New South Wales

Explanatory note

This explanatory note relates to this Bill as introduced into Parliament.

Overview of Bill

The object of this Bill is to amend the Limitation Act 1969 to provide for the limitation period for a loan payable on demand to be three years and to run from when a demand for payment is first made.

At present, the Limitation Act 1969 provides for the relevant limitation period to be six years and to run from when the cause of action first accrues. The cause of action first accrues on a loan payable on demand when the loan is made because it is settled law that a loan payable on demand creates an immediate debt (Young v Queensland Trustees Limited (1956) 99 CLR 560 at 566). Hence, under the current law, the limitation period could run out on a loan payable on demand before a demand for payment is even made.

This Bill gives effect to the Recommendations of the NSW Law Reform Commission in its report entitled Time limits on loans payable on demand (Report 105), which made reference to the judgment of Woodward v McGregor [2003] NSWSC 672.

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on a day or days to be appointed by proclamation.

Clause 3 is a formal provision that gives effect to the amendments to the Limitation Act 1969 set out in Schedule 1.

Schedule 1 Amendments

Schedule 1 [2] provides for the limitation period for a cause of action founded on a loan payable on demand (and any collateral obligation also payable on demand) to be 3 years running from the date on which a demand for payment is first made. Such a demand for payment must be an unconditional demand for immediate payment (although a reasonable time for payment may be allowed). The limitation period runs on a demand for payment of only part of the debt arising from such a loan only in respect of the part of the debt that is the subject of the demand. Schedule 1 [2] further provides that a demand need not be made in writing and may be made by or on behalf of any one of joint lenders.

A loan or collateral obligation is payable on demand if it:

(a) does not provide for payment of the debt arising from the loan on or before a fixed or determinable date, and

(b) the obligation to pay the debt arising from the loan is not conditional on a demand for payment made by or on behalf of the lender or on any other matter.

Schedule 1 [1] makes an amendment consequential on the amendment made by Schedule 1 [2].

Schedule 1 [4] provides for the ultimate bar for loans payable on demand to be thirty years running from the date on which the cause of action first accrues. Schedule 1 [3] makes a consequential amendment.

Schedule 1 [6] enacts a transitional provision providing that an amendment made by the proposed Act does not apply to a loan made before the commencement of the amendment. Schedule 1 [5] makes a consequential amendment.

Contents

New South Wales

Limitation Amendment (Loans Payable on Demand) Bill 2004

1 Name of Act

2 Commencement

3 Amendment of Limitation Act 1969 No 31

Schedule 1 Amendments

No , 2004

A Bill for

An Act to amend the Limitation Act 1969 to make further provision for the limitation period for loans payable on demand; and for other purposes.

The Legislature of New South Wales enacts:

1 Name of Act
This Act is the Limitation Amendment (Loans Payable on Demand) Act 2004.
2 Commencement
This Act commences on a day or days to be appointed by proclamation.
3 Amendment of Limitation Act 1969 No 31
The Limitation Act 1969 is amended as set out in Schedule 1.

(Section 3)

Insert at the end of section 14 (2) (b):
, or
(c) a cause of action to which section 26A applies.

Insert after section 26:

26A Loans payable on demand

(1) An action on a cause of action founded on a loan payable on demand is not maintainable if brought after the expiration of a limitation period of 3 years running from the date on which a demand for payment is first made by or on behalf of the lender.

(2) A demand for payment is not a demand for payment for the purposes of this section unless it is an unconditional demand for immediate payment. A demand for payment that allows a reasonable time for payment can still be considered an unconditional demand for immediate payment.

(3) If the demand is for payment of only part of the debt arising from the loan, this section applies to an action only to the extent that it is in respect of the part of the debt that is the subject of the demand.

(4) The demand for payment does not have to be made in writing.

(5) In the case of joint lenders, a demand for payment by or on behalf of any one of them constitutes a demand for payment for the purposes of this section.

(6) This section does not apply to a loan payable on demand that is supported by a collateral obligation unless the collateral obligation is itself payable on demand. A loan is supported by a collateral obligation if, in connection with taking out the loan, the borrower enters into the collateral obligation to pay the amount (or part of the amount) of the debt arising from the loan, such as by delivering a promissory note as security for the debt.

(7) For the purposes of subsection (1), a cause of action founded on a loan payable on demand includes a cause of action founded on a collateral obligation, itself payable on demand, that supports a loan payable on demand.

(8) A loan, or a collateral obligation that supports a loan, is payable on demand if it satisfies both of the following requirements:

(a) it does not provide for payment of the debt arising from the loan on or before a fixed or determinable date, and

(b) the obligation to pay the debt arising from the loan is not conditional on a demand for payment made by or on behalf of the lender or on any other matter.

(9) This section does not apply to a cause of action founded on a deed.

(10) This section does not affect when a cause of action accrues.

Omit section 51 (2). Insert instead:
(2) This section does not apply to the following:
(a) a cause of action in relation to which an order has been made under Subdivision 3 of Division 3 (Discretionary extension for latent injury etc),

(b) a cause of action for which a limitation period is fixed by section 26A.

Insert after section 51:

51A Ultimate bar—loans payable on demand

Notwithstanding the provisions of this Part, an action on a cause of action for which a limitation period is fixed by section 26A is not maintainable if brought after the expiration of a limitation period of thirty years running from the date on which the cause of action first accrues.

Omit “Limitation (Amendment) Act 1990”. Insert instead:

Part 1 Limitation (Amendment) Act 1990

Insert after clause 5:

Part 2 Provisions consequent on enactment of Limitation Amendment (Loans Payable on Demand) Act 2004

6 Operation of amendments

An amendment made by the Limitation Amendment (Loans Payable on Demand) Act 2004 does not apply to a cause of action that first accrued before the commencement of the amendment.