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Note: Tony Noble (Guarantor) executed two guarantees in favor of the Business Development Bank of Canada (Lender/Beneficiary) in connection with two loans extended to a company (Borrower) owned by Guarantor for the construction of a fishing vessel, which originated in 2001. Although most of the interest payments were made until 2010, Borrower soon afterwards failed to make some principal payments as required by the loan agreements. In 2010, Lender/Beneficiary drew on the guarantees. When Guarantor refused to honor its guarantees, Lender/Beneficiary sued Guarantor for the enforcement of the two guarantees and moved for summary judgment. An oral summary judgment was granted in favor of Lender/Beneficiary. On Guarantor's subsequent motion for reconsideration, the Newfoundland and Labrador Supreme Court, Faour, J., dismissed.

Guarantor argued that because the guarantees were "performance guarantees" that became due on the first default of Guarantor in 2002, the Limitations Act barred Lender/Beneficiary from commencing action against the Guarantor as the time to commence the action had expired. Lender/Beneficiary argued that the guarantees were demand guarantees, so that time would not begin to run until the demand on the guarantees had actually been made.

The Judge ruled that the guarantees were not performance guarantees, but demand guarantees and that the limitation period began to run when the demand was made against Guarantor. The Judge noted that any challenge to the legal issue or to the classification of the guarantees must be raised by appeal to an appellate court and not on a motion for reconsideration.

[JEB/sb]

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