Why Xia Couldn't Rely on the Clock Running Out

The situation

Xia had been a factory technician in London for over a decade, steady work with modest, predictable pay. In 2021 he borrowed $65,000 from Kofi, a longtime family friend, to fund a small side venture importing used vehicles for resale. The arrangement was informal: a one-page written agreement setting out the loan amount and a rough repayment schedule, no lawyer involved on either side, the kind of deal friends make on the understanding that trust will cover what the paperwork doesn't.

The venture struggled. Xia repaid about $15,000 over the following year, then the payments slowed and eventually stopped in early 2022 as margins on the imported vehicles collapsed and his own household budget tightened. His wife, Hua, an administrative assistant, kept the family's finances organized enough that Xia always knew what he owed, even as he fell behind. He and Kofi stayed in touch. There were text messages over the following two years, Xia saying he'd catch up once things stabilized, Kofi saying he understood and wasn't in a rush.

In the spring of 2026, more than four years after the loan was made and over two years since Xia's last payment, Kofi filed a claim in the Superior Court seeking repayment of the outstanding $50,000 principal plus roughly $7,000 in claimed interest and damages, a total of about $57,000. Xia's first reaction, once the shock wore off, was that surely too much time had passed. He came to Treadstone Law believing the case would be a quick win on a technicality.

The legal problem

Ontario's Limitations Act, 2002 sets a basic limitation period of two years for most civil claims, including claims to recover money owed under an informal loan. Miss that window and a claim is generally barred, no matter how legitimate the underlying debt. On its face, Xia's instinct was right: his last payment was made in early 2022, and Kofi's claim wasn't filed until 2026, well past two years.

But the two-year clock doesn't automatically start on the date a payment is missed. Under the discoverability principle built into the Act, the limitation period begins when the person with the claim knew, or reasonably ought to have known, that a loss had occurred, that the loss was caused by the other person's act or omission, and that starting a legal proceeding was an appropriate way to remedy it. Where a debtor keeps assuring a creditor that payment is coming, courts have been willing to find that the creditor did not yet know, and could not reasonably have known, that the debt would go unpaid. The clock doesn't start until that belief becomes unreasonable to hold.

That was the problem with Xia's case. The text messages he and Kofi exchanged after the last payment weren't neutral. Xia had repeatedly told Kofi he intended to repay, referenced specific dates when he expected to have money available, and never once suggested he considered the debt forgiven or disputed. Kofi's position, and a fairly strong one, was that he reasonably relied on those assurances and only concluded in late 2024, when a promised payment tied to a tax refund never materialized, that Xia was not going to pay voluntarily. If a court accepted that later date as the discovery date, Kofi's 2026 claim was filed comfortably within two years of it, and the limitation defence would fail entirely.

This is the part of limitation-period cases that catches people off guard. The rule feels like a fixed deadline, something you can count backward from a calendar and know exactly where you stand. In practice, discoverability turns it into a factual question about what the parties knew and when, and that question gets answered by the evidence each side actually has, not by general intuition about how much time is fair.

What we did

1. Reviewed the full communication record before advising on strategy. Before telling Xia what his chances were, we asked for every text, email, and note connected to the loan going back to 2021. The messages after the missed payments turned out to be the whole case: repeated assurances, specific promised dates, no hint of dispute. That record would be presented by Kofi's side regardless of what Xia wanted to argue, so it had to shape the advice from the outset.
2. Assessed the discoverability argument honestly, rather than the argument Xia wanted to hear. A limitation defence can be a complete answer to a claim, but only where the facts support it. Here, the pattern of ongoing assurances was exactly the kind of conduct that has led courts to postpone the start of the limitation clock. We told Xia plainly that a defence built solely on the two-year period was a weak bet, not because the law was against him in principle, but because his own messages worked against him.
3. Weighed the real cost of proceeding to trial against settling early. Contesting the claim in full meant discovery, motions, and a trial, each stage adding cost and delay, with a meaningful chance of losing on the limitation issue and still owing the full $57,000 plus a share of Kofi's legal costs. We laid out that risk in concrete terms rather than in the abstract, so Xia could weigh it against a negotiated outcome he could actually plan around.
4. Opened settlement discussions with Kofi's lawyer while preserving the limitation argument as leverage. Even a defence unlikely to succeed outright has negotiating value, since it adds uncertainty and cost for the other side too. We used the discoverability question as a genuine point of dispute to bring both sides to a number well below the full claim, rather than conceding it outright.
5. Structured a repayment agreement Xia could realistically meet. A settlement that collapses because the payer defaults again solves nothing. We negotiated not just the total but the schedule, spreading payments over a period matched to Xia's actual income rather than agreeing to terms that looked good on paper and failed in practice.

The outcome

After roughly six weeks of negotiation, Xia and Kofi settled on a payment of $40,000, down from the roughly $57,000 originally claimed, structured as monthly installments over eighteen months with no further interest accruing while payments stayed on schedule. Kofi gave up the claimed interest and a portion of the principal in exchange for certainty and avoiding a trial where the outcome, while likely in his favour, was not guaranteed. Xia gave up the possibility of a full dismissal but avoided the far larger risk of a judgment for the entire $57,000 plus costs, and kept the dispute out of a courtroom.

Neither side got everything they wanted, which is the honest description of most negotiated settlements. Xia would have preferred the claim thrown out entirely. Kofi would have preferred full repayment with interest. What both avoided was the cost and unpredictability of litigating a discoverability question in front of a judge, where the outcome would have turned heavily on how that text message record was read and neither side could be certain how it would land.

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