Brampton paralegal Ben Peterson successfully challenged a motion to strike a claim.
When is a promissory note due? I had a motion last week in Small Claims Court, with a surprising result. It was in regards to a promissory note. My client, the plaintiff, had given the defendant a cheque for $16,000 in June, 2009, for the purchase of a vehicle. When he decided he didn’t want to buy the vehicle, he asked the defendant to return the money.
The defendant said he no longer had the money, but agreed to sign a promissory note, agreeing to pay back the money as soon as he was able.
The defendant signed the note the day after cashing the cheque. The note did not specify a due date.
Over the next few years, the defendant kept putting off my client, assuring him that the money would be repaid, as per the promissory note — just not yet. After three years, the defendant became elusive. My client began to suspect that the debtor was planning to sell his property. That’s when the plaintiff contacted me. I filed in Small Claims Court in February 2013, for the amount of the promissory note.
Motion to Strike
The defendant served my client with a motion to strike the claim, based on the Limitations Act. He argued that the two-year limit had started when the note was issued, three years earlier, and had expired before the claim was filed.
We disagreed; our position was that the time limit started when the note was called, not when it was issued. The claim was the first demand for payment on the note.
My motion factum was 13 pages long, and included seven cases. It set out my response to their motion to strike, with references to the relevant case law and statutes, which I included in the book of authorities.
When the motion was heard, the court asked me why one of my cases seemed to disagree with my argument. Hare v. Hare,  O.J. No. 4955 states that a demand note is due upon issuance. I detected a note of smugness in the defendant’s counsel when the justice pointed out this apparent contradiction in my case law.
I replied that, while the case ratio is useful for its interpretation and application of the law, the decision is outdated. Hare had been affected by a 2008 Limitations Act amendment. Since the amendment, the limitation period on such notes begins to run after a default when payment is demanded — not when the note is issued.
The effect of the amendment is demonstrated in more-recent cases that I included. The amendment applies to demand obligations, such as promissory notes, created on or after Jan. 1, 2004, when the basic limitation period was changed from six years to two years.
I also read to the court sections 22 and 23 of the Bills of Exchange Act, which state that if a note specifies no date, it is due upon demand, and if it states a date, it is due upon that date. It was clear, I said — my client’s claim was not statute-barred.
The court agreed.
In my request for an order, I had asked for this matter to go to trial, or, in the alternative, that the court strike the defence.
The court surprised me. The justice struck the defence, finding that it was not valid. Because the limitation defence was the only defence, the court ordered judgment for the full $16,000, plus pre-judgment and post-judgment interest, plus $2,500 in costs.
So, we had gone from a possibility of our case being thrown out, to theirs being thrown out, all without a trial. My client was very pleased.
Paralegal Ben Peterson maintains a wide-ranging practice that includes provincial offences, small claims and landlord-tenant issues. Contact Ben at:
Peterson Legal Services
Phone (416) 885-4607 | Fax (888) 927-1879