James Leslie Olesen v. Mavis Lynne Olesen, 2013 SKPC 069

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 069 Date: April 16 , 2013 File: File # 113/12 Location: Regina, Saskatchewan _____________________________________________________________________________ Between: James Leslie Olesen and Mavis Lynne Olesen - and - Perry Lee Hrenyk James Olesen and Mavis Olesen For the Plaintiffs Mr. Jeff ery Deagle For the Defendant _____________________________________________________________________________ JUDGMENT P.

DEMONG, J _____________________________________________________________________________ Introduction [ 1 ] By Summons dated March 26, 2012 the plaintiffs, James and Mavis Olesen bring action against the defendant Perry Lee Hrenyk for

recovery of monies they allege are due and owing to them and which arise from a loan agreement entered into between the plaintiffs and the defendant on or about September 23, 2002. [ 2 ] The defendant has filed a dispute note in which he denies he was personally loaned any monies; denies that he ever agreed to repay any monies pursuant to an alleged loan; and pleads that if there was an obligation to repay under the alleged loan, the plaintiffs’ claim is statute barred by reason of the passage of time.

Facts [ 3 ] Notwithstanding the averments set forth in the dispute note, and following the close of his case, the defendant through his counsel stipulated to certain facts and agreed that the only real issue to be determined between the parties is whether or not the claim advanced by the plaintiffs is statute barred. [ 4 ] On or about the 23 rd day of September 2002 at the request of the defendant’s then wife Polly (the plaintiffs’ daughter), the plaintiffs forwarded a cheque in the sum of $32,000.00 payable to Polly which was deposited to Polly and Perry’s joint account. They were married at the time.

The monies were advanced to assist them in dealing with certain financial difficulties they were encountering. [ 5 ] It was understood that these monies were a loan which was to be repaid when their financial circumstances improved. No specific repayment date was agreed to, and the loan monies did not bear interest. [ 6 ] In the ensuing months, the defendant and his wife began to have marital problems and chose to separate.

Prior to the physical separation, Polly prepared a form of written separation agreement which dealt with, among other things, child support, the matrimonial home, and the division of their accumulated matrimonial debt. [ 7 ] The debts identified in the agreement made specific reference to the $32,000.00 loan owed to Mavis and James Olesen. [ 8 ] Under the terms of the agreement, which the defendant signed on February 17, 2003, the defendant was to pay one-half of the $32,000.00 loan advanced to the parties by the plaintiffs, and to facilitate that payment by arranging financing and paying his proportionate share of the loan ($16,000.00) no later than April 1, 2003. [ 9 ] It should be noted that the separation agreement was a contract between the defendant and his wife.

The plaintiffs were not a party to the agreement. The agreement is pertinent only in so far as it evidences the defendant’s written acknowledgment of his obligation to repay one-half of the monies loaned to the defendant and his wife by the plaintiffs. [ 10 ] The defendant never did obtain the financing anticipated under the separation agreement, but did, on or about May 3, 2004 provided a cheque to the plaintiffs in the amount of $5,000.00 in partial satisfaction of his loan obligation.

This partial payment was a clear acknowledgment of his obligation to repay his share of the loan. [ 11 ] In the ensuing years, the defendant and his ex-wife would, every 3 or 4 months, discuss child support and ongoing payments for their daughter’s extracurricular activities. From time to time Polly would advise the defendant that her parents were deferring from calling the loan to afford the defendant an opportunity to manage his finances and thereby have sufficient funds available to deal with his ongoing child support payments.

Polly eventually related to the defendant that the plaintiffs were prepared to wait until their daughter attained the age of 18 years before attempting to collect further on the loan. This presumably was because at that time the defendant’s obligation to pay child support would cease. [ 12 ] The plaintiffs never discussed this forbearance directly with the defendant, and the defendant never signed a written document agreeing to the plaintiffs’ acquiescence.

Nor, according to the evidence, did the defendant ever acknowledge, confirm, or agree to abide by this forbearance. [ 13 ] The defendant’s daughter turned 18 on or about November 3, 2011. On December 28, 2011 the plaintiffs sent an email to the defendant indicating that since he was no longer supporting his daughter, they wanted him to honor his loan obligation and repay the remaining $11,000.00 due and owing under the loan. They asked that he pay this amount immediately. [ 14 ] The defendant replied on the same date by email and stated “I have paid what I will”.

The plaintiffs took this to mean that he was not prepared to pay anything more, and brought this action to recover the remaining $11,000.00 owing under the loan. As indicated, the action was commenced on March 26, 2012. [ 15 ] On the facts, this court is satisfied that the defendant was lent money on or about September 23, 2002 and he derived benefit from those monies.

The court is also satisfied that he made a written commitment to repay one-half of that amount, and he further acknowledged his indebtedness to the plaintiffs on May 3, 2004 when he made a partial payment of $5,000.00. [ 16 ] The only issue before this Court is whether or not the plaintiffs are now statute barred by the passage of time from collecting on the remainder of that loan. The Law

[17] This court has had the advantage of reviewing the decision of the Saskatchewan Court of Appeal in Johnson v. Johnson 2012SKCA 87, rendered by the Honorable Chief Justice Klebuc on October 3, 2012. That case deals with, among other things, the nature of aparental loan and the implications of The Limitations Act 2004, c.L-16.1 and its predecessor legislation The Limitation of Actions ActRSS 1978 c.L-15.

