Nadeau v Nadeau, 2021 SKCA 69

Court of Appeal for Saskatchewan Docket: CACV3641 Citation: Nadeau v Nadeau , 2021 SKCA 69 Date: 2021-04-28 Between: Roger Nadeau Appellant (Plaintiff/Applicant/Defendant by counterclaim) And David Nadeau Respondent (Defendant/Respondent/Plaintiff by counterclaim) Before: Ottenbreit, Caldwell and Schwann JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Ottenbreit In concurrence: The Honourable Mr. Justice Caldwell The Honourable Madam Justice Schwann On appeal from: 2020 SKQB 136 , Regina Appeal heard: November 18, 2020 Counsel: Daniel J. Maddigan for the Appellant Kenneth J.

Brodt for the Respondent Ottenbreit J.A. I. INTRODUCTION [ 1 ] Roger Nadeau [Roger] appeals the decision of a Court of Queen’s Bench Chambers judge dated May 13, 2020, determining several issues under The Limitations Act , SS 2004, c L-16.1 [ Act ] regarding a claim in debt made by his brother David Nadeau [David] against him: Nadeau v Nadeau , 2020 SKQB 136 [ Chambers Decision ]. [ 2 ] For the reasons hereafter set forth, I would dismiss the appeal. II.

FACTS AND BACKGROUND [ 3 ] Roger commenced an action against David alleging that he, in his capacity as executor for the estate of Paul Nadeau (the parties’ father), had breached a fiduciary duty owed to Roger by wrongfully withholding title and possession to certain estate land for the period September 27, 2012, to September 22, 2015. [ 4 ] In his statement of defence dated March 10, 2017, David denied the allegations of fiduciary breach and, in the alternative, claimed the right of set-off for debts allegedly owed by Roger to him. David also claimed payment of those debts in a counterclaim.

The amount of these debts are not in dispute and consist of the following: (

a) an existing debt of $50,000, acknowledged by Roger in writing on June 14, 2000, as owing to David, payable on demand together with interest; and (

b) additional sums totaling $70,400, advanced by David to Roger between June 20, 2000, and November 20, 2002, all payable on demand. [ 5 ] Repayment of these sums was demanded by David on August 25, 2016. [ 6 ] The parties agreed there had been no payment by Roger of any principal or interest on the amounts claimed, nor had there been any written acknowledgment of payment beyond or after the above dates. [ 7 ] Roger submitted that David’s right to set-off the debts in his action for breach of fiduciary duty and his counterclaim was barred by either the Act or The Limitation of Actions Act, RSS 1978, c L-15 [ Former Act ]. [ 8 ] With David’s consent, Roger obtained an order for a

summary determination of the following questions of law pursuant to Rule 7-1 of The Queen’s Bench Rule s: (

a) Was David’s counterclaim statute-barred by reason of s. 3(1) (f)(

i) of the Former Act or s. 31(5) (

b) of the Act ? (

b) In the alternative, was David’s counterclaim, in any event, statute-barred by reason of ss. 5 and 31(5) (

a) of the Act ? (

c) Was the indebtedness, as detailed in David’s counterclaim, a proper matter to plead as a set-off to Roger’s claim in the action? (

d) What orders should the court make under Rule 7-1(3)? [ 9 ] The parties filed an agreed statement of facts with regard to determining these questions.

III. THE CHAMBERS DECISION [10] Before the Chambers judge, the parties agreed that all of the loans were demand loans and that all came into existence prior tothe effective date of the Act, being May 1, 2005 [effective date]. It was also agreed that none of the six-year limitation periods applicableto the loans had expired under Former Act before the effective date. [11] Roger submitted that, consistent with the common law, the limitation period of six years ran from the date when the funds wereadvanced, notwithstanding any changes in the Act to the contrary.

Roger cited Hare v Hare (2006), (ON CA), 83 OR(3d) 766 (CA) [Hare], in support of this proposition. [12] Roger also argued the transitional provisions under s. 31(5) of the Act applied but that, regardless of whether s. 31(5)(

a) ors. 31(5)(

b) governed, David was statute-barred from collecting on the demand loans. He further submitted that if s. 31(5)(

b) applied, theclaim was discovered before the effective date and, therefore, the former six-year limitation period governed David’s claim and it wasbarred because it too had expired. [13] Roger’s alternative position was that if s. 31(5)(

a) applied and the claim was discovered on or after the effective date, the act oromission giving rise to David’s claim was deemed to have taken place on the effective date and, pursuant to s. 6(2), David would havebeen presumed to have known that the default occurred on the effective date. Roger argued therefore that the new two-year limitationperiod would have expired in 2007 and David’s claim would be barred. [14] The Chambers judge reviewed the Former Act and the Act. She found s. 10 of the Act effectively changed the date from whichthe limitation period begins to run for demand loans and that it is no longer the date of advancement of the funds as it had been in the past.She said: [34]

Section 10 of the New Act substantively changed the limitation period for demand obligations. No longer does the common lawapply whereby the advancing of funds triggers the limitation period for a demand loan. Instead, the triggering event is the default whicharises following the demand for repayment.

