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Limitation Periods for Loans Repayable on Demand

On 15 September 2022 the Supreme Court delivered a judgment in Kure v He [2020] NSWSC 1240 which considered the limitation period applicable to a verbal loan which was repayable on demand.

Factual Background

Mr Kure (the Plaintiff) commenced proceedings against Ms He (the Defendant) in the Supreme Court in 2017.  The Plaintiff alleged the Defendant owed him a total sum of $1,804,117.84 in relation to loans made to the Defendant in 2008 and 2009.

The loans were verbal and there were no documents setting out the terms and conditions of the loans.  The Defendant had signed written acknowledgements of receiving the sum of $312,000.00 in March 2009 and the sum of $159,738.47 in May 2009.  In his first Statement of Claim filed in 2017, the Plaintiff alleged all three loans were repayable by the Defendant on demand. 

The Court authorities are clear on the position that where money is advanced on terms that it is to be repayable on demand, the cause of action for recovery accrues on the date of the advance without the need for any demand.  The debt which constitutes a cause of action arises instantly on the loan.  Therefore for the purposes of limitation, time begins to run from the date of the loan.

It appears the Plaintiff and/or his lawyers recognised the position at law during the proceedings and subsequently amended his claim alleging the loans were to be loans repayable only if and when demanded by the Plaintiff. 

The Court noted that a loan repayable only if and when demanded by a lender is unusual, however in this case the context was that there was a Chinese cultural connection between the parties’ two families.  The Plaintiff’s evidence was that he saw his loans to the Defendant as acts of generosity in favour of a close family friend, with whom he hoped to do further business with and that is why he was prepared to loan funds that were repayable only if and when he demanded repayment.

The Defendant argued that the claim was status barred. Pursuant to section 16 of the Limitation Act NSW, the time to bring an action is 6 years from the date of the of breach of contract. The limitation defence was based on the loans being loans that were repayable on demand.

The Defendant also argued that each of the three alleged loans were repaid to the Plaintiff by her creation of term deposits in his name in Australia. 

As there were no documents and limited bank records in relation to the transfer of funds, the Court was required to consider the oral evidence of each of the Plaintiff and the Defendant and decide whether their oral accounts were reliable.

The Court found that the loans were established and the requirement of two weeks’ notice for repayment was a term of the loans.  The loans were therefore not statute barred under the Limitation Act.

The Plaintiff succeeded in his claim for recovery of the loans. The Court entered judgment for the Plaintiff in the amount of $1,105,513.04


This case highlights the prudence of parties entering into written loan agreements which set out all of the relevant terms of the loan including the term of the loan and payment details.  These proceedings were commenced in 2017 and not heard by the Court until 2021 with judgment being delivered in 2022.  There was significant delay plus legal costs associated with six hearing days before the Court. The takeaway from this decision is to ensure that all commercial agreements and loan agreements are in writing.

The parties to a loan should also be cautious of terms which require loans to be repayable on demand because the limitation period will commence to run at the date of the loan.  The limitation period in a contract is six years and if the loan is a loan repayable on demand, and the loan is not repaid within six years, the aggrieved party’s claim is likely to be extinguished under the Limitation Act.

Kristy Nunn is a director of the Dispute Resolution & Litigation Group at Mullane & Lindsay. Mullane & Lindsay have extensive experience in professional negligence claims.

Liability limited by a scheme approved under Professional Standards Legislation

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