Hare v. Hare

83 O.R. (3d) 766

Court of Appeal for Ontario,

Gillese, Juriansz and LaForme JJ.A.

December 14, 2006

Limitations -- Promissory notes -- Demand loans -- New Limitations Act not changing law in respect of demand promissory notes so that refusal to repay loan triggers running of limitation period -- Limitation period running from date of delivery of note -- Claim based on act that took place after January 1, 2004 for purposes of s. 24(5) of new Limitations Act where demand promissory note was delivered in February 1997 -- Limitation period under former Limitations Act applying -- Action for repayment commenced in February 2005 -- Action barred by s. 45(1)(g) of former Limitations Act -- Limitations Act, R.S.O. 1990, c. L.15, s. 45(1)(g) -- Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 24.

The plaintiff loaned the defendant money in February 1997. By promissory note dated February 10, 1997, the defendant promised to pay the plaintiff, on demand, the sum of $150,000. The defendant last made an interest payment on October 26, 1998. No payments in respect of the note had been made since then. On November 10, 2004, the plaintiff made a demand for repayment. She met with no success. On February 17, 2005, she commenced an action for repayment of all sums due on account of the note. The defendant moved successfully for summary judgment dismissing the claim. The motions judge rejected the plaintiff's argument that the Limitations Act, 2002 ("the new Act") applied to the claim. Applying the Limitations Act, R.S.O. 1990, c. L.15 ("the former Act"), the motions judge held that it was clear law that a demand note matures for all purposes as soon as it is delivered, and that in circumstances where the loan is repayable on demand, s. 45(1)(g) of the former Act applies to bar an action unless commenced within six years of the funds being advanced. The action was not commenced within six years of the funds being advanced, so it was barred by s. 45(1)(g). The plaintiff appealed.

Held, the appeal should be dismissed. [page767]

Per Gillese J.A. (LaForme J.A. concurring): The transition provisions in s. 24 of the new Act applied, as the claim was based on an act or omission that took place before January 1, 2004 and no proceeding had been commenced in respect of that claim before January 1, 2004. Section 24(5) of the new Act provides: "If the former limitation period did not expire before the effective date and if a limitation period under this Act would apply were the claim based on an act or omission that took place on or after the effective date [January 1, 2004], the following rules apply: 1. If the claim was not discovered before the effective date, this Act applies as if the act or omission had taken place on the effective date. 2. If the claim was discovered before the effective date, the former limitation period expires." Both of the preconditions to the application of the rules set out in s. 24(5) were met in this case, as the former six-year limitation period had not expired before January 1, 2004 and as the claim would be subject to the two- year limitation period provided for by s. 4 of the new Act if the claim were based on an act or omission that took place on or after January 1, 2004. The plaintiff claimed that it was the defendant's refusal to comply with the demand letter of November 10, 2004 that constituted the act or omission giving rise to her loss and, hence, to her claim, so that the claim was "discovered", as defined in s. 5(1) of the new Act, on that date. To accede to that submission, the court would have to accept that the legislature intended to change the law relating to demand notes by means of the new Act, a piece of legislation that is directed at limitation periods, not commercial law. It would require very clear language evidencing an intention on the part of the legislature to impair existing rights before such a construction, which would overturn centuries' old jurisprudence, would be warranted. The language in the new Act is not so irresistibly clear that it can be presumed that the legislature intended to depart from established commercial law and disturb existing common law rights. Moreover, the plaintiff's interpretation, taken to its logical extreme, resulted in limitless liability. If a demand for repayment must be made before the limitation period would begin to run and no demand is made, the limitation period would never begin to run, the claim would exist in perpetuity, and liability would exist indefinitely. If the act on which the plaintiff's claim is based is the delivery of the demand note, no such problem exists. Pursuant to s. 5(2) of the new Act, the plaintiff was presumed to have discovered her claim in February 1997. There was no evidence tendered to rebut that presumption. Consequently, she was presumed to have discovered the claim before January 1, 2004, and Rule 2 of s. 24(5) applied. By Rule 2, the six-year limitation period in s. 45(1)(g) of the former Act applied. The action was statute-barred.

Per Juriansz J.A. (dissenting): 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. Section 5 of the new Act sets out the criteria that define the day on which a claim is discovered. The earliest a plaintiff can "discover" a claim based on a demand note is the date on which default in making repayment following a demand occurs, and not the date on which the demand loan is made. Without default following a demand for payment, one cannot speak of the lender of a demand loan suffering injury, loss or damage. Section 5(1)(a)(iv) of the new Act requires that the claimant know that "having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it". If s. 5(1)(a) were satisfied upon a creditor knowing he or she has a cause of action, then s. 5(1)(a)(iv) would be devoid of meaning. At least in the context of a demand loan, the creditor must know more than that a cause of action has accrued. It is appropriate to bring a proceeding to remedy the injury, loss or damage only when a demand has been made. Applying the criteria for discovery stipulated in s. 5 of the new Act, the claim in this case was not discovered before the effective date of the new Act. In [page768] particular, the plaintiff, having regard to the nature of the damage, could not know that a proceeding would be an appropriate means to seek to remedy the claim before a demand was made. The presumption in s. 5(2) did not apply because the record indicated that no demand for payment was made until after the effective date. The first rule in s. 24(5) applied and the limitation period was calculated as if the act or omission had taken place on the effective date. Applying the new Act, the basic limitation period would begin to run upon the defendant's default in repaying the loan following the plaintiff's demand made on November 10, 2004. Accordingly, the claim was not statute-barred when the plaintiff started proceedings in 2005.

APPEAL from an order of the motions judge Minden J., of the Superior Court of Justice, dated April 10, 2006, dismissing an action as statute-barred.