This is what is alluded to in Johnson when the Court contemplated “legislation [that] providesfor a limitation period to be calculated from a different commencement date.” [15] In coming to that conclusion, the Chambers judge reviewed several cases dealing with that issue, including this Court’s decisionin Johnson v Johnson, 2012 SKCA 87, 356 DLR (4th) 459 [Johnson]. The Chambers judge also considered Hare and found that it did notapply.

On the issue of the limitation period, the Chambers judge concluded: [39] Based on the above, I am satisfied that s. 10 of the [Act] displaces the common law with respect to demand loans. Thecommencement of the limitation period for a demand loan is from the date the demand is made. As this reflects a substantive change inthe law, including the triggering event for the commencement of the limitation period, the transitional provisions under s. 31 of the [Act]do not apply. [40] While the parties have not agreed on the date the demand was made, it is alleged to be August 25, 2016.

Were this established attrial, the counterclaim would not be statute-barred by limitations legislation. [16] With respect to the question of whether the debts were a proper matter to plead as a set-off, the Chambers judge reviewed TheQueen’s Bench Rules applicable to that issue and the associated case law. She determined that although there was no basis for legalset-off, there was a basis for equitable set-off. The Chambers judge was satisfied that the claims were sufficiently connected because theyarose out of the same relationship between the parties and their dealings with the land.

She concluded it would be manifestly unjust toallow Roger to enforce payment without consideration of the set-off and counterclaim, and declined to strike the counterclaim. IV. ISSUES [17] Roger raises the following issues: (

a) Did the Chambers judge err in finding that s. 10 of the Act displaced the common law with respect to the triggering event forthe commencement of the limitation period applicable to demand loans? (

b) Did the Chambers judge err in finding that the transitional provisions in s. 31 of the Act do not apply to bar David’s claimfrom proceeding? (

c) Did the Chambers judge err in finding equitable set-off and not striking the claim for repayment of the loans? [18] The lynchpin of Roger’s first two arguments is that the majority decision in Hare should apply to the matter at hand. V. ANALYSIS A.

Did the Chambers judge err in finding that s. 10 of Act displaced thecommon law with respect to the triggering event for the commencement of thelimitation period applicable to demand loans? [19] By way of general comment, the coming into force of the Act made significant changes to the limitations law of Saskatchewan.For the purposes of this case, the salient changes were the introduction of a new general limitation period of two years (s. 5) and the

abandonment of the common law principle in relation to when the cause of action arose in determining when a limitation period begins to run, in favour of a when the claim was discovered approach (s. 6). The Act also contains transitional provisions dealing with how causes of action that had accrued under the Former Act are to be dealt with in light of the Act ( s. 31 ). [ 20 ]

Section 10 of the Act specifically sets forth a provision targeted at demand loans and how they are to be treated for limitation period purposes. The

section reads as follows: 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. [ 21 ] Roger argues that, at common law, the cause of action for repayment of a demand loan was deemed to accrue on the date on which the funds were advanced. He submits that date determined the start of the limitation period under the Former Act and that this methodology for calculating the commencement of the limitation period has not been displaced by s. 10 of the Act . He submits the triggering event for the commencement of the limitation period on demand loans remains the date of advance.

Accordingly, he argues that the limitation period applicable to the sums owing is six years from when they were advanced and that this period had elapsed long before David claimed set-off and counterclaimed. [ 22 ] As he did before the Chambers judge, Roger cites the majority decision in Hare in support of this argument .

He submits that, in Hare , the court concluded that a provision in the Ontario limitations statute ( Limitations Act, 2002 , SO 2002, c 24, Sch B , s 15(6) [Ontario statute]) – which is virtually identical to s. 10 of the Act – did not change the common law rule that the accrual of the cause of action determined when the limitation period starts to run . He argues that because s. 10 and the Ontario provision are so similar, the conclusion of the majority in Hare applies to s. 10 as well.

He submits that the Chambers judge’s failure to apply the reasoning in Hare was an error . [ 23 ] As a preliminary observation, this Court is not bound to follow the conclusions of courts of other provinces made in respect of their own statutes nor must we adopt their analysis of statutory provisions that are similar to ours. While the majority decision in Hare may well be persuasive authority given the similarity in the legislation, it is not binding on this Court. [ 24 ] Moreover, Hare was not a unanimous decision.

The dissent in that case, written by Juriansz J.A., determined that the provision in issue did indeed change the common law approach and that the trigger for the start of the limitation was the default of demand for payment for the loan.