In Johnson the Court of Appeal, at p. 21, reviews, articulates and confirms the following common law principle: “[21] At common law, a loan or other form of indebtedness made with no specific date for payment is often described as a “demandloan” or “open loan” and is deemed to be repayable on a demand for payment by the creditor.

Since the creditor can demand repaymentof a demand loan immediately after it is funded, the limitation of action applicable to a demand loan at common law is deemed to starton the date the demand loan was funded, unless legislation provides for a limitation period to be calculated from a differentcommencement date.” [emphasis added]. [18] The loan which is in issue in this matter, clearly comes within the definition of a “demand loan or “open loan”.

There was nospecific date for payment, and the plaintiffs could have demanded repayment immediately after it was funded. [19] In determining whether or not the claim is statute barred by reason of the passage of time, reference must be had to the former Act,the existing Act, and in particular the transitional provisions of the existing Act. [20] The loan was advanced September 23, 2002. Section 3(1)(f)(i)of the former Act establishes a six year limitation period for recoveryon this demand loan. That

section reads: Periods of limitation “3(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned; (

f) Actions for; (

i) the recovery of money, except in respect of debt charged upon land, whether recoverable as a debt or damages or otherwise, andwhether on a recognizance, bond, covenant or other specialty or on a simple contract, express or implied; within six years after the causeof action arose; ...” [21] At first glance, the limitation period would run through and until September 22, 2008, a period of six years after first advancing thefunds. [22] The defendant however made a partial payment on the loan on May 5, 2004, and pursuant to

Section 7 of the former Act, partialpayment renews the limitation period. As such, the limitation period under the former Act would continue through until May 4, 2010. [23] The defendant argues therefore that at best, the plaintiffs’ right to bring action would have expired May 4, 2010.

The defendantfurther invites the court to conclude that regardless of whether or not the plaintiffs chose to forebear from calling the loan within thattime frame, the defendant did not acknowledge the loan, nor did he agree in writing to any forbearance within that time frame, andtherefore the plaintiffs claim, brought in March of 2012 is well out of time. [24] While not fully articulated by defense counsel in final argument, he could, in the alternative argue that if the new Act applies, thenSection 5 of the new Act governs.

It sets a basic limitation period of two years for demand obligations from “the effective date” which inturn, and in accordance with the new Act, is the date when the new legislation comes into effect. That date was May 1, 2005, andtherefore the defendant could arguably maintain that the limitation period would have expired by April 30, 2007. [25] This court would agree with the defendant but for the transitional provisions of the new Act, and

Section 10 of that Act which in thecourt’s view has the effect of providing for “legislation [that] provides for a limitation period to be calculated from a differentcommencement date” as alluded to in Johnson supra, noted above. [26] Ascertaining the appropriate limitation period on this particular set of facts, is a difficult task. It has not, to this court’s knowledge,been determined by any another court in Saskatchewan. As Perell, J. in Skuy v Greenough Harbour Corporation, 2012 ONSC 6998 states at paragraph 29: “As will quickly become apparent, it is a gross understatement to say that the law about limitation periods and demand obligationsis complicated”.

[ 27 ] This court agrees.. [ 28 ] The new Act came into being, and was effective May 1, 2005. [ 29 ] The transitional provisions of the new Act are identified under

Section 31 of the Act: Transitional 31(1) In this section: (a) “effective date” means the day on which this Act comes into force; (b) “former limitation period” means, with respect to a claim, a limitation period that applied with respect to the claim before the effective date; (c) “new limitation period” means, with respect to a claim, a limitation period established by this Act, that would apply if the claim were based on

an act or omission that took place on or after the effective date.

(2) This

section applies to claims: (

a) that are based on acts or omissions that took place before the effective date; and (

b) with respect to which no proceeding has been commenced before the effective date.

(5) If there is a new limitation period with respect to a claim and the former limitation period did not expire before the effective date: (

a) 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; (

b) if the claim was discovered before the effective date, the former limitation period applies. [ 30 ] In my view, the effect of Section 31(5)(a)of the new Act is to amend the previously existing limitation period and effectively incorporate the new limitation period which is determined by reference to the provisions of the new Act. [ 31 ] Under the new Act, the basic limitation period is set out in

Section 5 which indicates that no proceedings shall be commenced with respect to a claim after two years from the date on which the claim is discovered. [ 32 ]

Section 6 of the new Act speaks to the method of discovery and pursuant to Section 6(2) of the new Act, a claimant is presumed to have known of the matters mentioned in

Section 6, on the day of which the act or omission on which the claim is based took place, unless the contrary is provided. [ 33 ] The former Act had no equivalent to

Section 10 of the new Act.

Section 10 reads: Demand Obligations 10 Unless otherwise provided in this Act, in the case of a default in performing a demand obligation, the day on which

an act or omission on which a claim is based takes place is the day on which the default occurs.

