Justice Di Luca’s decision in Ryu Electric v. Sam Bung Hong contains a helpful discussion of the limitation implications of payments on a running account and payments for a particular invoice:
[48] Intaglio Design argues that since the action was only commenced on April 9, 2015, the claim relating to Fionn MacCools, which is based on an invoice dated November 22, 2012, is statute-barred even allowing for a reasonable time frame within which payment on the invoice could be expected.
[49] Ryu Electric argues that when the nature of the business relationship is properly viewed in context, the periodic payments made by Intaglio Design were payments “on account.” The effect of the partial payments on account is that the entire debt owed is considered as a whole, and therefore the limitation period would only start to run two years after the final payment which was made on October 21, 2014. Ryu Electric relies on the authority of section 13(11) of the Limitations Act, which provides that partial payment serves as a substitute for an acknowledgement of debt and therefore “re-sets” the start of the limitation period to the date of the acknowledgment of the debt.
[50] The starting point for determining this issue is my finding that the periodic payments made by Intaglio Design were generally made “on account”, as opposed to specifically related to a particular invoice. In cases where a debtor makes periodic payments on a running account, the court will treat the balance as a single debt and the periodic payment as being made in respect of the entire balance, see Justice Graeme Mew et al., The Law of Limitations, 3d ed. (Toronto: LexisNexis, 2016) at p. 226-227. As such, a periodic payment in relation to the entire balance owing on account has the effect of an acknowledgment of the debt and serves to re-set the limitation period.
[51] The scenario would have been different, if I had found that the nature of the relationship between the parties was such that the various invoices were treated as separate or discrete debts. Were that the case, Ryu Electric would have been free to allocate specifically unallocated payments to statute-barred debts, but the allocation by Ryu Electric would not have had the effect of re-setting the limitation period, see Burton v. Hunter, [1931] S.J. No. 11 (Sask. C.A.) at para. 7.