There is much to commend in that analysis. [ 25 ] Most significantly, the majority’s determination that the Ontario Legislature did not intend to change the common law approach when it first introduced its equivalent to our s. 10 was put to rest when the Legislature, in response to the majority’s decision, passed an amendment to the Ontario statute that made it absolutely clear that the triggering event for the start of limitation period for demand loans was the failure to perform the obligation to repay after a demand for repayment had been made and not when the loan was funded. [ 26 ] Accordingly, I determine that the majority decision in Hare is of questionable assistance with respect to this matter. [ 27 ] To properly evaluate Roger’s arguments about s. 10, I turn first to the principles applicable to statutory

interpretation. The Act must be interpreted in accordance with s. 2 -10 of The Legislation Act , SS 2019, c L-10.2 , which reads as follows: Acts and regulations remedial 2-10

(1) The words of

an Act and regulations authorized pursuant to 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 the Legislature.

(2) Every Act and regulation is to be construed as being remedial and is to be given the fair, large and liberal

interpretation that best ensures the attainment of its objects. [ 28 ] To understand the effect of s. 10, and the Legislature’s intention with regard to this new provision, it is also necessary to digress for a moment to briefly examine the approach under the Former Act to limitation periods generally and with respect to demand loans, as well as the new approach to limitation periods brought about by the Act for all claims. [ 29 ] The Former Act based the commencement of a limitation period on when the cause of action arose or accrued (see s. 3 of the Former Act ) .

The common law determined what acts or omissions would constitute a particular cause of action for limitation period purposes. The date those acts or omissions occurred became the date the cause of action arose, i.e., when a claim could be made and the limitation period began to run. [ 30 ] The Act , in contrast to the Former Act , focuses on the date of the act or omission and not the date of the commencement of the limitation period based on that act or omission . Looking at the Act as a whole, this is achieved by a number of provisions. [ 31 ] First, the term claim is defined in relation to

an act or omission in s. 2: 2 In this Act : (a) “claim” means a claim to remedy an injury, loss or damage that occurred as a result of

an act or omission[.] [ 32 ] However, the most significant provision that drives the separation of the date of the act or omission and the date on which the limitation period in regard thereto begins to run is at s. 5 : Basic limitation period

5 Unless otherwise provided in this Act , no proceedings shall be commenced with respect to a claim after two years from the day on which the claim is discovered. [ 33 ] This

section makes it clear that the limitation period for all claims begins to run when the claim is discovered.

Section 5 establishes the concept of discoverability as a determiner of when a limitation period begins to run.

The traditional accrual of action approach has been replaced. [ 34 ] Generally speaking, the principle of discoverability provides that “a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence” (emphasis added, Fehr v Sun Life Assurance Company of Canada , 2018 ONCA 718 at para 169 , 84 CCLI (5th) 124 , quoting Lawless v Anderson , 2011 ONCA 102 at para 22 , 276 OAC 75 ). [ 35 ] Discoverability now drives when limitation periods in Saskatchewan begin to run: Saskatchewan (Highways and Infrastructure) v Venture Construction Inc. , 2020 SKCA 39 , 447 DLR (4th) 316 .

The principle of discoverability is codified in s. 6 of the Act : Discovery of claim 6

(1) Unless otherwise provided in this Act and subject to subsection (2), a claim is discovered on the day on which the claimant first knew or in the circumstances ought to have known: (

a) that the injury, loss or damage had occurred; (

b) that the injury, loss or damage appeared to have been caused by or contributed to by

an act or omission that is the subject of the claim; (

c) that the act or omission that is the subject of the claim appeared to be that of the person against whom the claim is made; and (

d) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

(2) A claimant is presumed to have known of the matters mentioned in clauses (1)(

a) to (

d) on the day on which the act or omission on which the claim is based took place, unless the contrary is proved. [ 36 ] The date a claim is discovered is determined by reference to when the claimant first knew or, in the circumstances, ought to have known all of the material factors as set out in s. 6(1)(a)–​(d). A person is presumed to know of those factors on the day on which the act or omission on which the claim is based took place unless the contrary is proved (s. 6(2)) .

In short, the cumulative criteria in s. 6 provide the trigger date for when the limitation period will start to run, i.e., when the claim is discovered. These discoverability factors apply to all claims, including those made for repayment of a demand loan. However, the Act also makes a special provision for this type of debt. [ 37 ] Under the Former Act , the start of the limitation period for a demand loan was governed by the common law.

This was explained in Johnson : [21] At common law, a loan or other form of indebtedness made with no specific date for payment is often described as a “demand loan” or “open loan” and is deemed to be repayable on a demand for payment by the creditor.

Since the creditor can demand repayment of a demand loan immediately after it is funded, the limitation of action period applicable to a demand loan at common law is deemed to start on the date the demand loan was funded, unless legislation provides for a limitation period to be calculated from a different commencement date. … … [23] … Prior to the repeal of the Former Act in 2004, s. 3(1) thereof provided that an action to recover a debt, except in respect of a debt charged upon land, may only be brought “within six years after the cause of action arose.” Since the Former Act did not specify when a cause of action based on a demand loan is deemed to have arisen, Saskatchewan courts resorted to the common law of England, as of July 15, 1870, and based thereon held the limitation period for a demand loan commenced immediately upon the loan being funded. … (Citations omitted) [ 38 ] In short, the common law deemed the advance of funds under a demand loan to be the act or omission upon which a cause of action or claim for repayment was based and from which the limitation period began to run. [ 39 ] Applying the interpretive principles mentioned above to the question of whether the common law rule has been changed, I note first that, unlike the Former Act , there is a specific

section dealing with demand loans in the Act . I note as well that s. 10 is found in