Cases referred to Sawchuk v. Bourne, 2005 ABCA 382, [2005] A.J. No. 1558, 144 A.C.W.S. (3d) 12 (C.A.), affg [2004] A.J. No. 526, 2004 ABQB 344, 130 A.C.W.S. (3d) 1123, consd Other cases referred to Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 100 B.C.L.R. (3d) 1, 212 D.L.R. (4th) 1, 287 N.R. 248, [2002] 5 W.W.R. 1, 93 C.R.R. (2d) 189, 18 C.P.R. (4th) 289, 2002 SCC 42; Birks v. Trippet (1966), 1 Wms. Saund 32, 85 E.R. 34 (K.B.); Deaville v. Boegeman (1984), 1984 1925 (ON CA), 48 O.R. (2d) 725, [1984] O.J. No. 3403, 6 O.A.C. 297, 14 D.L.R. (4th) 81, 47 C.P.C. 285, 30 M.V.R. 227 (C.A.); Goodyear Tire and Rubber Co. of Canada v. T. Eaton Co., 1956 2 (SCC), [1956] S.C.R. 610, [1956] S.C.J. No. 37; July v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, [1986] O.J. No. 1101, 17 O.A.C. 390, 32 D.L.R. (4th) 463, [1986] I.L.R. Â1-2126, 12 C.P.C. (2d) 303, 44 M.V.R. 1 (C.A.); Letang v. Cooper, [1965] 1 Q.B. 232, [1964] 2 All E.R. 929, [1964] 3 W.L.R. 573, [1964] 2 Lloyd's Rep. 339 (C.A.); Macintosh v. Haydon (1826), Ry. & Mood. 362, 171 E.R. 1050 (K.B.); Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549, [1997] S.C.J. No. 31, 151 D.L.R. (4th) 429, 217 N.R. 371, 30 M.V.R. (3d) 41, 12 C.P.C. (4th) 255; Royal Bank of Canada v. Hogg, 1929 417 (ON CA), [1929] O.J. No. 99, 64 O.L.R. 653, [1930] 2 D.L.R. 488, 37 O.W.N. 279 (S.C. (A.D.)); Rumball v. Ball (1711), 10 Mod. Rep. 39, 88 E.R. 616 (K.B.) Statutes referred to Creditors' Relief Act, R.S.O. 1990, c. C.45 Family Law Act, R.S.O. 1990, c. F.3 Limitations, 95, Limitation of Actions; Adverse Possessions, Fla. Stat. 95.031 (2007) Limitations Act 1980 (U.K.), 1980, c. 58, s. 6(3) Limitations Act, R.S.A. 2000, c. L-12, ss. 1(e), 3(1) [as am.] Limitations Act, R.S.O. 1990, c. L.15, s. 45(1)(g) Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 1 "claim", 2, 4, 5, 15, 16, 17, 24 Remedies for Organized Crime and Other Unlawful Activities Act, 2001, S.O. 2001, c. 28 Authorities referred to Bucknall, Brian"The Limitations Act, 2002 and the Real Property Limitations Act: Some Notes on Interpretive Issues" (2004) 29 Advocates' Q. 1 Consultation Group on the Limitations Act, Recommendations for a New Limitations Act: Report of the Limitations Act Consultation Group (Toronto: Consultation Group on the Limitations Act, 1991) Megrah, Maurice, Byles on Bills of Exchange (London: Sweet & Maxwell, 1965) Mew, Graeme, The Law of Limitations, 2nd ed. (Markham, Ont.: Butterworths, 2004) Ontario Law Reform Commission, Report on Limitation of Actions (Toronto: Department of the Attorney General, 1969) [page769]

John W. Montgomery, for appellant. Philip C. Polster, for respondent.

[1] GILLESE J.A. (LAFORME J.A. concurring): -- 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.

Background

[2] In February 1997, the appellant loaned her son, the respondent, the sum of $150,000. By promissory note dated February 10, 1997 (the "Note"), the respondent promised to pay the appellant, on demand, the sum of $150,000. The Note also required the respondent to pay interest at the rate of prime plus one per cent per annum.

[3] The respondent last made an interest payment on October 26, 1998. No payments in respect of the Note have been made since then.

[4] On November 10, 2004, the appellant made a demand for repayment. She met with no success so, on February 17, 2005, she commenced the present action in which she claims all sums due on account of the Note.

[5] The respondent moved for summary judgment. By order dated April 10, 2006, Minden J. granted the motion and dismissed the appellant's claim. He held that the appellant's action is barred by s. 45(1)(g) of the Limitations Act, R.S.O. 1990, c. L.15 (the "former Limitations Act").

[6] The motion judge referred to the appellant's submission that the new Limitations Act applied. His reasons for rejecting that submission are extremely brief. The full text of the reasons in respect of this issue is as follows:

Plaintiff's principal submission, unsupported by any caselaw, concerning the applicability of Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. was premised upon the defendant's refusal to comply with the plaintiff's November 10, 2004 demand letter as constituting the act or omission giving rise to the plaintiff's claim. As I have said, the authorities binding upon me make it clear that it was, rather, the making of the demand loan that gave rise to the plaintiff's claim.

[7] The appellant appeals. Counsel for the appellant notes that, given the paucity of the reasons on the issue of the applicability [page770] of the new Limitations Act, it is unclear whether the motion judge considered its provisions. If he did, the appellant argues that the motion judge erred in concluding that her claim arose when the Note was made, rather than when the respondent refused to repay the loan after a demand for repayment had been made. Consequently, the appellant says, the limitation period under the new Limitations Act has not expired and her claim is not statute-barred.

[8] For the reasons that follow, I would dismiss the appeal. The Issues

[9] This appeal requires the court to decide the following issues:

(1) What effect does the new Limitations Act have on the present action?

(2) Is the action statute-barred?

[10] Before addressing these issues, it is useful to consider the result under the former Limitations Act.

