The Limitation Period on a Loan Repayable on a Sale

The Dispute

Two sisters owned a house together. One of them paid out the five-figure balance owing on the mortgage over it, and the sisters then wrote out a short agreement: the other sister would carry eighty percent of what had been paid, and repayment would wait until the house was sold or until they agreed on some other arrangement. The house was not sold for another seventeen years. By the time it was, the sisters were in litigation over the property, the money had never been repaid, and the question was whether it could still be recovered.

The Parties’ Positions

The petitioner applied to the Supreme Court of British Columbia for a ruling that her claim for repayment under the 2004 agreement was not statute barred. She framed the debt as one repayable on a contingency rather than on a fixed date, pointing to the term that held repayment in abeyance and made it payable if the property was sold or if other repayment agreements were made. On that footing, she contended, no cause of action arose until the contingency occurred, so the limitation period, the window within which a court proceeding must be started, began on the day the sale completed. She relied on the authorities treating delayed-demand and contingent obligations this way, among them Zeitler v. the Estate of Alfons Zeitler, approved by the Court of Appeal in Ewachniuk Estate v. Ewachniuk, and Kong v. Saunders, where the Court of Appeal stated that the limitation period on a contingent loan begins to run on the repayment date or the occurrence of the contingency.

The respondent resisted the application. She submitted that the debt was presumptively statute barred, the payment the petitioner sought to recover having been made more than twenty years before. She further submitted that the agreement was incomplete, relying on its third clause, which recorded that “a further meeting needs to be held to refine the 80/20%”. No such meeting took place.

The Court’s Decision

The court held that the contingency was the sale of the property, and that the contingency was clear from the language of the parties’ agreement. Another agreement between the parties might also have been a contingency, the court observed, but none came into being. The limitation period began to run on the day the sale completed, and the claim was clearly within the two years that followed. On the twenty-year submission, the court noted that the respondent had put forward no authority for the presumption advanced, where repayment was based on a delayed demand.

The application was granted and the claim for repayment was declared not to be statute barred. The petitioner was awarded the costs of the application on Scale B, as a matter of ordinary difficulty. The limitation defence was therefore unavailable, and the sums advanced stayed in issue in the accounting over the division of the sale proceeds.

Key Lessons for Co-Owners and Family Lenders

• Name the event that triggers repayment in the document itself. The agreement here made repayment payable if the property was sold or if other repayment arrangements were made, and the court found the contingency clear from that language. An advance recorded without a repayment event starts the analysis somewhere different.
• Do not assume that age alone defeats a debt. Under the Limitation Act the basic period runs from the day a claim is discovered, so a payment made many years earlier may still be recoverable once the contingency for repayment occurs.
• Close the loose ends a written settlement leaves open. This agreement recorded that a further meeting was needed to refine the split, and the meeting never happened. An unfinished clause invites an argument that the agreement was never completed, open to whichever party it suits.
• Diarize the triggering event, not the date of the advance. Where repayment depends on a sale, the date to watch is the day the sale completes, and it matters equally to the party owed and the party who owes.

The outcome of this matter turned on the wording of the parties’ written agreement and on the evidence before the court on the application. A similar dispute may resolve differently.

ATAC LAW acts on both sides of civil and commercial litigation over debts, co-owned property and the division of sale proceeds.

This matter was conducted by Dan H. Griffith, a partner at ATAC LAW, who acted for the respondent on the application.