What to do with Old Debts

Kathy SchwartzUncategorized

Sometimes when administering an estate an executor or administrator will discover the testator had an old unpaid debt. One of the obligations of a personal representative is to pay the debts of the estate. What happens if one of those debts is so old that it is statute-barred by limitation of actions legislation? Does the executor have an obligation to rely on a limitations defence?

If the creditor sued on the debt when the testator was alive, the testator would defend the suit by saying the creditor waited too long to sue—this is typically a complete defence. One would think that the executor must set up the same defence after death. There is not a lot of precedent on this issue, but cases going back to the 19th century suggests a personal representative may have a choice of whether to rely on a limitations defence. Cases also suggest that if a personal representative pays a debt that could have been statute-barred, the beneficiaries of the estate cannot complain or hold the executor liable.

Every fact scenario is different so care must be taken before a personal representative makes a decision one way or the other. The following cases all touch on this unusual situation:

Re Green, 1932 CanLII 325 (NS CA)

Heubach v. Sprague, 1933 CanLII 288 (MB CA)

Anguilla v. Estate & Trust Agencies (1927) Ltd., [1938] AC 624 (Singapore PC)

Re Gate Estate, 1960 CanLII 585 (BC SC)

Illiczuk v. Werbiski, 1961 CanLII 248 (SK QB)

Re Chamandy, 1975 CanLII 488 (ON SC)

Carpenter v. Registrar of the Supreme Court of Newfoundland, 1979 CanLII 2689 (NL SC)

Walker v. Bostwick, 1986 CanLII 731 (BC CA)

Ken G. Mandzuik