The Result Under the Former Limitations Act

[11] If the former Limitations Act applies, the limitation period expired before the action was commenced. I agree with the motion judge who explained this result as follows:

In my view, this situation is governed by clear and binding authorities, including the Ontario Court of Appeal's decision in Royal Bank v. Hogg, 1929 417 (ON CA), [1930] 2 D.L.R. 488, and other cases to the effect that (p. 490) "a demand note matures for all purposes as soon as it is delivered". See also: Royal Bank v. Dwigans, 1933 286 (AB SCAD), [1933] 1 W.W.R. 672 (Alta. C.A.) at p. 675 and p. 677. In these circumstances, where the loan is repayable on demand, s. 45(1)(g) of the Limitations Act, R.S.O. 1990, C. L.15 applies to bar an action unless commenced with[in] 6 years of the funds being advanced; Wilkosz v. Amato, [1999] O.J. 1958, at paras. 49 and 50, and Spencer Investments Ltd. v. Hansford (1974), 1974 1173 (AB SCTD), 48 D.L.R. (3d) 474, at para. 6. Here, the limitation period was started afresh by reason of the last payment [on October 26, 1998]: St. Hillaire et al. v. Kravacek et al. (1979), 1979 1705 (ON CA), 26 O.R. (2d) 499 (Ont. C.A.). See also Montreal Trust Co. of Canada v. Vanness Estate, [2005] O.J. No. 594 (C.A.) at para. 2. Thus, the effective limitation period by which this action had to have commenced was October 26, 2004. Accordingly, this action commenced February 17, 2005 is statute barred.

What Effect Does the New Limitations Act Have on the Present Action?

[12] The present action was commenced on February 17, 2005, after the new Limitations Act came into force on January 1, 2004. To determine whether the appellant's claim is to be dealt with in [page771] accordance with the former or the new Limitations Act, recourse must be had to the transition provisions in s. 24 of the new Limitations Act.

Section 24(2) of the new Limitations Act

[13] The parties argued this appeal on the basis that s. 24(5) of the new Limitations Act applies. However, it appears to me that s. 24(2) determines whether the transition provisions in s. 24 apply. Thus, in my view, s. 24(2) must be considered before it can be known whether s. 24(5) is applicable.

[14] Section 24(2) provides:

24(2) This section applies to claims based on acts or omissions that took place before the effective date and in respect of which no proceeding has been commenced before the effective date.

[15] There are two conditions in s. 24(2): first, that the appellant's claim is based on an act or omission that took place before January 1, 2004; and, second, that no proceeding had been commenced in respect of that claim before January 1, 2004. The second condition is met as the present action is the only proceeding to have been commenced in relation to the Note and it was brought after January 1, 2004.

[16] Thus, in determining whether the requirements of s. 24(2) have been met, the only issue is whether the appellant's claim is based on an act or omission that took place before the effective date. As the demand for payment was made on November 10, 2004, a date after the effective date of January 1, 2004, while the appellant may argue that she "discovered" her claim after January 1, 2004, since she argues on the basis that s. 24(5) applies, she must concede that for purposes of s. 24(2), her claim is based on an act or omission that took place prior to January 1, 2004. The only such acts are the delivery of the Note on February 10, 1997, the making of the last interest payment on October 26, 1998, or the failure to repay the loan prior to January 1, 2004, without the necessity of a demand for repayment having been made. As explained below, I agree that the act is the delivery of the Note as extended by the making of an interest payment. As those events took place before January 1, 2004, s. 24 applies to her claim.

Section 24(5) of the new Limitations Act

[17] Section 24(5) reads as follows:

24(5) If the former limitation period did not expire before the effective date and if a limitation period under this Act would apply were the claim based on an act or omission that took place on or after the effective date, the following rules apply: [page772]

1. If the claim was not discovered before the effective date, this Act applies as if the act or omission had taken place on the effective date.

2. If the claim was discovered before the effective date, the former limitation period applies.

"Effective date" and "former limitation period" are defined in s. 24(1), which reads as follows:

24(1) In this section,

"effective date" means the day on which this Act comes into force; ("date de l'entrée en vigueur")

"former limitation period" means the limitation period that applied in respect of the claim before the coming into force of this Act. ("ancien délai de prescription")

[18] On a plain reading of s. 24(5), its rules apply if two conditions are met:

(1) the former limitation period did not expire before January 1, 2004; and

(2) a limitation period under the new Limitations Act would apply if the claim were based on an act or omission that took place after January 1, 2004.

[19] Thus, I must first consider whether the two conditions in s. 24(5) have been met.

Have the conditions in s. 24(5) of the new Limitations Act been met?

The first condition

[20] The former limitation period, as provided by s. 45(1)(g) of the former Limitations Act, was six years. As the motion judge explained, given that a payment had been made in October 1998, that six-year limitation period expired in October 2004. As the former six-year limitation period had not expired before January 1, 2004, the first condition is met.

The second condition

[21] The second condition requires a determination as to whether a limitation period under the new Limitations Act would apply if the appellant's claim were based on an act or omission that took place after January 1, 2004.

[22] The parties disagree as to what act or omission is the basis of the appellant's claim. The appellant contends that her claim is [page773] based on the respondent's refusal to repay the loan after demand for repayment had been made. [^1] The respondent maintains that the appellant's claim is based on the Note. In my view, regardless of which of those views is correct, a limitation period under the new Limitations Act would apply and the second condition has been met.

[23] Section 4 of the new Limitations Act creates a basic limitation period of two years following the discovery of a claim. It reads 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.

[24] None of the exceptions in s. 2 of the new Limitations Act apply to a demand promissory note so prima facie the appellant's claim (whether based on default after demand for repayment or the Note) would be subject to the two-year limitation period provided for by s. 4. As discussed below, the appellant's claim may be subject to the 15-year ultimate limitation period in s. 15 of the new Limitations Act. However, whether the applicable limitation period is two years or 15 years is immaterial for the purposes of the second condition as all that is required is that a limitation period under the new Limitations Act would apply if the claim were based on an act or omission that took place after January 1, 2004.

