Canada: Independent vs Co-Extensive Limitation Periods For Guarantees In Ontario: "The Bank Of Nova Scotia vs. Williamson"*

Last Updated: December 2 2008
Article by Howard S. Silverman

Most Read Contributor in Canada, September 2016

When does the limitation period begin to run on a guarantee in Ontario? Under the Limitations Act, 2002 (Ontario), a creditor must commence a proceeding to enforce a guarantee within two years of "discovering a claim". If the guaranteed obligations are considered to be "co-extensive" with the principal debt, the limitation period for a guarantee commences when the limitation period for the principal debt commences. If the principal debt and the guaranteed obligations are considered to be independent, the limitation period for a guarantee will depend on the terms of the guarantee. In the latter situation, the limitation period for the principal debt and for the guarantee may commence at different times. Recent case-law in Ontario has been troubling, as the co-extensiveness principle has been misapplied. However, the recent case of The Bank of Nova Scotia v. Williamson, following the latter, more traditional, approach has endeavoured to clarify the law on this point in Ontario. The issue is relevant not only to when actions are commenced against guarantors, but also to how guarantees are drafted.

The Bank Of Nova Scotia v. Williamson


In 2001, The Bank of Nova Scotia (the "Bank") made a loan to Ancon Industries Inc. ("Ancon"). On March 20, 2002, Williamson executed a limited guarantee of Ancon's loans. The guarantee contained the following provision:

The Guarantor's liability to make payment under this guarantee shall arise forthwith after demand for payment has been made in writing on the undersigned...

Ancon defaulted on its loans, and on October 20, 2004 the Bank demanded repayment from Ancon. On the same day, the Bank sent a letter to Williamson, which provided in part:

If payment of our demand is not made as required, we will take steps to recover payment from you.

Following Ancon's receivership, the Bank suffered a shortfall. On June 12, 2007, the Bank delivered a letter to Williamson which demanded on the guarantee.

Williamson argued that the two-year limitation period for enforcing the guarantee began either when it received the Bank's letter of October 20, 2004 or when the Bank knew it would suffer a shortfall; in any event, the limitation period had elapsed. The Bank argued that the demand was made on June 12, 2007 and that when a guarantee provides for a demand as a condition precedent to the guarantor's obligations being triggered, as was the case here, the guarantor is not liable until demand is actually made.


The court found in favour of the Bank. The court quoted the Supreme Court of Canada in Canadian Pickles,1 noting that "there is nothing inherent in the nature of a guarantee that requires liability to be contingent upon a formal demand", but:

...when the parties to a guarantee agreement clearly incorporate a demand as a condition precedent to the guarantor's liability, liability does not crystallize until a proper demand has been made... [u]nless it is otherwise stipulated, there is no requirement that the demand be made upon the guarantor and the principal debtor at the same time. This flows from the fact that the guarantee relationship constitutes an independent contractual relationship with the lender. Moreover, the guarantor may never be called upon to pay if the principal debtor is able to satisfy the debt. But this may not be known until attempts to recover from the principal debtor have been completed, perhaps years later. Accordingly, the authorities support the proposition that, where the terms of the guarantee require that a demand be made upon the guarantor, the limitation period commences upon the receipt of the demand...

In making this finding, the court distinguished 2105673 Ontario Inc. v. Chorny,2 which case had applied the "co-extensiveness" approach.

2105673 Ontario Inc. v. Chorny

In Chorny, the lender extended several loans to the borrower between August 16 and 30, 2005, which were due in 30 days. Guarantees of these loans were executed contemporaneously. The defendants defaulted on the loans on September 16 and 30, 2005 respectively. Demand was made on the guarantors on January 15, 2006. The lender commenced an action against the guarantors on September 21, 2006. At that time, the lender-corporation was dissolved. Articles of revival were filed on October 19, 2007.

The lender argued that the limitation period for the guarantees did not commence until a demand was made on the guarantees, and the limitation period had not lapsed on the guarantees until after the revival of the lender.

The court held that if the limitation period does not start to run against a guarantor until a demand is made, then conceivably the limitation period could be extended to 15 years under the "ceiling" provision in s. 15 of the Limitations Act, 2002 (Ontario) and the obligation on the guarantee could long survive the principal obligations. The court decided this could not be true. The court stated that the two-year limitation period for the principal debt commenced when the borrower defaulted on the principal debt and the limitation period for the principal debt passed without any action having been commenced. The principal debt was therefore unenforceable. As the principle of co-extensiveness applied to the guaranteed obligations, the court held, the limitation period on the guarantee lapsed when the limitation period lapsed on the principal debt. By the time the lender-corporation was revived, the limitation period for the guarantees had lapsed.

Chorny stands for the proposition that, based on the "principle of co-extensiveness" (referred to in a different context) by the Supreme Court of Canada in Canadian Pickles, a guarantee becomes unenforceable upon the expiry of the limitation period applicable to the underlying debt. This represents a departure from the traditional view in Ontario.

Distinguishing Chorny

For that reason, while both Chorny and Williamson were decided by the Superior Court of Ontario, the court in Williamson tried to distinguish Chorny as follows: First, in Chorny, the limitation period elapsed as against the principal debtor when the lender was dissolved, resulting in the principal debt becoming unenforceable, and therefore the action on the guarantee was also statute-barred. Second, in Chorny, the loan had a specific due date, whereas in Williamson the loan was advanced over time and repayable on demand. Third, the court in Williamson felt that it was unfair to permit the lender to proceed against Chorny when its action was barred as against the principal debtor, whereas there was no such unfairness in Williamson. It is also noteworthy that the court in Williamson stated that the guarantee in question in Chorny included a term requiring the lender make a demand upon the guarantor, even though the court in Chorny was silent on the terms of the guarantee.


Traditionally, with some exceptions, case-law has viewed guarantees as contracts which are independent of the contracts which govern the underlying debt. Accordingly, again with some exceptions, traditionally, limitation periods on guarantees in Ontario have run independently of limitation periods on the underlying debt. Chorny raised the spectre of having to commence an action on a guarantee within the limitation period applicable to the underlying debt, even if a demand had not been made on the guarantee. Williamson endeavours to return case-law to its more traditional roots. Particularly if a guarantee includes a provision which provides that the liability under the guarantee does not commence until a demand has been made, Williamson bolsters the view that the limitation period on a guarantee does not commence until demand has been made on the guarantee. Therefore, it will be particularly important to ensure that when drafting a guarantee, a provision is included, among other protections for the lender, stating that the obligation to pay does not commence until demand has been made.

John D. Marshall of Borden Ladner Gervais LLP acted for The Bank of Nova Scotia in Williamson.


* The Bank of Nova Scotia v. Anthony R. Williamson. Court file no.: 07-CV-335817PD1. ( S.C.J.)

1. Communities Economic Development Fund v. Canadian Pickles Corp., [1991] 3 S.C.R. 388 (S.C.C.).

2. (2008), 90 O.R. (3d) 207 (S.C.J.).

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.