The court’s observation in June 2021 that the litigation between TO and DO was “fast and furious…heading for a very lengthy and expensive trial” was prescient, a legal journey with 4 hearings in the Superior Court, and the sad death of TO in August 2023, culminating in a final appeal that took 4 hearings, with judgment handed down on August 8, 2024. TO Estate v. DO 2024 ONCA 603.
The issue before the appeal court involved the trial judge’s finding that the sum of $341,000 advanced by TO’s company in 2013 to his wife’s company, a daycare business, Little Bright Starts Learning Centre, was not recoverable in debt due to the expiration of the applicable limitation period.
The parties married in 2007 and separated in 2018. In July 2019 the husband brought a variety of claims against his wife including an allegation that his company made a loan to her business, payable on demand. The wife replied that the funds advanced were a gift, and in the alternative, if they were a loan, the limitation period had lapsed.
TO presented three witnesses at trial. The first was a relationship counsellor who met with the parties in 2016, resulting in a letter to the parties referring to the debt owed by the wife’s business to the husband. The second witness was a financial advisor who met with the parties in 2018 and prepared a report referring to the debt of $400,000 owed by the wife to the husband’s business. He testified that he prepared the report based on his discussions with the parties and the wife did not object to the statement in his report.
The final witness was TO’s company’s auditor who testified that the company’s 2014 financial statement showed a debt payable by the wife’s company, as did financial statements for 2019 and 2020.
The court rejected DO’s evidence that the funds were a gift, however, the court held that TO was “saddled with the 2-year limitation period under the Limitations Act 2002, SO 2002. c. 24, Schedule B” and denied recovery, finding that TO’s claim for repayment of the loan was brought too late.
The court found that the limitation period either began to run as of the date the loan was made in 2013 or more generously, as of the date the parties’ separated in the Spring of 2018. The court also rebuffed TO’s counsel’s submission that the limitation period commenced when TO filed his original claim in July 2019.
On appeal, the Estate argued that the trial judge erred by overlooking section 5(3) of the Limitations Act, which provides that the period for recovery of a demand loan commences as of the date of demand for payment, and the court agreed. They were not persuaded by DO’s submissions that the trial court did not make an express finding that the loan was payable on demand, and that the appeal court’s invocation of section 5(3) was impermissible as it raised a “new issue” on appeal. The appeal court also referenced language in the corporate financial statements where the loan was referred to as “due on demand”.
On DO’s cross-appeal, she raised the issue of $40,000 loaned to her by her husband in 2012, which the trial judge ordered her to repay to him. However, the trial judge made a finding that the loan was from the husband’s company with the appeal court finding that the trial judge erred when he ordered repayment to the husband personally.
The lower court’s order was based on TO’s corporate auditor testifying that DO advised the auditor that since the company was no longer active she would repay the funds to her husband. The appeal court rejected that analysis, holding there was no legal basis to create a liability by the wife to the husband where it did not exist.
**This article was first published in LAW360 Canada, a publication of LexisNexis, Canada.