MacMillan Tucker & Mackay
3 Billy Goats and a Troll
4 July 2018
A Gruff Limitation?
What would you do if you were the judge? Judges decide the facts based on evidence put before them, and then apply the law. Here is a fact pattern. How would you decide who was at fault? Fact patterns similar to this one are often presented in court by Judges. Test your judgment!…
The three Billy Goats Gruff (“Goats Gruff”) lived in Pitt Meadows on a property that was too small to provide them with enough grass to eat. In 2013 they purchased a property in Langley which had a greater abundance of grass. To purchase the property, they borrowed 1 million dollars from their friend Mr. Troll, who lived under the Golden Ears Bridge, and who operated a lucrative tolling business. Mr. Troll had a mortgage put on the property. The principal amount of 1 million dollars (the Principal) was payable “on demand” and until then the Goats Gruff only had to pay interest on specific dates starting December 01, 2013.
The Goats Gruff failed to make their first payment on December 01, 2013 but no action was taken by Mr. Troll. Subsequently, the Goats Gruff continued to fail to make payments through to 2016. Mr. Troll finally demanded payment in November 2016 and filed a petition for repayment and foreclosure in December 2016.
The Goats Gruff argued Mr. Troll was statute barred from taking legal action because the two-year limitation period had expired. The Goats Gruff claimed the limitation period had begun when they failed to make the first payment on December 01, 2013. Further, they claimed that the limitation period began when the loan was made and that a demand obligation did not exist in the mortgage
A Gruff Limitation
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If you were the Judge, how would you decide?
The Judge ruled that under the Limitation Act 2012 the two-year limitation period required to bring a legal action begins to run either for a demand obligation, when the borrower fails to make payment after the demand is made by a lender, or for a claim on security (such as a mortgage on land) when the specified date set in the security document passes and no payment is made. The Judge ruled that Mr. Troll’s mortgage included a covenant to pay the Principal and a security debt through the scheduled interest payments.
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The Judge further ruled that the limitation period on the security debt (the interest payments that had accumulated) had begun when the Goats Gruff failed to make the first payment on December 01, 2013 and therefore the period to bring action had expired on December 01, 2015. However, the limitation period to bring an action on the covenant to pay the principal, (which was stated as “on demand” in the mortgage), had only started when Mr. Troll made his demand for payment in December 2016. Therefore, Mr. Troll was within the limitation period to bring his foreclosure action.
The Judge ruled that Mr. Troll had the right to collect on the principal amount owing as that was within the limitation period, but he did not have the right to collect on the interest accumulated. A Gruff limitation it was for Mr. Troll.
Tyler B. Dennis is a lawyer who practices in Cloverdale with the firm MacMillan Tucker & Mackay
at 5690 – 176A Street, Cloverdale (Surrey), B.C. At MacMillan Tucker & Mackay.
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