Limitation Act Gives BC Security Holder Unpleasant Surprise

This article was co-authored by Ceilidh Stubbs, an articling student at Gowling WLG's Vancouver office. 

The British Columbia Court of Appeal considered for the first time section 15 of that province's updated Limitation Act¹ (the "Act"). The result should give security holders pause. In Leatherman v 0969708 BC Ltd^2, the Court of Appeal held that the two-year limitation period on a demand mortgage ran from the first date of default under the mortgage and not from the date of demand.

On May 28, 2013, Kootenay Lake Estates Ltd. ("KLE") granted a mortgage of land to Mr. and Ms. Leatherman securing a loan in the principal amount of $1.5 million. The mortgage provided that it was repayable on demand, with interest payments due annually beginning on October 31, 2013. The mortgage also incorporated by reference Prescribed Standard Mortgage Terms which included certain common default provisions.³