Part III of the Act , which deals with rules respecting limitation periods in special circumstances. It may be inferred that the legislative intention in passing a completely new provision such as s. 10, as well as situating it among a number of special limitation period rules, was to signal that a significant change had been made to the way that demand loans would be approached for limitation period purposes. [ 40 ]

Section 10 must also be seen in the context of s. 5 of the Act , which requires that the commencement of the limitation period be calculated from the date of the discovery of the claim. The text of s. 10, read as a whole, sets forth both the act or omission (default) on which a claim is based and the date that act or omission is deemed to have happened (date of default). It therefore sets out the event and the date of the event upon which a claim for repayment of a demand loan will be based.

Section 10 also picks up the “acts or omission” language set out in ss. 2 and 6 of the Act and makes the act of default the “act or omission” part of the discoverability test for the purposes of s. 6. [ 41 ] The

section speaks directly to two of the factors set forth in s. 6(1), reproduced here for ease of reference:

6 (1) … (

a) that the injury, loss or damage had occurred; (

b) that the injury, loss or damage appeared to have been caused by or contributed to by

an act or omission that is the subject of the claim[.] [ 42 ] The explanation for how the discoverability principle factors into the limitation period for demand loans is outlined in the dissenting reasons in Hare : [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 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 ‘injury, loss or damage’ to the creditor until a demand was made and refused”: Brian Bucknall, “Limitations Act, 2000 and Real Property Limitations Act: Some Notes on Interpretative Issues” (2004) 29 Advocates Q. 1 at 20. [ 43 ] Reading the words of s. 10 in their grammatical and ordinary sense and in context with the other sections of the Act mentioned, the act or omission for which a claim for injury, loss or damage may be made has been changed from what it was under the Former Act .

It is no longer the accrual of the action on advancement of the funds but, rather, default of payment. This conceptual change alters the start of the limitation period from the date of advancement of the funds to the date on which the default is discovered in accordance with s. 5 and s. 6(1). [ 44 ] My

interpretation of s. 10 is consistent with Johnson , where this Court said: [24] The Limitations Act replaced the Former Act , effective as of May 1, 2005 and changed the limitation period applicable for several causes of action as well as the manner in which the commencement date for many limitation periods is to be calculated. Of particular relevance in this appeal are the following sections: … [ 45 ] Similarly, in Hopkins v Stockman , 2013 SKCA 118 , 427 Sask R 4 , this Court said: [12] I find additional support for the appeal judge’s conclusions in s. 10 of The Limitations Act .

The trial judge found there were no clear terms of payment between the parties (i.e. the debt arising was not a term debt obligation). As such, the respondents’ obligation to pay the appellant must be characterised as a demand obligation.

Section 10 provides that “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.” On the facts as found by the trial judge, the respondents’ default in this case would have occurred sometime between June 6, 2005, when the respondents last made payment towards the amounts owing under the agreement, and the date the respondents terminated the agreement by hiring a different plumber, or, at the latest, the date in December 2005 on which the appellant picked up his tools and thereby accepted the respondents’ repudiation of the parties’ agreement. … [ 46 ] That s. 10 has changed the law was also confirmed by this Court in Rodway v Reardon , 2019 SKCA 99 : [72] I agree with Mr.

Rodway that the trial judge erred in finding that “ The Limitations Act ... suggests enforcement of this amount is barred by the passage of time” (at para 109).

Section 10 of The Limitations Act provides as follows: 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. Thus, if a default occurred in the future, the limitation period would run from the date of default, not the date of the promissory note. [ 47 ] The

interpretation of s. 10 in Johnson was adopted in Jones v Smith, 2017 SKQB 63 , and Olesen v Hrenyk , 2013 SKPC 69 , 418 Sask R 308 , both of which were relied on by the Chambers judge. [ 48 ] On the basis of all of the foregoing, I conclude that the Chambers judge did not err in her conclusion that s. 10 has changed the law with respect to the “act or omission” underlying a claim for repayment of a demand loan, as well as the start of the limitation period in regard thereto. It is no longer the fact of and date of advancement of the loan.

That said, this conclusion does not answer the question of whether s. 10 applies to David’s claim. To determine that question, resort must be had to the transitional provisions of the Act . B. Did the Chambers judge err in finding that the transitional provisions in s. 31 of the Act do not apply to bar David’s claim from proceeding? [ 49 ] Roger submits that even if s. 10 is found to have changed the law after the effective date, when the transitional provisions in s. 31 are applied, the limitation period on David’s claim has expired.

