You snooze, you lose - Recovery of debts barred after time

6 November 2017

John and Gary were great mates. Gary became sick and had to go on a sickness benefit because he was unable to work any longer. Over a period of several years John lent Gary money to help him pay his bills. When the amount owing became substantial John prepared an acknowledgement for Gary to sign. The acknowledged stated: “I, Gary Smith owe John Brown $32,396. Signed: G Smith. 2 February 2009.” John told Gary he didn’t expect payment until Gary got back on his feet again. John also told Gary that, if that never happened, John wasn’t worried about being repaid. Eight years after the acknowledgement was signed John passed away.

Gary thought that when John passed away that would be the end of the debt. He was shocked to get a letter from the lawyer for the executors of John’s estate asking for repayment. He phoned the lawyer and told her that John had promised he would never have to pay the debt back if he couldn’t afford it. The lawyer told him that there was no record of that promise and the executors would be legally bound to collect the debt on behalf of the beneficiaries of John’s estate. John’s estate’s lawyer asked Gary to write to her confirming he would repay the debt.

John’s estate time barred from recovery of debt

Gary comes to you for advice. You look at the signed handwritten acknowledgement and ask Gary some questions about how and when the debts arose and what has happened since the handwritten acknowledgement was signed. This is what you tell Gary:

  • Because there is no evidence to show anything different, the loan was repayable on demand.

  • John had the right to ask for repayment from the dates the advances were made.

  • The Limitation Act 1950 (which applied to this debt) prevents John’s estate from suing Gary for repayment of the debt because more than six years has elapsed from the date the loans were made.

  • If Gary had acknowledged in writing the debt was owing, or if he had made a payment towards the debt, the limitation period would have started to run again.

  • As Gary had acknowledged in writing that the debt was still owing on 2 February 2009, the limitation period started to run from then. John (or John’s estate) was barred by the Limitation Act 1950 from bringing an action to collect the debt from 2 February 2015. Although Gary had acknowledged in his phone call to the lawyer for John’s estate that the debt was owing, this was not an acknowledgement in writing so it didn’t affect the running of the limitation period from 2 February 2009. If Gary had written to John’s estate’s lawyer confirming he would repay the debt, the limitation period would have started to run again and the executors of John’s estate could sue him to recover the debt.

  • If the acknowledgement had stated the loan was repayable on demand being made “in writing” then the limitation period would not have started to run until John or John’s estate had made written demand for repayment.

  • If the acknowledgement had been in the form of a “Deed”, then the limitation period would have been 12 years from the date John had been entitled to ask for repayment. (A deed must be in writing and it must be signed, witnessed and delivered in the form required under the Property Law Act 2007.)


Gary is relieved that he can’t be sued for repayment of the debt. He realises that he should have seen you before he signed the acknowledgement so it would have correctly recorded the agreement about repayment. He thinks the executors of John’s estate would be wishing John had taken some legal advice when he made the loans and prepared the acknowledgement of the debt.


Please email me at [email protected] with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.

Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.


Barbara McDermott