The Ontario Court of Appeal has ruled that the Bankruptcy and Insolvency Act, 1985, stayed the appellants’ claim, even if they could not discover the debt before the limitations period’s expiration, given one appellant’s assignment into bankruptcy in September 2017.
In Lee v. Chang, 2025 ONCA 632, the appellants lived in Seoul, South Korea, where they met the respondents in 1998. The respondents immigrated to Canada in 2000. They agreed to take along the appellants’ daughter, who wanted to attend a Canadian school.
The respondents offered the daughter room and board for around 11 years. The appellants wire-transferred to the respondents $183,000 between 1999–2008, plus $30,000 to repay a credit card loan from Hyundai in 2010.
The respondents used the money to buy a residential property for $550,000 in 2001 and sold it for $2,340,000 in 2016.
At trial, the appellants requested:
- damages of $533,000 for contractual breach, fraudulent misrepresentation, deceit, unjust enrichment, breach of fiduciary duty, and fraudulent conveyance
- aggravated and exemplary damages of $200,000
- punitive damages of $200,000
- unspecified special damages
- a declaration that the respondents held the property’s sale proceeds in constructive trust for the appellants
- an equitable relief order
The appellants alleged that two transfers were for investments, while the other transfers were loans to the respondents. They argued that a transfer of $100,000 in 2001 was for a joint real estate investment and that they were awaiting payments of the property sale’s principal amount and profits.
The respondents acknowledged the Hyundai loan debt. However, they asserted that they had repaid a significant portion of the credit card debt. They added that the wire transfers were not loans or investments but payments for the daughter’s room and board, art lessons, and transportation costs while she resided with them in Canada.
In February 2024, Justice Audrey Ramsay of the Ontario Superior Court of Justice dismissed the appellants’ action and claims and ordered the appellants to pay costs of $177,123.68, all-inclusive.
First, the trial judge barred the appellants’ claims under Ontario’s Limitations Act, 2002. The judge determined that the appellants:
- knew or should have known the facts underlying the claims by February 2011 or December 2015 at the latest
- filed their claim in January 2018
- failed to overturn the presumption that they discovered their claims on the day the act or omission occurred
Regarding the Hyundai loan, the judge decided that the Bankruptcy and Insolvency Act stayed the appellants’ claim, even if the debt was undiscoverable before the limitations period ended, considering that an appellant made an assignment into bankruptcy in September 2017.
The judge rejected the appellants’ claims that the parties entered into a forbearance agreement that would have suspended the limitations period and that the respondents’ acknowledgement of the debts in emails and messages restarted the limitation period under s. 13 of the Limitations Act.
The judge said the appellants did not act with due diligence when the respondents failed to repay the purported loans after several repayment requests.
Second, the judge acknowledged the existence of an agreement that the appellants would pay the respondents for the daughter’s homestay expenses. However, the judge found she could not determine the agreement’s terms.
Find out what your options are when you claim insolvency under Canadian laws, such as the Bankruptcy and Insolvency Act or the Companies' Creditors Arrangement Act.
Claims denied
The Court of Appeal for Ontario dismissed the appeal, denied leave to appeal costs, and ordered the appellants to pay the respondents’ appeal costs fixed at the agreed, all-inclusive amount of $12,000.
First, the appeal court rejected the appellants’ argument that the trial judge erroneously applied the Limitations Act by barring their claims and saw no basis to interfere with the judge’s factual findings, without any palpable and overriding error.
The appeal court noted that the appellants’ counsel emphasized the text messages the parties exchanged regarding the acknowledgement of debts. The appeal court found that the judge addressed these messages and concluded that none clearly acknowledged the respondents’ debts.
Second, the appeal court disagreed with the appellants’ argument that the judge wrongly dismissed their unjust enrichment claim.
The appeal court noted that the judge determined that the appellants failed to show the payments’ enrichment of the respondents and the lack of a juristic reason for denying recovery.