He argues the Chambers judge erred in not applying those provisions. [ 50 ] Roger submits that s. 31(5) applies. He argues this is so because the act or omission mentioned in s. 31(2) must refer to

an act or omission as it was understood before the effective date. He submits that this was the

interpretation placed on that term in Johnson . On that basis, he submits that the advancement by David to him of the various demand loans are the acts or omissions within the meaning of s. 31(2) and the transitional sections, and more specifically s. 31(5) , apply.

[ 51 ] Roger argues that if s. 31(5) (

b) applies, the start of the six-year limitation period is the date of advancement of the loan and that the limitation period in relation to it had expired by the time David claimed set-off and his counterclaim. In the alternative, he argues that if s. 31(5) (

a) applies, the act or omission of advancement of the loan is deemed to have taken place on the effective date and the two-year limitation period starting on that date had similarly expired. [ 52 ] In determining whether s. 31 applies and its effect, I again rely on the principles germane to the

interpretation of legislative intent mentioned earlier. [ 53 ] Section 31(1) to (7) of the Act reads: 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.

(3) No proceeding shall be commenced with respect to a claim if the former limitation period expired before the effective date.

(4) If there is no new limitation period with respect to a claim and the former limitation period did not expire before the effective date, this Act applies as if the act or omission had taken place on or after 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; and (

b) if the claim was discovered before the effective date, the former limitation period applies.

(6) If there is a new limitation period with respect to a claim but there was no former limitation period with respect to the claim: (

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; and (

b) if the claim was discovered before the effective date, there is no limitation period.

(7) This

section is subject to any agreement to vary or exclude a limitation period that was made before the effective date. [ 54 ] As a preliminary point, s. 31 must be interpreted in light of the profound change in approach brought about by the Act as to when limitation periods start to run, as mentioned earlier. To recap, under the Former Act , the start of the limitation period was based on when a cause of action arose. In the Act , it is now based on when the claim is discovered. [ 55 ] Section 31(2) sets forth two necessary conditions that must exist for the transitional provisions to apply: (

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

b) there must have been no proceedings commenced with respect to the claim before the effective date. It is a reasonable construction of this

section that, because the act or omission referred to took place before the effective date, it refers to

an act or omission as that term was understood before that date. Such a claim and the act or omission underpinning that claim must, for the purposes of s. 31(2), be understood in terms of the applicable law prior to the effective date. This understanding is confirmed by Johnson , which implicitly interpreted s. 31(2) in that manner (at para 36). [ 56 ] However, this interpretive approach is true only for the purposes of s. 31(2). This subsection is a gateway to the substantive transitional provisions that follow in the rest of the section.

Once a party is through that gate, the remaining provisions of s. 31, apart from s. 31(3), clearly refer to and incorporate the significant changes wrought by the Act as discussed above. [ 57 ] Nothing in the text of s. 31 explicitly speaks to what constitutes, in any given case,

an act or omission underlying a claim, the date on which such a claim is based or when the claim is discovered. However, as I will address later, discoverability plays an important

part in the operation of the

section as a determiner of whether the former limitation period applies or the provisions of the Act apply. [ 58 ] Generally, the purpose of s. 31 is to determine, in respect of a claim based on acts or omissions that took place before the effective date and for which no proceeding has been commenced , which one of four possible limitation period outcomes is appropriate in the circumstances.

These outcomes are driven by the interaction of several criteria: whether there is a new limitation period, whether there was a former limitation period and whether the former limitation period had expired. [ 59 ] The first outcome is that the proceeding is prohibited because the former limitation period had expired before the effective date (s. 31(3)). The next three outcomes proceed on the basis that the former limitation period had not expired or there was no former limitation period. They are that either:

(

a) the Act as a whole applies (ss. 31(4), (5)(

a) and (6)(a)); (

b) the former limitation period applies (s. 31(5)(b)); or (

c) there is no limitation period (s. 31(6)(b)). [60] In cases where the Act as a whole applies, this is accomplished through deeming the act or omission to have occurred on orafter the effective date (s. 31(4)) or on the effective date (s. 31(5)(a)). On this basis, the act or omission that occurred before the effectivedate is for limitation period purposes deemed to have happened when the Act is in force and the claim is subject to all the provisions of theAct. Where the former limitation period applies (s. 31(5)(b)), the act or omission is dealt with as it would have been before the effectivedate. [61] The criteria for the application of s. 31(5)(

a) can be summarized as follows: (

a) the act or omission occurred before the effective date; (

b) there was no proceeding commenced before the effective date; (

c) there is a new limitation period with respect to the claim; (

d) there is a former limitation period with respect to the claim which has not expired; and (

e) the claim was not discovered before the effective date. If these criteria are met, then the Act as a whole applies, including the new two-year limitation period. [62] The criteria for the application of s. 31(5)(

b) can be summarized as follows: (

a) the act or omission occurred before the effective date; (

b) there was no proceeding commenced before the effective date; (

c) there is a new limitation period applicable to the claim; (

d) there is a former limitation period with respect to the claim which has not expired; and (

e) the claim was discovered before the effective date. If these criteria are met, then the former limitation period applies. [63] As is apparent from those criteria, discoverability is the key. As alluded to earlier, discovery plays an important

part indetermining which of the subsections in s. 31(5) and (6) apply. For the purposes of this case, I need only address s. 31(5). Roger arguesthat the term discovered referred to in s. 31(5)(

a) and (

b) must mean the date when the cause of action accrued. I disagree. [64] Accrual of the cause of action at common law and discoverability are not the same. The common law addresses only when alender is entitled to bring a proceeding as opposed to when it is appropriate to do so. Indeed, the concept of discoverability was developedto mitigate the unjust effects in certain situations of reliance on the accrual of actions concept to determine the start of the limitationperiod.