[25] As both conditions in s. 24(5) are met, its rules apply. Determination of which of its two rules applies will dictate whether the governing limitation period is that provided by the former or the new Limitations Act.

Does Rule 1 or Rule 2 of s. 24(5) apply?

[26] Rule 1 in s. 24(5) provides that if the appellant's claim was not discovered before January 1, 2004, the new Limitations Act applies as if the act or omission had taken place on January 1, 2004. Rule 2 provides that if the appellant's claim was discovered before January 1, 2004, the former limitation period applies. It is readily apparent that in order to decide which of the two rules applies, it must be determined when the appellant's claim was discovered. [page774]

[27] The appellant contends that it was the respondent's refusal to comply with the demand letter of November 10, 2004, that constituted the "act or omission" giving rise to her loss and, hence, to her claim. Thus, the appellant argues that her claim was discovered after the demand for repayment was made in November 2004. As November 2004 falls after January 1, 2004, the appellant says that Rule 1 applies. Rule 1 provides that the new Limitations Act applies as if the act or omission had taken place on January 1, 2004. As the action was commenced in February 2005, it was brought in time.

[28] The respondent argues that the appellant's claim was discovered on February 10, 1997, when the Note was made. [^2] As February 1997 [^3] is a date before January 1, 2004, the respondent argues that Rule 2 applies. Hence, the limitation period under the former Limitations Act applies and it has expired.

[29] There is a great deal of strength to the appellant's position. The language of the new Limitations Act is very different from that of the former Limitations Act. Where the former Limitations Act speaks of "action", the new legislation speaks of "claims". "Claim" is defined in s. 1 of the new Limitations Act as "a claim to remedy an injury, loss or damage that occurred as a result of an act or omission".

[30] Section 5 of the new Limitations Act ties the discovery of a claim to the notion of "injury, loss or damage". Section 5(1) reads as follows:

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,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). [page775]

[31] The appellant argues that in the modern commercial world, a reasonable lender would not be considered to have suffered "injury, loss or damage" until there was a failure to comply with a demand for repayment

[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.

[33] Further, the Alberta Limitations Act, R.S.A. 2000, c. L- 12 (the "Alberta Act"), has been interpreted so that failure to pay, after the demand for repayment has been made, triggers the running of the limitation period.

[34] Section 3(1) of the Alberta Act provides:

3(1) Subject to section 11, if a claimant does not seek a remedial order within

(a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known,

(i) that the injury for which the claimant seeks a remedial order had occurred,

(ii) that the injury was attributable to conduct of the defendant, and

(iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding,

or

(b) 10 years after the claim arose,

whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

[35] Section 3(1) was interpreted in the context of a claim based on a demand loan in Sawchuk v. Bourne, 2004 ABQB 344, [2004] A.J. No. 526, 130 A.C.W.S. (3d) 1123 (Q.B.). In Sawchuk, the court held that the limitation period started to run when the plaintiff demanded payment and the defendant refused to pay. The court acknowledged that at common law, the cause of action on a demand loan runs from the date of the advancement of the loan. However, the court referred to s. 3(1) of the Alberta Act and held that the limitation period began to run not on the date the cause of action arose but on the date of injury. The date of injury was held to be when the defendants failed to repay the loan despite a demand having been made. [page776]

[36] The order in Sawchuk was appealed but the appeal was dismissed for inaction; the defendant's application to have the appeal restored was denied. See 2005 ABCA 382, [2005] A.J. No. 1558, 144 A.C.W.S. (3d) 12 (C.A.).

[37] I do not find Sawchuk to be helpful in construing the new Limitations Act, as the wording of the Alberta Act is materially different. Significantly"injury" is defined in s. 1(e)(iv) of the Alberta Act to include "non-performance of an obligation" whereas the new Limitations Act does not define "injury, loss or damage".

[38] In any event, I reject the appellant's argument for three reasons.

[39] First, to accede to the appellant's submission, I would have to accept that the legislature intended to change the law relating to demand notes by means of the new Limitations Act, a piece of legislation that is directed at limitation periods, not commercial law. In my view, it would require very clear language evidencing an intention on the part of the legislature to impair existing rights before such a construction, which would overturn centuries' old jurisprudence, would be warranted. As the Supreme Court of Canada stated in Goodyear Tire and Rubber Co. of Canada v. T. Eaton Co., 1956 2 (SCC), [1956] S.C.R. 610, [1956] S.C.J. No. 37, at p. 614 S.C.R.:

[A] Legislature is not presumed to depart from the general system of the law without expressing its intention to do so with irresistible clearness, failing which the law remains undisturbed.

[40] In my view, the language in the new Limitations Act is not so "irresistibly clear" that it can be presumed that the legislature intended to depart from established commercial law and disturb existing common law rights.

[41] Second, the appellant's interpretation, taken to its logical extreme, results in limitless liability. If a demand for repayment must be made before the limitation period would begin to run and no demand is made, the limitation period would never begin to run and the claim would exist in perpetuity. Consequently, liability would exist indefinitely. That is contrary to the foundational notions underlying the creation of limitation periods, namely, the need for the law to promote finality and certainty in legal affairs and to prevent indefinite liability. When considering the undesirability of indefinite liability, the words of this court in Deaville v. Boegeman (1984), 1984 1925 (ON CA), 48 O.R. (2d) 725, [1984] O.J. No. 3403 (C.A.), at pp. 729-30 O.R. are usefully recalled:

When limitation periods were under consideration by the common law courts in the 18th and 19th centuries, the judges described these limitation statutes as "statutes of repose" or "statutes of peace". The emphasis then was [page777] as it is today, on the necessity of giving security to members of society. Citizens would not expect to be disturbed once the limitation period had expired. Today when a limitation period has expired it is considered that, generally speaking, a defendant need no longer be concerned about the location or preservation of evidence relevant to the particular claim or relevant to a claim which has not been made. Further, the defendant is, presumably, at that stage free to act and plan his life without concern for stale claims or claims of which he has no knowledge which have arisen out of the original incident. When considering the purpose of limitation periods, the maxim, although used frequently in other connections, expedit reipublicae ut sit finis litium is appropriate; it is indeed in the public interest that there should be an end to litigation.

