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CONSIDERATION - What constitutes - Forbearance

Tuesday, June 26, 2018 @ 9:08 AM  

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Appeal by the plaintiff, Rosas, from the dismissal of her action against the defendants, Toca and Visaya, to enforce repayment of a loan. On January 8, 2007, Rosas won $4.163 million in a lottery draw. Two days later, within hours of receiving her winnings, Rosas handed a bank draft in the amount of $630,000 to her friend, the defendant Toca, to assist with a house purchase. At trial, Rosas alleged that $30,000 of the advance was a gift and $600,000 was a loan. The defendants acknowledged that the advance was to enable them to buy a house, but they alleged that the entire advance was a gift rather than a loan. The trial judge accepted Rosas' evidence that the advance consisted of a $30,000 gift and a $600,000 interest-free loan. A term of the parties' loan agreement specified that the loan would be repaid 12 months after the date of the advance. The trial judge found that Rosas voluntarily acceded to requests from the defendants requesting further time to pay. There was no consideration for the multiple forbearance agreements relied upon by Rosas to preserve her limitation period. The six-year limitation period expired in January 2014 and Rosas' claim, filed in July 2014, was accordingly statute-barred. Rosas appealed.

HELD: Appeal allowed. There was no error in interpreting the terms of the parties' agreement or in declining to find in favour of Rosas on the basis of a resulting trust. The trial judge did not err in finding that good consideration was required to make an agreement to forbear from suing enforceable. However, there was significant case law and academic authority in multiple jurisdictions supporting adoption of reforms to the doctrine of consideration in the context of “going-transaction adjustments” or contract variations. The Court of Appeal determined that it was appropriate to reform the doctrine of consideration as it applied to variation of an existing contract. When parties to a contract agreed to vary its terms, that variation was enforceable without fresh consideration, absent duress, unconscionability, or other public policy concerns. Such an approach ensured protection of the parties' legitimate expectations. To find otherwise permitted the doctrine of consideration to work an injustice. Here, the annual modifications extending the payment date term were enforceable and consequently delayed the running of the limitation period. Rosas' action was thus commenced within the limitation period. Based on the trial judge having made all other necessary findings to dispose of the claim, Rosas was granted judgment in the amount of $600,000 plus prejudgment interest.

Rosas v. Toca, [2018] B.C.J. No. 938, British Columbia Court of Appeal, R.J. Bauman C.J.B.C., L. Fenlon and B. Fisher JJ.A., May 18, 2018. Digest No. TLD-June252018003