Ontario: the impact of partial payment on the limitation of debt claims

Hamilton and Son Roofing Inc. v. Markham (City) provides an example of a partial payment operating to restart the limitation period for a debt:

[51]           In any event, the Notice of Action was not issued until June 14, 2016, more than two years after the June 10, 2014 email was received.

[52]           The final issue is whether the payment of the deficiency holdback on May 6, 2015, was an acknowledgment of the debt through part payment under the contract, within the meaning of s. 13(11) of the Act.

[53]           The effect of s. 13(11) of the Act was summarized by Perell J. in Montcap Financial Corporation v. Schyven2011 ONSC 4030 (CanLII), at para. 26:

With each payment, a debtor acknowledges or re-acknowledges his or her liability; partial payment acts as an acknowledgment that will restart the running of the two-year limitation period: ABC Lumber Ltd. v. Bodrenok2010 ONSC 769 (CanLII), 2010 ONSC 769 (S.C.J.) at para. 39Emmott v. Edmonds 2010 ONSC 4185 (CanLII), 2010 ONSC 4185 (S.C.J.)Bank of Nova Scotia v. Christie2008 CanLII 37609 (ON SC)[2008] O.J. No. 2971 (S.C.J.) at paras. 58-59Montreal Trust Co. of Canada v. Vanness Estate, [2005] O.J. No. 594 (C.|A.) at para. 2; Markham School for Human Development v. Ghods (2002), 2002 CanLII 62432 (ON SCDC)60 O.R. (3d) 624 (Div. Ct.).

[54]           In my view, Markham’s payment of the deficiency holdback on May 6, 2015, was a part payment under s. 13(11) of the Act and had the effect of restarting the limitation period.

[55]           The three invoices delivered by Hamilton Roofing on April 7, 2014 all related to the same contract: Markham Purchase Order # PD13334. These invoices represented the total contract price of $151,035.80. Markham held back part of the purchase price – $9,000 plus HST – for deficiencies. When Markham paid this amount on May 6, 2015, it was not making a payment that was unrelated to the invoice at issue; it was making a “part payment” of the amount originally claimed by Hamilton Roofing. This was not the payment of a different or additional contract. It related to the original contract and invoices, even though payment was made in response to a new invoice for the deficiency hold back amount.

[56]           As this part payment occurred within two years of May 28, 2014, it had “the same effect as the acknowledgment” in s. 13(1) of the Act, and restarted the running of the two year limitation period as of May 6, 2015. Since the Notice of Action was issued on June 14, 2016, and the Statement of Claim issued on July 13, 2016, the action is not time barred.