed that the limitation period began to run when a cause of action arose.
[73] Finally, I note that all of the authorities regarding the commencement of the limitation period for a demand loan antedate the development of the discoverability principle. It appears as though this is the first case in Ontario to consider when a claim based on a demand loan is discovered.
[77] Some commentators have suggested that without default following a demand for payment, one cannot speak of the lender of a demand loan suffering from injury, loss or damage. For example Brian Bucknall states, “the simple existence of a present debt would not, in accordance with the interpretive principles set out here, be construed to occasion ‘injury, loss or damage’ to the creditor until a demand was made and refused”: Brian Bucknall, “Limitations Act, 2000 and Real Property Limitations Act: Some Notes on Interpretative Issues” (2004) 29 Advocates Q. 1 at 20.
[78] That commonsense view is foreclosed by the common law authorities. The rationale of the common law authorities dictates the conclusion that the holder of a demand note has suffered some sort of legally cognizable damage on the day the loan is made. Otherwise, the creditor would not be entitled to bring an action in court.
[86] The inappropriateness of commencing a legal action on a demand note without first making a demand is so apparent there are few cases where such action has been taken. Nevertheless, in Byles on Bills of Exchange (London: Sweet & Maxwell, 1965) at 378, Maurice Megrah writes: “If a bill or note is payable on demand, no demand other than action brought is necessary, apart from the question of costs, to enforce payment.” For this proposition, Macintosh v. Haydon (1826), Ry. & Mood. 362, 171 E.R. 1050 (K.B.), is cited as authority, where the court wrote at 363:
It is quite true that in strict law no demand is necessary against an acceptor, but in practice a demand is usual, and ought to be made before proceedings are instituted; and it might make a material difference in the costs, if a solvent acceptor, against whom proceedings had been instituted without a demand, were promptly to apply to the Court.
[88] Thus, it would seem to me that a reasonable person would not know that it was appropriate to commence a legal proceeding to recover a demand loan without first making a demand for repayment.
[89] I have considered the reasoning that a creditor would know that the limitation period had begun to run upon the making of a demand loan, and so would regard it as appropriate to commence a legal proceeding before the limitation period expired. In my view, this reasoning is circular. It uses a presumption about when the limitation period begins in order to construe the statutory definition of when the limitation period begins. Section 5(1)(a)(iv) is part of the statutory definition of the commencement date of the limitation period under the new Act. It should be construed without presuming the creditor knows the limitation period began upon the making of the loan. As well, I see no reason for making such a presumption. The common law does not provide a basis for making the presumption, as the common law does not establish limitation periods, but only addresses when a creditor is entitled to commence an action. The only possible source for such a presumption is the former Act, which has been repealed. Under the new Act, which governs now, it is only when the creditor knows not only that he or she is entitled to bring an action but also that it is appropriate to do so that the limitation period begins to run.
[90] In my view, the grammatical and ordinary sense of the words of s. 5(1) is clear. They do not identify the date the demand loan was made as “the day on which the claim was discovered.” Under s. 5(1) the basic limitation period for a claim based on a demand note commences on the date that the debtor defaults on a demand for immediate repayment by the creditor. To find otherwise would be to countenance unnecessary litigation as appropriate.
[96] In argument, the respondent did not offer any interpretation of s. 15(6)(c). In my view, s. 15(6)(c) refers to the day of default in not performing the obligation to repay a demand loan after a demand has been made. The words “default” and “in performing” in s. 15(6)(c) do not aptly describe the passive state of simply being subject to a demand obligation in good standing. I would conclude that these words identify the day on which the debtor defaults after being called upon to “perform” by repaying the demand obligation.
[101] Nor do I see a departure from established commercial practice or the common law. There is no interference with the common law that determines when a cause of action accrues. The creditor of a demand loan may still commence an action without making a demand for repayment, as unlikely and inappropriate as that action may be. Only the provincial statute of limitations has changed. Commercial practice must be based on the statutory limitation period. Commercial practice would be more affected by the majority’s conclusion, which results in the considerable reduction, from six years to two years, in the limitation period during which creditors could recover on demand loans. I venture that a two-year limitation period for demand loans would cause difficulties in numerous routine commercial transactions. For example, a small company’s operating line of credit secured by a personal demand note of the owner would need to be revisited every two years.
[103] Finally, I note that several other jurisdictions have adopted limitation periods for demand loans that commence only after a demand for repayment has been made.
VI. Conclusion
[113] I would conclude that the new Act applies, that the appellant did not discover her claim until the default following the demand for repayment made on November 10, 2004, and that the appellant’s action was launched within the basic two-year limitation period which began on that day. Consequently, I would conclude that the motion judge erred in granting summary judgment. I would allow the appeal, set aside the summary judgment, and replace it with an order dismissing the respondent’s motion for summary judgment..."
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment