COURT OF APPEAL SUMMARIES (June 15 – 19, 2020)7550111 Canada Inc. v. Charles, 2020 ONCA 386 (CanLII)
[Rouleau, van Rensburg and Roberts JJ.A.]
Kevin Sherkin, for the appellant
Doug Bourassa, for the respondent
Keywords: Contracts, Real Property, Mortgages, Interest, Criminal Rate of Interest, Civil Procedure, Summary Judgment, Appeals, Fresh Argument on Appeal, s. Criminal Code, RSC 1985, c C-46, s 347, Interest Act, RSC 1985, c I-15, s 8, Rules of Civil Procedure, Rule 20.4(2), Kaiman v. Graham, 2009 ONCA 77, R. v. Reid, 2016 ONCA 524, leave to appeal refused,  S.C.C.A. No. 432, Krayzel Corp. v. Equitable Trust Co., 2016 SCC 18, Hryniak v. Mauldin, 2014 SCC 7
The appellant appealed the summary judgment granted to the respondent totalling almost $165,000 in respect of amounts owing under a mortgage.
1. Did the motion judge err by denying the appellant’s request for an adjournment of the respondent’s motion and for leave to file additional materials?
2. Did the motion judge err by failing to find that the interest, fees and charges sought by the respondent were in violation of s. 347 of the Criminal Code and s. 8 of the Interest Act?
3. Did the motion judge err by granting summary judgment in favour of the respondent?
1. No. It was within the reasonable exercise of the motion judge’s discretion to decline an adjournment and additional materials that did not appear to be necessary. The appellant was well aware that the motion date was peremptory to her whether or not she had counsel. The issues were relatively straightforward. The motion judge accommodated newly retained counsel by granting further preparation time. There is no indication that the appellant was prejudiced in any way.
2. The appellant submitted that the motion judge erred by failing to consider whether the mortgage’s one-month term, ten percent interest rate, and $12,000 lender fee, as well as the other fees and charges, amounted to a 131% rate of interest and therefore a criminal rate of interest contrary to s. 347 of the Criminal Code, R.S.C. 1985, c. C-46, and whether they contravened s. 8 of the Interest Act, R.S.C. 1985, c. I-15, by “increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears.”
The Court refused to entertain these arguments, since they were not pleaded or raised before the motion judge and were only raised for the first time on appeal. The general rule that an appellate court will not entertain new arguments for the first time on appeal exists because, typically, the evidentiary record is inadequate to permit an appellate court to properly determine the new issue. Moreover, the introduction of a new issue on appeal is usually prejudicial to the respondent and runs counter to the societal interest in finality and the expectation that cases will be disposed of fairly, fully and expediently at first instance. The burden falls squarely on the appellant to satisfy the court that it should exercise its discretion to permit a new argument to be advanced for the first time on appeal. The appellant failed to meet that onus in this case.
The Court then discussed the analysis that must be undertaken to determine whether a criminal rate of interest is being charged. On its face, the mortgage in question provides for a ten percent interest rate. Under s. 347(2) of the Criminal Code, “interest” is broadly defined to include “the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit… but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes”. A “criminal rate” of interest means “an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds sixty per cent on the credit advanced under an agreement or arrangement”.
Where, as here, a mortgage does not contain on its face a criminal rate of interest, the party alleging that a mortgage contravenes s. 347 must identify the fees or other charges that it alleges are “interest”, and then provide evidence that the effective annual rate of interest calculated in accordance with “generally accepted actuarial practices and principles” exceeds sixty percent. Because the appellant did not challenge the various fees charged by the respondent in response to the motion for summary judgment, there was no evidence that would permit the court to determine whether they are properly considered “interest”. Moreover, the impact of such fees and charges on the interest rate is not a simple calculation that the court can make on the submissions of counsel. The appellant did not tender fresh evidence of a calculation of the rate of interest in accordance with generally accepted actuarial practices and principles.
3. No. The granting of summary judgment in the face of a counterclaim and third party claim alleging fraud against the respondent and others will not result in inconsistent findings. It was not clear a counterclaim had actually been filed or that it was before the motion judge. The motion judge determined that the respondent did not participate in any fraud and that the mortgage was valid. The appellant is bound by that determination.
However, the Court agreed that there was a small calculation error in the judgment relating to interest and other charges, and the appeal was therefore allowed for the narrow purpose of addressing that small calculation error only.