Law Note - Suing on a Demand Note: Marking Time 

publication 

Spring 2007 - (Lang Michener LLP InBrief Spring 2007 )

Lang Michener LLP InBrief Spring 2007
Logic or common sense suggests that, with reference to a demand promissory note, it would be the "refusal" to pay, following demand, that would trigger the running of the limitation period. However, in Hare v. Hare, the Ontario Court of Appeal recently decided that the basic two-year limitation period runs from the later of (i) the date the loan was advanced, and (ii) the date of the last interest or principal payment.

That is now the law with reference to loans made after January 1, 2004, the date the Ontario Limitations Act, 2002 came into force.

However, by virtue of the same statute, if a debtor or a debtor's agent signs and delivers a written acknowledgement of the debt, the basic two-year limitation period starts again from the date of delivery of the acknowledgement. Also, parties to a business agreement (but not individuals acting for personal, family or household purposes) can vary the basic limitation period under the Limitations Act, 2002. So, for example, business parties may specify in a demand note that "a claim may be made in respect of the note, three years after default by the borrower, after demand."

For loans made prior to January 1, 2004, the statute has transitional rules.