(Citations omitted)

[42] The Ontario Law Reform Commission explained the need for limitation periods in its Report on Limitation of Actions (Toronto: Department of the Attorney General, 1969) at 9-10:

Lawsuits should be brought within a reasonable time. This is the policy behind limitation statutes. These laws are designed to prevent persons from beginning actions once that reasonable time has passed. Underlying the policy is a recognition that it is not fair that an individual should be subject indefinitely to the threat of being sued over a particular matter. Nor is it in the interests of the community that disputes should be capable of dragging on interminably. Furthermore, evidentiary problems are likely to arise as time passes. Witnesses become forgetful or die: documents may be lost or destroyed. Certainly, it is desirable that, at some point, there should be an end to the possibility of litigation in any dispute. A statute of limitation is sometimes referred to as an "Act of peace".

Apart from the protection they give to potential defendants, limitation statutes enable the courts to function more effectively by ensuring that litigation is not started so long after the event that there are likely to be evidential difficulties. In addition, the commercial world is able to carry on more smoothly. The limitation statutes encourage early settlements so that the disrupting effect of unsettled claims on commercial intercourse is minimized.

[43] It has been suggested that the ultimate 15-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.

[44] Sections 15(2) and (6)(c) read as follows:

15(2) No proceeding shall be commenced in respect of any claim after the 15th anniversary of the day on which the act or omission on which the claim is based took place.

(6) For the purposes of this section, the day an act or omission on which a claim is based takes place is, [page778]

(c) in the case of a default in performing a demand obligation, the day on which the default occurs.

[45] Section 15(2) creates an ultimate 15-year limitation period. It is triggered by the "act or omission on which the claim is based". Section 15(6)(c) provides that, in the case of demand obligations, the day an act or omission on which a claim is based takes place is the date of default. If default does not occur until a demand for repayment has been made and no demand is made, there can be no default and the limitation period cannot begin to run. If, on the other hand, default is the failure to repay on the day that a demand promissory note is delivered, the limitation period begins to run on that date [^4] and the ultimate limitation period will necessarily operate. This interpretation is consistent with established jurisprudence, as explained above, and with s. 5(2) of the new Limitations Act, discussed below.

[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.

[48] As the act on which the appellant's claim is based is the delivery of the Note in February 1997, pursuant to s. 5(2) of the new Limitations Act, the appellant is presumed to have "discovered" her claim in February 1997. [^6] There was no evidence tendered to rebut the presumption. Consequently, she is presumed to have discovered the claim before January 1, 2004, and Rule 2 of s. 24(5) applies.

[49] My third reason for rejecting the appellant's submission is this. The alleged deficiency in the approach to limitation periods [page779] 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.

Is the Action Statute-Barred?

[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.

Disposition

[52] Accordingly, I would dismiss the appeal.

[53] Normally, costs would follow the event. In the circumstances of this case, however, I would make no order as to costs. This case raised novel points of interpretation on which there is no existing judicial authority. Furthermore, the issues are of broad significance and arise early in the life of the new Limitations Act.

JURIANSZ J.A. (dissenting): --

I. Introduction

[54] I have had the opportunity to read the reasons of Gillese J.A. and agree with her statement of the facts and characterization of the issues. However, I would interpret the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the "new Act") differently and, as a result, would allow the appeal. I will discuss my interpretation of the new Act first and explain the application of the transition provision to the present appeal second.

[55] The question is whether the new Act changes the commencement date for the limitation period for demand loans [page780] generally to the date of default following a demand, as opposed to the date the loan is made. I conclude that it does.

[56] Gillese J.A. reaches the conclusion she does because she does not accept that the legislature, by enacting the new Act, intended to change the law relating to demand notes. She would require very clear language to make evident the intention of the legislature to depart from established commercial practice and disturb existing common law rights before adopting a construction of the new Act that would overturn long- established jurisprudence.

[57] Gillese J.A. further points out that if the limitation period relating to a demand loan does not begin to run until a demand is made for payment, then liability would exist indefinitely so long as a demand is not made. She considers it contrary to common sense to think that a limitations act designed to create uniform, simplified limitation periods would have created indefinitely existing liability for demand loans.

[58] I would not resort to these interpretive techniques in deciding this case. I would conclude, on the basis of the text of the new Act, that the limitation period for a demand loan starts to run on the date of default following a demand for repayment. This result does not, in my view, interfere with commercial practice or common law rights.

II. The New Act

[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, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 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)

[60] Looking at the new Act as whole, it marks a major change of approach from the former limitations regime. It prescribes a basic limitation period of two years and an ultimate limitation period of 15 years that both apply generally, it enumerates a [page781] number of claims subject to no limitation period, and it lists specific statutory limitation periods that remain unchanged. I will describe the key parts of the new Act in more detail.

[61] First, the new Act creates a new "basic limitation period" of two years that applies generally. It begins to run on the day on which the claim was discovered as opposed to the day on which the cause of action arose. This is apparent from ss. 1, 4 and 5, which are set out below.

1. In this Act, . . . "claim" means a claim to remedy an injury, loss or damage that occurred as a result of an act or omission

2. 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,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(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.

[62] Second, the new Act provides for an "ultimate limitation period" that also applies generally. The 15-year ultimate limitation period begins to run on the day on which the act or omission on which the claim is based took place. This is set out in s. 15:

15(1) Even if the limitation period established by any other section of this Act in respect of a claim has not expired, no proceeding shall be commenced in respect of the claim after the expiry of a limitation period established by this section.

