This involved a mortgage by a father and mother to their daughter and son-in-law. Under the mortgage the borrowers were jointly and severally liable. The loan was repayable upon written demand being made and it was expressly agreed that if the daughter and son-in-law got divorced the loan would be called up. The borrowers separated and the loan was called up.
The son-in-law raised the defence that the claim was out of time pursuant to the statute of limitations. However the Court held that the time for the purposes of the statute of limitations ran from the service of the notice of demand. It was only at that time the amount was payable by the borrowers and that the cause of action arose. Accordingly the statement of claim was not out of time.
Readers may recall a very similar case with a different outcome reported in our August 2008 newsletter Icamp v Eykamp  NSWSC 853. The loan in Icamp was “to be repaid at call” but there was nothing in the contract about a mechanism for a written demand being issued as a precondition to payment of the debt and so the loan fell into the category of one where no formal demand needed to be issued (with the words “at call” essentially being a rhetorical flourish rather than anything of substance). This was different to the loan in Gray which expressly required there to be a written demand by the lender served in accordance with s 170 of the Conveyancing Act. Thus this loan was found to fall into the second category where a formal demand was a precondition for the debt being due. Accordingly in the one case the limitation period ran from the date of the loan, and in the other from the date of demand for repayment.