Wednesday, January 21, 2009

limitation period demand notes

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"...[1] Has the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the “new Limitations Act”), changed the law in respect of demand promissory notes so that refusal to repay the loan now triggers the running of the limitation period? This appeal decides that question.

32] For the same reason, several commentators have suggested that the new Limitations Act should be interpreted as changing the law so that the limitation period would begin to run from the date of default of payment, as opposed to from the date of the promissory note. See, for example, Brian Bucknall, “The Limitations Act, 2002 and the Real Property Limitations Act: Some Notes on Interpretive Issues” (2004) 29 Advocates’ Q. 1 at 19 – 21.

43] It has been suggested that the ultimate fifteen-year limitation period provided by s. 15 of the new Limitations Act resolves the problem that a claim could exist in perpetuity. In my view, it does the opposite. It confirms that a claim could exist in perpetuity should a demand for repayment (or failure to respond to such a demand) be the triggering event.

[46] In my view, it would be contrary to common sense to think that a piece of legislation designed to create uniform, simplified limitation periods actually did the opposite by taking a well-settled area of commercial law and creating indefinite liability.

[47] If the act on which the appellant’s claim is based is the delivery of the demand note,[5] however, no such problem exists. Pursuant to s. 5(2) of the new Limitations Act, the appellant is presumed to have discovered her claim in February 1997. Section 5(2) reads as follows:
5 (2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

49] My third reason for rejecting the appellant’s submission is this. The alleged deficiency in the approach to limitation periods under the former legislation is that it failed to recognize that a person may not know of a cause of action at the time the limitation period commences. Hence, the former approach could act to unfairly bar claims before potential plaintiffs had any knowledge of their causes of action.

[50] This concern, it seems to me, does not arise in the case of demand promissory notes. The law is well-settled that a lender has the right to immediate repayment of such loans. The face of the promissory note makes clear that the debtor owes money to the lender. As there is no repayment period specified, the lender is entitled to require immediate repayment. There is nothing to be discovered by the lender before he or she becomes aware of their claim. They know of their claim immediately on receipt of the demand promissory note...."

And finally:

"...[51] Rule 2 of s. 24(5) of the new Limitations Act provides that the former limitation period applies. As explained above, the former limitation period is the six-year limitation period under s. 45(1)(g) of the former Limitations Act. For the reasons given by the motion judge, set out above, the former limitation period has expired and the appellant’s action is statute-barred..."

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