(2) No proceeding shall be commenced in respect of any claim after the 15th anniversary of the day on which the act or omission on which the claim is based took place. [page782]

[63] Third, ss. 16 and 17 set out a number of claims that are not subject to any limitation period, including proceedings for a declaration where no consequential relief is sought, proceedings to enforce a court order or an arbitration award, proceedings to obtain support under the Family Law Act, R.S.O. 1990, c. F.3, and undiscovered environmental claims.

[64] Finally, the list of specific statutory limitation periods that are left unchanged is set out in a schedule to the new Act. These limitation periods range from eight days to launch an application under the Creditors' Relief Act, R.S.O. 1990, c. C.45 to 15 years to bring a proceeding for forfeiture under the Remedies for Organized Crime and Other Unlawful Activities Act, 2001, S.O. 2001, c. 28.

[65] Before turning to the specific provisions of the new Act and considering how they apply to demand loans, it is useful to make some observations about the Limitations Act, R.S.O. 1990, c. L.15 (the "former Act").

III. Application of the Former Act to Demand Loans

[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, Ont.: 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 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 v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, [1986] O.J. No. 1101 (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, [1964] 2 All E.R. 929 (C.A.), at pp. 242-43 Q.B.: "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 of Canada v. Hogg, 1929 417 (ON CA), [1929] O.J. No. 99, [1930] 2 D.L.R. 488 (S.C. (A.D.)) the court wrote at p. 489 D.L.R.:

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. [page783]

[70] The logic of the common law is easily appreciated. There would be no basis upon which the courts could dismiss an action brought before the making of a demand. Not only was the loan fully mature and repayable as soon as it was made, but the bringing of the action itself constituted a demand for payment. In Birks v. Trippet (1666), 1 Wms. Saund. 32, 85 E.R. 34 (K.B.), the court adopted counsel's argument that "no actual request is necessary, but the bringing of the action is a sufficient request". Further, in Rumball v. Ball (1711), 10 Mod. Rep. 39, 88 E.R. 616 (K.B.), the court noted: "Besides, supposing the demand necessary, the action itself, perhaps, is a demand."

[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.

[72] It is also worth noting that the former Act did not contemplate demand loans specifically, as does the new Act in s. 15(6)(c). Section 45(1)(g) of the former Act set out a six- year limitation period for actions based on "trespass to goods or land, simple contract or debt grounded upon any lending or contract without specialty, debt for arrears of rent, detinue, replevin or upon the case other than for slander". This was the provision that applied to demand loans. Under it, the limitation period began to run immediately upon the delivery of the demand note.

[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.

[74] I turn now to a consideration of the new Act keeping in mind that the common law determined when one was first entitled to sue, and it was the former Act that stipulated that the limitation period began to run on that day.

IV. Application of the New Act to Demand Loans

[75] The new Act establishes a new and different regime for limitation periods. Section 4, which is set out above, provides for a basic limitation period of two years that begins to run, not when the cause of action arose, but on the day "on which the claim was discovered". Section 5, also set out above, stipulates the criteria that define the day on which a claim is discovered. Section 5 refers to "injury, loss or damage", but for the sake of simplicity I will, at times, speak of "damage" only.

[76] My view is that the earliest a plaintiff can "discover" a claim based on a demand loan is the date on which default in [page784] making repayment following a demand occurs (provided all other conditions of the loan had been met) and not the date on which the demand loan is made.

[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 aeinjury, loss or damage' to the creditor until a demand was made and refused": Brian Bucknall"The Limitations Act, 2000 and the 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.

[79] Employing the logic of the common law authorities leads to the conclusion that the criteria of ss. 5(1)(a)(i), (ii) and (iii) are satisfied on the date the demand loan is made. As required by subparagraph (i), legally cognizable damage has occurred because there is a fully mature loan that has not been repaid. Subparagraph (ii) is satisfied because the act that caused the damage was the delivery of the demand note or equivalent act that created the demand loan. Subparagraph (iii) is met because the claim is made against the person who delivered the demand note or otherwise created the demand obligation.

[80] While ss. 5(1)(a)(i), (ii) and (iii) may be satisfied as of the date of the loan, s. 5(1)(a)(iv) is not. Subparagraph (iv) requires that the claimant know that "having regard to the nature of the . . . damage, a proceeding would be an appropriate means to seek to remedy it". Section 5(1)(a)(iv) imposes a completely new requirement. There is nothing analogous to it in the former Act. Nor are the common law authorities of any assistance in understanding this new requirement, as they address when a lender is entitled to bring a proceeding as opposed to when it is appropriate to do so. A more detailed examination of the words of s. 5(1)(a)(iv) is necessary.

[81] My first observation is that s. 5(1)(a)(iv) sets out something the claimant must know, in addition to knowing the matters in ss. 5(1)(a)(i), (ii) and (iii). In the context of a demand loan, knowledge of the matters in the first three subparagraphs is sufficient for a creditor to appreciate that he or she has a cause of [page785] action against the debtor. If s. 5(1)(a) were satisfied upon a creditor knowing he or she has a cause of action, then s. 5(1)(a)(iv) would be devoid of meaning. This leads me to conclude that, at least in the context of a demand loan, the creditor must know more than that a cause of action has accrued.

[82] I next observe that the "nature" of the injury, loss or damage is important in assessing whether the claimant should know a proceeding is appropriate. The "nature" of an injury, loss or damage requires consideration of matters beyond the mere fact that such exists. "Nature" is a general word. It would seem to include the character as well as the extent of the injury, loss or damage. Before the concept of discoverability was judicially developed, the nature and extent of damages were not relevant to the determination of whether a cause of action accrued. As Major J. noted in Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549, [1997] S.C.J. No. 31, at para. 18:

It was conceded that at common law ignorance of or mistake as to the extent of damages does not delay time under a limitation period. The authorities are clear that the exact extent of the loss of the plaintiff need not be known for the cause of action to accrue. Once the plaintiff knows that some damage has occurred and has identified the tortfeasor . . . , the cause of action has accrued. Neither the extent of damage nor the type of damage need be known.