[34] This court is satisfied that the demand obligation referred to in

Section 10 speaks to what the Court of Appeal in Johnson describedas a “demand loan”and, in interpreting

Section 10, this court can come to no other conclusion but that the day on which the act oromission upon which the plaintiffs’ claim is based arises on the day in which the default occurs. [35] In this court’s respectful opinion, the date of default was the 28th day of December, 2011, when the plaintiffs demanded paymenton the loan, and the defendant demurred. [36] As such, in this court’s respectful view, the limitation period began to run from December 28, 2011 and the plaintiffs’ action,commenced in March of 2012, is well within the limitation period. [37] This court recognizes that this

interpretation effectively changes the subslantive common law in respect to the running of alimitation period with respect to demand loans. This is precisely what was anticipated when the Court of Appeal in Johnson supraqualified its statement in paragraph 21 when it stated: “Unless legislation provides for a limitation period to be calculated from a different commencement date”. [38] This court finds support for this

interpretation after reviewing the British Columbia Ministry of the Attorney General, JusticeServices Branch, Civil Policy Legislation Office White Paper on Limitation Act Reform dated September 2010. [39] In that paper, the learned authors make reference to demand obligations in their consideration of amending the British ColumbiaLimitations Act. The learned authors, at page 69, state: “Demand loans are loans in which there are no fixed conditions for repayment. For instance, there may be no set date upon which theloan becomes due and no

schedule for repayment. They often arise in the context of friends and family lending one another money andmay be intended to run over the long term period. The current statute does not specify when time begins to run on a demand loan. However, case law indicates time starts to run from thedate that the obligation is created i.e., when people enter into the demand loan for example, a mother lends her son $50,000.00 in 2000,so that he can buy a house, but does not ask for the money back until 2004.

The loan is due in 2004 when the mother makes the demand.Under the existing law, a six year basic limitation period would apply, starting from 2000 (the date the mother and the son enter into thedemand loan). In other words, if the son does not pay back his mother as per her request in 2004, she has until 2006 to sue him in civilcourt.

If the basic limitation period is reduced from six years to two years, and nothing further is done, request for repayment made more thantwo years after the creation of the loan will result in unfairness to the lender, as he or she will be out of time, or “statute barred” fromsuing the debtor. Going back to the previous example, the mother could not sue her son if he defaulted on the loan in 2004 because thebasic limitation period would have already expired in 2002. ...

To avoid these types of unfairness and allow people to structure demandobligations over the long term, some limitations statutes start the running of time from the moment of default after a demand forrepayment. This is true of the ULCC model law and the reformed limitations laws of Alberta, Saskatchewan and Ontario.[See theSaskatchewan Act

Section 10]. [40] The learned authors in the White Paper specifically note the further amendment to Ontario’s Limitations Act 2002 which wasamended in November 2008 to provide that time starts to run on a demand obligation from “the first date on which there is a failure toperform the obligation, once a demand for the performance is made”.

The amendment , according to the learned authors followed adecision out of the Ontario Court of Appeal wherein the majority interpreted the limitation period for demand promissory notes to beginto run as soon as the note was issued, and not following a default after a demand for payment: Hare v. Hare (ONCA), [2006] O.J. No.4955 (C.A.) [41] The White Paper went on to suggest, that by inclusion of the equivalent of

Section 10 in the Saskatchewan Act, the mother in theexample above would therefore have two years from the son’s default to sue him. [42] This court finds further support for its analysis, in the decision of Lauwers J, in Peca v. Peca, 2011 ONSC 770 . [43] While that decision is not binding upon this court, I did find it persuasive. In that case, Mr. Justice Lauwers was dealing with asimilar situation. A demand loan originated November 3, 1998. Under the then old Limitations Act, the demand loan would haveexpired on November, 3, 2004.

As in Saskatchewan, a new Limitations Act replaced a former Limitations Act and Lauwers J. feltcompelled to incorporate the same “discovery” analysis referred to above. He states at paragraph 21:

In my view, subsection 5(3) interacts with transitional subsection 24(5) to displace the old limitations period so that the old period does not just run its course. As a result of subsection 5(3), the “discovery” for the purposes of subclause 5(1)(a)(

I) and, therefore subsection 24(5)paragraph 1, is when the demand is made after January 1, 2004 where the previous period was otherwise set to expire after January 1, 2004. This was the purpose of the amendment in respect of demand loans. Assuming that the arrangement is a demand loan, then the limitations period begins when a demand is made.” [ 44 ] As stated, in this court’s view, and applying the transitional provisions, and in particular

Section 10 of the new Act, the default referred to in

Section 10 of the new Act occurred after the plaintiffs in the instance circumstances made a demand for performance and the defendant demurred. [ 45 ] For the foregoing reasons this court gives judgment to the plaintiffs jointly, in the sum of $11,000.00. [ 46 ] The plaintiffs are also entitled to pre-judgment interest on the sum of $11,000.00 commencing on the 29 th day of December, 2011, in the sum of $129.40. [ 47 ] In addition the plaintiffs are entitled to the costs of this action which the court fixes at $200.00. [ 48 ] Payment of this judgment is to be made immediately. Paul Demong, J