See: Central Trust Co. v Rafuse, (SCC), [1986] 2 SCR 147 at 224; Peixeiro v Haberman (1995), (ON CA), 25 OR (3d) 1 at 4 (Ont CA); and Sparham-Souter v Town and Country Developments (Essex) Ltd., [1976] QB 858 at 867 (CA). [65] Moreover, s. 31 and, in particular, ss. 31(5)(

a) and (

b) must be construed in the context of the Act as a whole. In light of this, theterm “discovered” can only be a reference to the discoverability factors set out in s. 6. [66] I repeat s. 6 for ease of reference: Discoverability of claim 6(1) Unless otherwise provided in this Act and subject to subsection (2), a claim is discovered on the day on which the claimant first knewor in the circumstances ought to have known: (

a) that the injury, loss or damage had occurred; (

b) that the injury, loss or damage appeared to have been caused by or contributed to by

an act or omission that is the subject of the claim; (

c) that the act or omission that is the subject of the claim appeared to be that of the person against whom the claim is made; and (

d) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

(2) A claimant is presumed to have known of the matters mentioned in clauses (1)(

a) to (

d) on the day on which the act or omission onwhich the claim is based took place, unless the contrary is proved. [67] As explained previously, s. 6 sets out a list of factors which, if all present, allow a court to conclude when the claim has beendiscovered and that the limitation period has begun to run. Whether a claim has been discovered for the purposes of ss. 31(5)(

a) and (b)must therefore be determined by applying those factors. [68] I pause to note that s. 10 plays no part at this stage of the analysis because it is not yet clear whether the Act as whole will apply

or whether the former limitation period will apply. [ 69 ] To evaluate Roger’s argument that the limitation period has expired, the first step is to determine whether s. 31 applies at all. Such an evaluation must begin with s. 31(2), as noted above. See: Winacott Spring Western Star Trucks v Moore Industrial Ltd. , 2013 SKCA 88 at paras 22 –​24, [2014] 1 WWR 755. Based on my previous analysis of that section, I conclude that David’s claim meets the two criteria set out in s. 31(2).

His claim is based on acts or omissions that took place before the effective date, i.e., the advance of the loans between the years 2000 and 2002, and there were no proceedings commenced with respect to that claim before the effective date. [ 70 ] On this point, the Chambers judge concluded that the transitional provisions of s. 31 did not apply. Given my analysis, I find that the Chambers judge erred in reaching that conclusion.

However, as I will explain, that error does not affect her ultimate conclusion that David’s claim is not barred by the Act . [ 71 ] In the absence of an analysis by the Chambers judge as to which transitional provision applies, it falls to this Court to determine whether David’s claim is to be dealt with in accordance with s. 31(5) (

a) or (b). Roger argues first that s. 31(5) (

b) bars David’s claim because, as the claim was discovered before the effective date, the former limitation period applies and, therefore, that period has expired. [ 72 ] It is common ground that, as at the effective date, the former limitation period of six years had not expired. It is also agreed there is a new two-year limitation period in respect of the loans. Therefore, David’s claim satisfies the criteria in the

preamble of s. 31(5) . [ 73 ] Roger argues that David’s claim was discovered before the effective date, namely, on the date of the advance of the loans. There is no merit to this argument. Even if I assume, as Roger argues, that the advance of funds under the loans is the act or omission underlying David’s claim, the claim was not discovered within the meaning of s. 6.

This is because, as I have explained, mere accrual of the cause of action is not discovery. [ 74 ] In determining whether the claim had been discovered for the purposes of s. 31(5) (b), I adopt and borrow the analysis and approach in the dissenting reasons in Hare as to why accrual of a cause of action is not discovery. That analysis is based on virtually identical discovery provisions in the Ontario statute. [ 75 ] For the sake of argument, I will assume the criteria in ss. 6(1)(a)–(

c) of the Act are satisfied, premised on the act or omission being the advancement of the loans. On this basis, as required by subsection (a), legally cognizable damage had occurred because there was a fully mature loan that had not been repaid. Subsection (

b) is satisfied because the act that caused the damage was the advance of the money that created the demand loan. Subsection (

c) is met because the claim is made against Roger, who created the demand obligation. [ 76 ] However, all that said, s. 6(1)(d), namely, “ that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, is not satisfied. Section 6(1)(

d) sets out something the claimant must know or discover, in addition to knowing the matters in ss. 6(1)(a)–(c). In the context of a demand loan, it is reasonable to assume that knowledge of the matters in subsections (

a) to (

c) may be sufficient for a creditor to know that he or she has a cause of action against the debtor. However, if the notion of discoverability was satisfied upon a creditor knowing he or she has a cause of action, then s. 6(1)(

d) would have no meaning. In the context of a demand loan, I conclude the creditor must therefore know or discover more than that a cause of action has accrued. [ 77 ] The nature of the injury, loss or damage that flows from an advanced demand loan is latent or potential until the debtor defaults in making repayment. Until then, the creditor is in 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.

