The question of when a lawsuit can be commenced in Ontario seems pretty straightforward – in general, a plaintiff has two years from the date when the basis for a claim is (or should have been) discovered. It sounds simple enough, and oftentimes, it is. However, a few recent decisions from the Ontario Court of Appeal have shown that this rule is not as simple as it may seem.
In one recent decision, the Ontario Court of Appeal dealt with a situation where money advanced between spouses could affect a limitation period depending on whether it was a loan or a gift.
In T.O. Estate v. D.O., the plaintiff advanced $40,346 in 2012 to Ridgeway Education Rec Centre Ltd. (“Ridgeway”), a daycare business owned by his wife. A year later, in 2013, he provided another $341,000 to Ridgeway in three separate payments. For several years, these funds were not repaid, and it was not clear whether they were meant to be a “loan” or a “gift.”
The distinction became crucial when, following the breakdown of their marriage, the husband sought repayment in July 2019 and commenced a claim against his wife and Ridgeway. At trial, he abandoned his claim against her personally for the 2013 advances and shifted his focus to Ridgeway and a holding company that was the sole shareholder of Ridgeway. In their defence, it was argued that the advances were gifts, not loans, and that the claim was therefore barred by the two-year limitation period set out in the Ontario Limitations Act.
The trial judge determined that the 2013 advances were loans and not gifts, which was confirmed by witness testimony and financial statements. In particular, Ridgeway’s financial records labelled the funds as “due on demand.” Despite this clear classification, the trial judge ruled against the husband and held that his claim for repayment was statute-barred under the Limitations Act, as the two-year limitation period had expired.
The husband passed away after the trial decision, and his estate appealed. The crux of the appeal revolved around a key concept: demand loans. In simple terms, a demand loan is a loan that doesn’t have a fixed date for repayment. Instead, repayment becomes due only once a demand is made. The estate argued that because the cash advances were demand loans, the two-year limitation period should have started when the husband formally demanded repayment, not back when the funds were advanced or even at the time of the marital separation.
The Ontario Court of Appeal sided with the estate and ruled that the trial judge had misinterpreted the timeline. The Court emphasized that the limitation period for a demand loan starts only when a demand is made and subsequently ignored. Since the husband had demanded repayment within two years of commencing the claim, it was not barred by the Limitations Act.
The Court of Appeal, therefore, overturned the trial judge’s ruling and concluded that Ridgeway was liable to repay the funds to the estate.
More recently, in Ingram v. Kulynych Estate, the Court of Appeal dealt with the interplay between different limitation periods that govern claims against an estate.
In that case, the late Henry Kulynych left behind an estate worth $690,119.59, which was distributed to his three children according to his 1989 will. His common-law partner, who had been with him from 1999 until his death in 2017, was left out of the will entirely. She claimed that she had contributed financially and emotionally to his life and that she deserved a share of the estate. To support her claim, she argued that she should be entitled to a constructive trust over the assets of the estate.
In March 2021, over four years after Mr. Kulynych’s death, she brought an application for support under the Succession Law Reform Act, as well as a claim for a share of the estate based on constructive trust. The estate, which had already been mostly distributed by that time, fought back, arguing that her claim was statute-barred.
The central issue at play is whether the common-law partner’s claim was subject to a two-year limitation period under the Trustee Act or a ten-year limitation period under the Real Property Limitations Act (the “RPLA”). The estate brought a motion to dismiss the claim on the basis that it was barred under the Trustee Act. The motion was dismissed, and the judge initially sided with the common-law partner, deciding that the ten-year limitation period in the RPLA applied and her claim could proceed.
The difference between these two limitation periods has significant implications. The two-year limitation under the Trustee Act is meant to ensure that estate matters are dealt with swiftly, as estates should not be left vulnerable to long-term claims. On the other hand, the ten-year limitation period under the RPLA can apply to claims related to property interests, giving a much longer window for people to assert their rights. The motion judge had applied the ten-year period, suggesting that the claim was about recovering property interests.
The estate appealed, arguing that the correct limitation period was only two years and the claim was now out of time. The Court of Appeal disagreed with the motion judge. It found that the two-year limitation period under the Trustee Act should apply to the common-law partner’s claim. The critical factor was the nature of the claim: it was about unjust enrichment—essentially, an argument that Mr. Kulynych had been financially enriched at her expense during his life and that it was only fair for her to receive compensation from his estate. The Court viewed this as an action against an estate, where someone is seeking compensation for being wronged, rather than a claim to recover specific property under a trust.
The Court of Appeal emphasized the importance of certainty and finality in estate administration. The goal of the shorter, two-year limitation period is to allow estates to be distributed without being held open for many years, potentially vulnerable to new claims long after the distribution of assets. The Court noted that there was no reason to apply a longer limitation period simply because the claim was framed as an “equitable trust.” It didn’t matter how the claim was labeled—the essence of it was still a claim against the estate for unjust enrichment and thus subject to the two-year rule.
These two decisions have important implications for the applicability of limitation periods in different situations. It is always advisable to err on the side of caution and stay within the two-year window when starting a claim. But, there could be exceptions depending on the nature of the claim and the parties involved.
These decisions also come off the heels of another series of important rulings from the Court of Appeal on limitation periods. Please see our previous blog for more information.
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About the Authors:
Daniel Waldman is Of Counsel in the firm’s Toronto office. He has a broad commercial litigation practice with an emphasis on real property litigation, including commercial leasing, commercial real estate, construction law, and debt collection. Daniel can be reached at 416-644-2838 or dwaldman@dickinsonwright.com. To read his full bio, please click here.
A partner in Dickinson Wright’s Toronto office, Ellad Gersh has a full service commercial litigation practice, with a special emphasis on real property disputes including real estate litigation, construction litigation, commercial tenancy disputes and mortgage fraud. He can be reached at EGersh@dickinsonwright.com. His full bio can be viewed here.