(Citations omitted)

[83] For the determination of this case, it is neither necessary nor desirable to embark on an exhaustive consideration of the meaning of the "nature" of the injury, loss or damage. It is sufficient to say that the nature of the damage that flows from a freely advanced demand loan is latent or potential until the debtor defaults in making repayment. Until then, the creditor is in precisely the situation he or she expected to be in. The creditor has lent money to someone and expects that person to keep it until asked to repay it. If the creditor did not expect the debtor to repay the money when asked to, it is doubtful the loan would have been advanced in the first place. It is only when the debtor fails to repay the money after a demand is made, that the creditor realizes the damage is not latent but actual. The creditor knows from the beginning that he or she is owed money, but only knows after the debtor has defaulted following a demand for repayment that he or she has a "bad debt". I conclude that the nature of the damage occasioned by the debt, whether "latent" or "actual", is pertinent to the application of s. 5(1)(a)(iv).

[84] It is necessary, in interpreting s. 5(1)(a)(iv), to consider what a reasonable person with the abilities and in the circumstances of the person with the claim ought to have known as required [page786] by s. 5(1)(b). A reasonable person who has extended a demand loan would know from the common law that he or she was entitled to commence legal action without first making a demand. That person would know that a legal proceeding might not be necessary to collect the debt as the making of a simple demand might prompt repayment. He or she would also know that commencing a legal proceeding could result in unnecessary costs. Finally and most importantly, the reasonable person would be well aware that the courts take a dim view of unnecessary litigation.

[85] There are many illustrations of the courts' dim view of unnecessary litigation. There are the common law concepts of maintenance and champerty; there is the rule against multiple proceedings; and there are potential cost consequences for unnecessary steps and excessive caution.

[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 p. 363 Ry & Mood:

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.

[87] It is worth noting that in Recommendations for a New Limitations Act: Report of the Limitations Act Consultation Group (Toronto: Consultation Group on the Limitations Act, 1991), it was recommended that the plaintiff have knowledge of "the significance of the harm relative to the claim". The Consultation Group made the following pertinent comments about the earlier wording proposed for s. 5(1)(a)(iv) at 24:

If the limitation period starts to run as soon as the plaintiff has knowledge of the harm, the cause of the harm and the identity of the defendant, in order to preserve their rights plaintiffs may be compelled to begin legal proceedings at the first moment they acquired this knowledge. It would not be in the public interest if limitations policy inadvertently promoted unnecessary litigation. Accordingly, some account should be taken of the significance of the harm, so the plaintiff is not necessarily required to commence proceedings at the first sign of damage. [page787]

[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.

[91] Other sections of the Act provide no reason to depart from this construction.

[92] Section 5(2) provides that claimants are presumed to discover their claims on "the day the act or omission on which the claim is based took place". It follows from the common law, again, that a claim on a demand note is based on the act of delivering the note or otherwise creating the demand obligation. At first glance, it might seem that s. 5(2) would entirely negate the effect of s. 5(1) for claims based on demand obligations. That is not so, because, in my view, evidence that no demand for repayment had been made would be sufficient to rebut the presumption in s. 5(2).

[93] Section 15(2) provides that the 15-year ultimate limitation period also begins to run on "the day on which the act or omission on [page788] which the claim is based took place". Attaching the same meaning to this phrase as in s. 5(2), it would seem, at first, that a claim based on a demand loan would be subject to an ultimate limitation period of 15 years from when it is made. However, s. 15(6)(c), provides:

15(6) For the purposes of this section, the day an act or omission on which a claim is based takes place is,

(c) in the case of a default in performing a demand obligation, the day on which the default occurs.

[94] This provision is undoubtedly pivotal in understanding the legislature's intent regarding limitation periods for demand loans, as it is the only provision of the new Act that deals with demand loans expressly.

[95] I first consider and reject a construction that would identify "the day on which the default occurs" as the date on which the demand loan is made. I consider this construction because the common law authorities may be taken to imply, awkwardly in my view, that a debtor is in default of performing a demand loan as soon as the loan is made. I reject this construction because the day on which "default occurs" cannot be the same day that would be identified as "the day of the act or omission on which the claim is based" absent the section. If that were so, s. 15(6)(c) would be a tautology -- i.e., the day of the act on which the claim is based is the day of the act on which the claim is based. Section 15(2) already provides that the ultimate limitation period begins to run on "the day on which the act or omission on which the claim is based took place". A special provision to say the general provision applies to demand obligations is not necessary. As s. 15(6)(c) must have meaning, the day of default must be construed to be a day other than the day that would be identified as "the day of the act or omission on which the claim is based" absent the section.

[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.

[97] As Gillese J.A. points out, the result of such a construction is that the limitation period for a demand loan will not be triggered unless a demand is made. This potential for indefinitely [page789] existing liability does not result from s. 5 or s. 15(2). Section 5 and s. 15(2), without s. 15(6) (c), would result in there being an ultimate limitation period of 15 years from the day the demand loan is made if there were no demand for repayment. It is s. 15(6)(c), and s. 15(6)(c) alone, that produces the potential for indefinitely existing liability. Section 15(6)(c) creates a special rule for demand obligations. In my view, it reflects the express legislative intent to allow the potential for indefinitely existing liability for demand obligations where no demand is made.

[98] I do not regard this result as disharmonious with the overall scheme of the new Act. While I agree that the legislation was designed to create uniform and simplified limitation periods generally, the new Act provides for special situations in which claims have no limitation periods. First, it would seem that the whole of s. 15(6) is devoted to situations where the limitation period could remain open indefinitely. Sections 15(6)(a) and (b) create the possibility for indefinite limitation periods where there is a continuous act or omission and a series of acts or omissions, as the ultimate limitation period in such situations will never begin to run as long as the act or series of acts continues. While paras. (a) and (b) concern matters that are different in concept, they do provide for indefinitely existing liability and the new Act deals with them in the same subsection as demand obligations.

