“Debt Owing” In Will Held Not Owing Due to Statute of Limitations

Statute of Limitations

Neudorf Estate v Sellmeyer 2012 SKQB 463 is a sensible decision from the Saskatchewan Queen’s bench interpreting a common situation in will construction disputes, namely the clause that if any of the testatrix’s children owed the deceased money at the time of the deceased’s death, then the amount of the debt would be deducted from the bequest so as to ensure an equal distribution among the children. The common situation however is that often the monies were advanced many years prior, so that by the time of the deceased’s passing, the executor is unable to enforce the debt as it is beyond the statute of limitations. The executor found records of monies owed to the testatrix by some of her children and proposed deducting the monies from their share accordingly. The beneficiaries however objected on the basis that the debts were statute barred and the executor brought an application for directions. The parties did not dispute that the amounts determined by the executor to have been owing to the estate were all statute barred, however in light of the specific construction of the will, the executor sought directions from the court. No evidence existed that the testatrix intended the debts to survive the limitation. So that on a plain reading of the phrase “owe me money” was interpreted to refer to debt. Whether or not the debt existed was a matter of law to be applied to the individual facts. Accordingly, by the time of her death the testatrix could not have sued her children to collect on those debts, as the limitation period for debts was a substantive and not procedural. Consequently at the time of the testatrix’s death, none of her children owed her any monies, and the testatrix’s estate was to be distributed equally among her children.

Indeed, the Supreme Court of Canada’s earliest express recognition of the shift appeared in a case addressing the predecessor of the current Saskatchewan statute, that predecessor bearing wording similar to that in the current statute: Tolofson v. Jensen, [1994] 3 S.C.R. 1022, [1994] S.C.J. No. 110 (S.C.C.).

15 In Tolofson Justice La Forest examined the historical reasons for holding that a statutory limitation provision is procedural and he rejected those reasons, concluding that the Saskatchewan limitation provision under consideration was substantive. Tolofson was a conflict of laws case, but there is no reason for thinking that Justice La Forest’s analysis would differ in any other context. No reason is apparent for limitation periods being substantive in a conflict of laws context but being procedural in other contexts. To the contrary, Justice La Forest’s analysis was not tied to the conflict of laws context. Rather, it was concerned with the logic and practicality of statutory limitation provisions generally being substantive rather than procedural.

16 Indeed, at paragraph 85 Justice La Forest adopted the “substantive” view in broad terms, then remarked on its particular – but not exclusive – application in the conflict of laws context:

… So far as the technical distinction between right and remedy, Canadian courts have been chipping away at it for some time on the basis of relevant policy considerations. I think this Court should continue the trend. It seems to be particularly appropriate to do so in the conflict of laws field ….
[Emphasis added]

17 Since Tolofson the Supreme Court has repeated its view that limitation provisions are substantive, as represented by its remarks in Markevich v. Canada, 2003 SCC 9, [2003] 1 S.C.R. 94 (S.C.C.), at paragraph 41, and in Castillo v. Castillo, 2005 SCC 83, [2005] 3 S.C.R. 870 (S.C.C.), at paragraph 7.

18 For these reasons I adopt Justice Clark’s analysis and conclusions of law as set out in Moody. The expiration of the limitation period served not only to bar a court action but also to extinguish the debt to which the limitation period applied. This result is not affected by the rule in Cherry v. Boultbee (1939), 4 My. & C. 442 (Eng. Ch. Div.) (prohibiting a beneficiary who owes money to an estate from participating in the estate unless the beneficiary pays the debt), a rule whose application has been superseded by the development of the law relating to statutory limitation provisions.

19 The result in this case is that, at the time of Ms. Neudorf’s death, none of her children owed money to her. Therefore, I direct the executor to distribute the estate on the basis that none of the beneficiaries owed Ms. Neudorf money at the time of her death.

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