Ontario has amended the Limitations Act, 2002 so that the limitation period for enforcing a demand promissory note runs from the date that demand is made on the note and not from the date the loan was made.
On November 27, 2008, Ontario proclaimed into force amendments to the Limitations Act, 2002 that have the effect of reversing the Ontario Court of Appeal’s 2006 decision in Hare v. Hare regarding the limitation period for demand obligations.
In Hare v. Hare, the Court held (2 to 1) that the Limitations Act, 2002 had not changed the common law rules regarding the calculation of limitation periods for demand obligations. The limitation period for a demand note (or other demand loan obligation) began to run from the date of the advancement of the loan rather than the date when demand for repayment was made. However, the limitation period could be restarted by acknowledgement of the obligation by, for example, an instalment payment. If it was not restarted, then the demand obligation would become statute barred after 2 years under the Limitations Act, 2002.
The legislative amendments reverse the result in Hare v. Hare. The relevant date for determining a limitation period for a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.
The amendments operate retroactively to January 1, 2004 (when the Limitations Act, 2002 came into force). Accordingly, some limitation periods that had expired under the Hare v. Hare analysis have been revived.
The amendments do not affect demand obligations entered into prior to January 1, 2004. Accordingly, the limitation period for these obligations will continue to be 6 years from the date on which the demand obligation was entered into, subject to being restarted by an instalment payment or other acknowledgment of indebtedness. This means that 2009 will see demand obligations become statute barred for those obligations entered into or last acknowledged in 2003.