[99] Second, as noted above, s. 16 lists a number of situations in which there is no limitation period at all. It is significant that ss. 16(1)(f) and (g) provide that there is no limitation period in regard to certain other types of debt obligations. Therefore, the legislature did contemplate indefinitely continuing liability in certain debtor-creditor relations.

[100] Therefore, I see no disharmony between the possibility for indefinitely existing liability for demand obligations and the new Act as a whole.

[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 [page790] 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.

[102] Moreover, I do not regard the adoption of a limitation period for demand loans that would commence on the day of default following a demand to be an interference with the rights of the debtor. Because the expiration of a limitation period does not extinguish the liability of a debtor, the debtor never acquires the substantive right not to repay the creditor. It is simply that after the provincially enacted limitation period elapses, the creditor cannot proceed with a civil action to recover on the note. In addition, creditors' rights to have their money repaid should also be considered.

[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.

[104] In 1980, the United Kingdom enacted legislation that postpones the commencement of the limitation period for qualifying loans, which include demand loans, until the making of a written demand for repayment. Section 6(3) of the Limitations Act 1980 (U.K.), 1980, c. 58, provides that the limitation period for such loans is calculated "as if the cause of action to recover the debt had accrued on the date on which the demand was made".

[105] Similarly, in Florida, for an "obligation or liability founded on a negotiable or non negotiable note payable on demand or after date with no specific maturity date specified in the note", the limitation period does not start to run until the first written demand for payment: Fla. Stat. 95.031 (LexisNexis 2006).

[106] It is also significant that the Alberta Limitations Act, R.S.A. 2000, c. L-12, which is similar to the scheme in Ontario, has been interpreted in a way that the limitation period for a demand loan starts to run from the date of default following a demand for repayment: Sawchuk v. Bourne, 2004 ABQB 344, [2004] A.J. No. 526, 130 A.C.W.S. (3d) 1123 (Q.B.). [^7]

[107] In sum, under the new Act in Ontario, I would conclude that a claim based on a demand loan cannot be discovered until a debtor defaults following a demand for repayment. At that point, both the basic and the ultimate limitation period will begin to run. [page791]

V. Application of the Transition Provision to Determine if the Present Action is Statute-Barred

[108] The transition provision of the new Act has to be applied to determine whether the new Act or the former Act applies to the present appeal. Section 24 reads as follows:

24(1) In this section,

"effective date" means the day on which this Act comes into force. . . ;

"former limitation period" means the limitation period that applied in respect of the claim before the coming into force of this Act. . . .

(2) This section applies to claims based on acts or omissions that took place before the effective date and in respect of which no proceeding has been commenced before the effective date.

(3) If the former limitation period expired before the effective date, no proceeding shall be commenced in respect of the claim.

(5) If the former limitation period did not expire before the effective date and if a limitation period under this Act would apply were the claim based on an act or omission that took place on or after the effective date, the following rules apply:

1. If the claim was not discovered before the effective date, this Act applies as if the act or omission had taken place on the effective date.

2. If the claim was discovered before the effective date, the former limitation period applies.

[109] In this case, the demand note was given on February 10, 1997 and some interest was paid on October 26, 1998. The terms of the note did not specify when the interest should be paid and the parties did not attach any significance to the payment of interest. As Gillese J.A. does, I find it convenient to refer to the date of the note for the sake of simplicity and to reflect the way the issue was presented to the court. Using the October 26, 1998 date as the commencement of the former limitation period would not change the result.

[110] The six-year former limitation period had not expired on the effective date of the new Act, January 1, 2004. The act referred to in s. 24(2) must mean the act of delivering the note in February 1997 and not the act of default. I say this because default is only deemed to be the act or omission for the purposes of s. 15. Therefore, the claim is based on an act that took place before the effective date and no proceeding was commenced before the effective date. The transition provision applies.

[111] According to the criteria for discovery stipulated in s. 5 of the new Act, the claim was not discovered before the effective [page792] date of the new Act. In particular, the appellant, having regard to the nature of the damage could not know that a proceeding would be an appropriate means to seek to remedy the claim before a demand was made. The presumption in s. 5(2) does not apply because the record indicates that no demand for payment was made until after the effective date.

[112] The first rule in s. 24(5) applies and the limitation period is calculated as if the act or omission had taken place on the effective date. Applying the new Act, the basic limitation period would begin to run upon the respondent's default in repaying the loan following the appellant's demand made on November 10, 2004. As such, the claim was not statute- barred when the appellant started proceedings in 2005.

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.

Appeal dismissed.

[^1]: While the appellant must concede for the purposes of s. 24(2) of the new Limitations Act, that the act or omission on which her claim is based occurred before January 1, 2004, for the purposes of s. 24(5) of that Act, she argues that the act or omission on which her claim is based is the respondent's refusal to repay the loan after a demand for repayment had been made.

[^2]: For simplicity sake, I refer to the date on which the Note was made. However, as the respondent properly concedes, on the line of argument, the limitation period began again in October 1998 when the last partial payment was made.

[^3]: October 1998 is (obviously) also before January 1, 2004 -- see footnote 2 above.

[^4]: Although it will be started afresh with any payments made pursuant to the note.

[^5]: As modified by the last partial payment -- see footnote 2 above.

[^6]: And again in October of 1998.

[^7]: The Sawchuk decision was appealed, but the appeal was struck for inaction. The defendant's application to have the appeal restored was denied: 2005 ABCA 382, [2005] A.J. No. 1558, 144 A.C.W.S. (3d) 12 (C.A.). the Court of Appeal held [at para. 18] that there was "no identifiable error in the chambers judge's use and appication of s. 3 of the Act" and therefore the case did not possess the requisite merit to be restored.