The creditor knows from the beginning that he or she is owed money, but it is only after the debtor has defaulted on the loan following a demand for repayment that the creditor knows the loan has become a “bad debt” and the injury, loss or damage is actual rather than latent. The nature of the injury, loss or damage occasioned by the debt, whether “latent” or “actual”, is pertinent to the application of s. 6(1)(d). [ 78 ] In applying s. 6(1)(d), it is necessary to consider what a reasonable person with the abilities and in the circumstances of David ought to have known with respect to the demand loan.

As noted in the dissent in Hare , a reasonable person ought to have known that: at common law, he or she was entitled to commence a legal action without first making a demand; commencing a legal proceeding could result in unnecessary costs; the courts take a dim view of unnecessary litigation; and a legal proceeding might not be necessary to collect the debt because the making of a demand might result in repayment.

A reasonable person would also know that while no demand is necessary, the law has acknowledged that, in practice, a demand is usual and ought to be made before proceedings are instituted or the creditor may risk suffering a costs award against them: Macintosh v Haydon (1826), Ry & Mood 362, 171 ER 1050 (KB) .

In light of all of this, a reasonable person – in this case, David – would not know that a legal proceeding was an appropriate means to seek to recover a demand loan without first having made a demand for repayment. [ 79 ] David first demanded payment of the loans in August of 2016, long after the effective date. Based on the above analysis, David would not have known that a legal proceeding was an appropriate means to seek to recover the demand loan until Roger defaulted in repayment thereof in response to his demand. David’s claim had therefore not been discovered prior to the effective date.

The criteria in s. 6(1)(

d) have not been satisfied. Because David’s claim had not been discovered, s. 31(5) (

b) does not apply. [ 80 ] On the basis that the claim was not discovered before the effective date, s. 31(5) (

a) therefore applies and the act or omission is deemed to have taken place on the effective date. This signals that the demand loan and any act or omission related thereto must be dealt with in accordance with the provisions of the Act as a whole. This also means that that the two-year limitation period applies. [ 81 ] However, s. 31(5)(

a) does not, as Roger argues, simply establish the date on which the limitation period begins to run despite that the subsection at first instance deems the act or omission to have occurred on the effective date. In my view, the precise start of the limitation period is subject to the application of the discoverability criteria and the other provisions of the Act . [ 82 ] Because the Act as a whole applies, s. 10 comes into play. It specifically deals with demand loans and establishes that the act or omission on which David’s claim is based is the incident of default on the demand loan by Roger. In most cases, the default will satisfy s. 6(1)(

d) because a reasonable person would know from the date of default that a legal proceeding was an appropriate means to seek to recover on a demand loan. At that point, the claim is discovered.

[83] Based on the above analysis, the earliest start date for the two-year limitation period for David’s claim would have been thedate of his demand for repayment in August of 2016. Since David’s claim was brought on March 10, 2017, the limitation period of twoyears had not expired on the commencement of David’s claim, whether framed as set-off in defence or as a counterclaim. [84] I conclude that, although the Chambers judge made an error with respect to the applicability of s. 31, she did not err inconcluding that David’s claim was not statute-barred. C.

Did the Chambers judge err in finding equitable set-off and not striking theclaim for repayment? [85] Roger argues there is an insufficient connection between the set-off claimed in paragraph 7 of David’s statement of defence andhis own claim for breach of fiduciary duty against David. Roger appears to argue as well that the sums cannot be claimed by way ofcounterclaim as a result. The premise of Roger’s argument is that Rule 3-47(2) of The Queen’s Bench Rules governs both David’s claimfor set-off and his claim for payment in the counterclaim.

It does not. [86] Curiously, the Chambers judge seems to have accepted Roger’s premise that the counterclaim could not be pleaded if theset-off were not allowed but dismissed his argument on finding there was sufficient connection between his claim and the set-off pursuantto Rule 3-47(2)(c). [87] Rule 3-42 governs counterclaims. A counterclaim is in the nature of a cross-claim and may raise any claim that mayconveniently be tried at the same time as the plaintiff’s claim: Co-Operative Trust Co. of Canada v Target 21 Industries Ltd. (1982), (SK KB), 20 Sask R 200 (QB).

