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Interest - Pre-Judgment Rate [CJA s.128]. Royal Bank of Canada v. Lendak
In Royal Bank of Canada v. Lendak (Ont Divisional Ct, 2024) the Ontario Court of Appeal dismissed an appeal from a Small Claims RBC bank action (which had been transferred from the Superior Court - Simplified Procedure), claiming credit line and credit card debt.
Here the court considers pre-judgment interest [under CJA s.128]:Did the trial judge err in ordering pre-judgment interest and post-judgment interest
[77] In her reasons, Deputy Judge Munro ordered that the appellant pay pre-judgment interest on the amount owing on the credit card and line of credit, on the basis of the interest rate provided in the terms of use for the credit provided.
[78] Pre-judgment interest compensates a plaintiff for the period from when the money was initially owed until the date of the judgment. A loan agreement, with a specified interest rate, is an agreement between the parties on the cost of borrowing money over a period of time. Absent exceptional circumstances, the interest rate which governed the loan prior to a breach is the appropriate rate to govern the post-breach loan: Bank of America Canada v. Mutual Trust Co, 2002 SCC 43, at para. 49-50.
[79] In this case, the appellant entered into an agreement with the respondent that an annual interest rate of 19.99% would apply to the balance on the VISA credit card; and that an interest rate of 6.90% would apply to the outstanding principal balance on the line of credit. I find that the trial judge did not err in applying these amounts up to the date of her judgment. There were no circumstances in this case that warranted a deviation from the contractually agreed upon interest. . Integrity Home and Cottage Inc. v. Clegg
In Integrity Home and Cottage Inc. v. Clegg (Div Court, 2024) the Divisional Court dismissed an appeal on issues of pre-judgment interest, here were the first judge died during the case and a second took over:[6] On March 4, 2020, Salmers J. determined the scope of the contract. He also heard the evidence dealing with the second part of the trial. Unfortunately, before rendering a decision, Salmers J. passed away. Sutherland J. adjudicated the second part of the trial, which dealt with the issues of damages and alleged deficiencies. He did so on the basis of the transcripts of the oral evidence that was heard before Salmers J., the documentary evidence filed during the proceeding and written argument from counsel.
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[8] Integrity appeals Sutherland J.’s decision respecting pre-judgement interest. According to Integrity, Sutherland J. erred in awarding interest at the rate prescribed by the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) instead of at the rate of interest set out in the Contract.
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[19] Integrity submits that Sutherland J.’s decision regarding prejudgment interest conflicts with the decision of Salmers J. that interest was to be awarded in accordance with the amount set out in the Contract. Further, Integrity submits that Sutherland J.’s decision to award interest in an amount that was not consistent with the Contract ignored the provisions of s. 128(4)(g) of the CJA that interest is not awarded at the prescribed rate “where interest is payable by a right other than under this section.” Section 129(5) has a similar provision regarding post judgment interest.
[20] Integrity also submits that it did not withdraw its claim for interest at the contractual rate. Rather, it just agreed that it was prepared to compromise by asking for interest at its usual rate of 2 percent per month. Integrity should not be penalized for being prepared to take less than it was entitled to.
[21] Finally, Integrity argues that if Integrity did withdraw its claim for interest at the rate prescribed by the contract, Sutherland J. ought to have considered whether to exercise his discretion under s. 130 of the CJA, which allows a court, where it considers it to be just to do so, to “allow interest at a rate higher or lower than that provided in either section.”
[22] As Sutherland J. noted, both at trial and in closing submissions, Integrity made it clear that it was not asking for interest pursuant to the Contract. Given this, it cannot be said that Sutherland J. erred in failing to award interest in accordance with the terms of the Contract. Integrity’s closing submissions were filed after Salmers J. made his finding that interest should be awarded in accordance with the Contract. Given these submissions, it was appropriate for Sutherland J. to consider what interest to award in accordance with the two options Integrity put forward – neither of which were for interest at the contractual rate. In other words, since Integrity was no longer requesting interest at the contractual rate, neither Salmers’ J.’s decision nor ss. 128 and 129 of the CJA required Sutherland J. to award interest at that rate.
[23] In terms of s. 130 of the CJA, while Sutherland J. did not mention that section, it is clear that he considered whether to award interest at a higher rate. Having done so, he decided that the more appropriate rate to award was the rate prescribed by the CJA. Section 130 is a discretionary provision. While Sutherland J. could have chosen to exercise his discretion to increase the rate of interest so as not to penalize Integrity for agreeing to a lower number than that provided for in the Contract, he was not required to exercise his discretion in that manner.
[24] For these reasons the appeal is dismissed.
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