In Bank of Nova Scotia v. Williamson, The Bank of Nova
Scotia (the "Bank") advanced loans to
Ancon Industries Inc. ("Ancon"). The
loans were guaranteed (the "Guarantee")
by an individual guarantor (the
"Guarantor") who was an officer,
director and shareholder of Ancon.
In October 2004, Ancon's loans went into default and the
Bank demanded payment from Ancon. On the same day, the Bank sent a
letter to the Guarantor (the "2004
Letter") stating, among other things, that
"If payment of our demand is not made as required, we will
take steps to recover from you."
In December 2004, Ancon was deemed bankrupt. Final
administration of Ancon's estate was not completed until
February 2007, at which point, the Bank was still owed over $1
million. As a result, the Bank sent a demand letter to the
Guarantor (the "2007 Letter") and took
subsequent judicial action when the Guarantor failed to pay under
At trial, the Guarantor argued that the 2004 Letter was a formal
demand for payment and as such the 2004 Letter triggered the
commencement of the limitation period under the Limitations
Act (Ontario). Alternatively, the Guarantor argued that the
limitation period should have commenced when the Bank either knew
or ought to have known that it would not fully recover from Ancon.
Under either scenario, the Guarantor argued that the limitation
period had expired, thus the Bank was statute barred from bringing
an action to recover on the Guarantee. Conversely, the Bank argued
that the 2004 Letter was merely a courtesy notice to the Guarantor
indicating that if Ancon did not fully pay its debts the Bank would
look to the Guarantor for payment.
The trial judge rejected both the Guarantor's
characterization that the 2004 Letter constituted a formal demand
for payment and the Guarantor's argument that the limitation
period under the Guarantee should have commenced when the Bank
knew, or ought to have known, that it would not fully recover from
On appeal, the Ontario Court of Appeal (the "Court
of Appeal") stated that recent amendments to the
Limitation Act (Ontario) made it clear that the limitation
period under a demand obligation commences on the first day after
there is a failure to perform the obligation under a guarantee and
not when it is known, or ought to have known, that the principal
debt would not be repaid.
Furthermore, in upholding the trial judge's decision, the
Court of Appeal stated that a demand must be unequivocal and clear
and that the 2004 Letter was merely a courtesy notice to advise the
Guarantor that if Ancon did not fully pay its debt, then the Bank
would look to the Guarantor for payment. As such, a formal demand
under the Guarantee was made by the Bank only as a result of the
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In late October 2016, the federal government introduced Bill C-29, Budget Implementation Act, 2016, No. 2, which addresses a wide variety of topics, including proposed changes to the Bank Act (Canada).
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