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Money - Credit. K.C.C. Chooka Cabinet Ltd. v. Kingsway Consulting Group Inc.
In K.C.C. Chooka Cabinet Ltd. v. Kingsway Consulting Group Inc. (Ont Div Ct, 2026) the Ontario Divisional Court dismissed an appeal from the Small Claims Court, this brought against "judgment in favour of the respondent ... for breach of contract and prejudgment and postjudgment interest at the 36% rate specified in the contract".
Here the court considers the criminal interest rate [CCC s.347(2)], and the meaning of the term "credit advanced":B. Prejudgment and Postjudgment Interest
[21] The contract between Chooka and Kingsway specified that any unpaid fees would be subject to interest at a rate of 36%. The Deputy Judge awarded prejudgment and postjudgment interest at that rate.
[22] At the time the contract was entered into, a “criminal rate” was defined in s. 347(2) of the Criminal Code, R.S.C. 1985, c. C-46 as “an effective annual rate . . . that exceeds 60% on the credit advanced under an agreement or arrangement.” The section was amended by s. 610(1) of the Budget Implementation Act, 2023, No. 1, S.C. 2023, c. 26, which changed the definition of a “criminal rate” to “an annual percentage rate of interest . . . that exceeds 35% on the credit advanced.”[1] The term “credit advanced” includes unpaid debts for goods and services: Garland v. Consumers’ Gas Co., 1998 CanLII 766 (SCC), [1998] 3 S.C.R. 112, at paras. 35-40. The amendment came into force on January 1, 2025.[2]
[23] Prejudgment interest in breach of contract cases is ordinarily fixed in accordance with the terms of the contract: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601, at paras. 49-50; Professional Court Reporters Inc. v. Pistachio Financier Corp., 2022 ONCA 669, at para. 14; Gyimah v. Bank of Nova Scotia, 2013 ONCA 252, 305 O.A.C. 198, at para. 10. However, the court can exercise its common law and equitable jurisdiction to depart from the contractual rate in special circumstances: Tribute (Springwater) Limited v. Atif, 2021 ONCA 463, 33 R.P.R. (6th) 1, at para. 27.
[24] I agree that the fact that a rate meets the definition of a “criminal rate” could be a special circumstance justifying a departure from the contractual rate. However, s. 347.01(1) of the Criminal Code provides that s. 347 does not apply to agreements provided for by regulation and s. 1 of the Criminal Interest Rate Regulations, SOR/2024-114 (which neither counsel brought to my attention) provides that:1. For the purposes of subsection 347.01(1) of the Criminal Code, section 347 of that Act does not apply in respect of an agreement or arrangement if(a) the borrower is not a natural person;
(b) the borrowing is for a business or commercial purpose; and
(c) either(i) the amount of the credit advanced is more than $10,000 but less than or equal to $500,000 and the annual percentage rate of interest — calculated in accordance with generally accepted actuarial practices and principles — does not exceed 48% on the credit advanced, or
(ii) the amount of the credit advanced is more than $500,000. The agreement in this case falls appears to fall into this category. As the rate of prejudgment interest is not criminal, there is no basis for this court to intervene.
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