A counterclaim may be set up in respect of claims for which the party could bring anindependent action: Burrell v Watt, (SK CA), [1928] 3 DLR 505 (Sask CA). The proximity requirements for set-off donot apply to counterclaims: Bank of Montreal v Artemenko (1992), (SK KB), 107 Sask R 5 (QB). [88] Though set-off is a matter of defence and a counterclaim is an independent action, the court will treat the claim in accordancewith its real nature, no matter how pleaded: United Chemicals Ltd. v Prince Albert Pulp Co.

Ltd. (1981), (SK KB), 11Sask R 320 (QB). [89] In short, it mattered little whether the Chambers judge found that there was no equitable set-off and struck paragraph 7 of thestatement of defence on that basis. David had claimed payment of the loan independently as a counterclaim and, as such, it could be triedwith Roger’s claim even if set-off were not allowed.

Notwithstanding this, I will address whether the Chambers judge erred indetermining that an equitable set-off could be pleaded as a matter of defence. [90] As mentioned above, set-off is governed by Rule 3-47(2) of The Queen’s Bench Rules: Claiming a set-off 3-47(1) A matter that might be claimed by set-off may be claimed by counterclaim or by pleading set-off as a defence or by both.

(2) A defendant may plead that a claim be set-off against the claim of the plaintiff if: (

a) there are mutual debts between the plaintiff and the defendant; (

b) in the case where either party sues or is sued in a representative capacity, there are mutual debts between the person represented andthe other party; or (

c) a claim, whether of an ascertained amount or not, by the defendant arises out of the same dealings, transactions or occurrence givingrise to the claim of the plaintiff. [91] The Chambers judge found that there was an equitable set-off: [47] However, I am satisfied that there are grounds for equitable set-off. The parties to the Agreement included the applicant, therespondent and their mother. The within litigation arises out of the specific terms of the bequest of the land under the Will.

The Agreementcontemplates the termination of the spousal trust on the death of their mother, as provided in the Will, when the land would vest in theapplicant’s name. [48] There is a clear connection between the respective claims. Both parties have brought claims arising out of the conveyance of theland. While the Agreement speaks to the encumbrance of the land, the parties have advanced their position based strictly on the debt beinga demand loan. [49] The claim by the respondent is for debts which contemplate the transfer of the land.

The corresponding allegations relate to thefailure to transfer the land as required. A significant portion of the amount claimed by set-off is clearly and directly related to the issues inthis litigation, specifically the $50,000 demand loan as contemplated by the Agreement. It is unclear in what context the remainingdemand loans were made. [50] I am satisfied that these claims are connected as they arise out of the same relationship between the parties and the land.

It wouldbe manifestly unjust to allow the applicant to enforce payment without consideration of the counterclaim. [92] Roger argues the loans made by David and the alleged breach of fiduciary duty are separated by ten years and that, therefore,David’s claim does not fall within Rule 3-47(2)(c). [93] This part of the Rule merely requires that the claim arise out of the same dealings, transactions or occurrence. Mutuality ofdebts is not required, as is the case in subsections (

a) and (

b) of Rule 3-47(2). Subsection (

c) casts the net fairly widely in terms of the

required connection, requiring a claim by the defendant merely to arise out of the same dealings, transactions or occurrence giving rise to the claim of the plaintiff. Whether there is a connection within the meaning of the Rule in the sense of the set-off arising out of the same dealings, transactions or occurrence is a finding of fact subject to review on a palpable and overriding error basis. [ 94 ] The gist of the doctrine of equitable set-off is that it would be manifestly unjust to allow a plaintiff to enforce his or her rights without taking the set-off into account.

A flexible approach is applied to equitable set-off based on principles of unfairness or injustice: Rimmer v Adshead , 2003 SKCA 19 , 224 DLR (4th) 372.

The Chambers judge’s finding that it would be unjust to allow Roger to enforce payment without consideration of the set-off is a discretionary finding subject to a deferential standard of review as well. [ 95 ] The Chambers judge relied on the facts as pleaded and the agreement as to facts to inform her decision as to whether the set-off arose out of the same dealings, transactions or occurrence giving rise to Roger’s claim. [ 96 ] A review of the Indemnification and Charging Agreement and Grant of Right of First Refusal signed in 2000 [Agreement] appended to the agreed statement of facts, as well as of the pleadings read as a whole, shows that there is a connection between the estate, estate land and the loans.

David and his mother were joint executors of the parties’ father’s will. The parties’ mother received a life estate in the land in issue in Roger’s claim. With respect to the amount of $50,000, the parties and their mother were signatories to the Agreement. The Agreement related to the land in issue in Roger’s claim. The $50,000 is a significant part of David’s whole claim. [ 97 ] Based on the standard of review mentioned above, I am not satisfied the Chambers judge erred either in finding the required connection under Rule 3-47(2)(

c) or in determining that it would be unjust to allow Roger’s claim to proceed without allowing David to plead equitable set-off. [ 98 ] Accordingly, the repayment of the loan may be claimed in defence as a set-off, as well as claimed in a counterclaim. VI. CONCLUSION [ 99 ] I would dismiss the appeal. David shall have his costs in the usual fashion. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Schwann J.A.” Schwann J.A.