Bank of Montreal v. McConnell, 2008 CarswellOnt 5187
Bank of Montreal v. McConnell
Bank of Montreal, Plaintiff and Carolyn L. McConnell, Defendant
Ontario Superior Court of Justice
J.S. Winny D.J.
Heard: September 5, 2008
Judgment: September 8, 2008
Docket: Cambridge 335/08
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Counsel: Mr. Roy Hwang (Student-at-Law), for Plaintiff
Ms Natalee Pink (Agent), for Defendant
Subject: Civil Practice and Procedure; Corporate and Commercial
Civil practice and procedure --- Judgments and orders — Interest on judgments — Prejudgment interest — Rate of.
Civil practice and procedure --- Judgments and orders — Interest on judgments — Postjudgment interest — Rate of.
Debtors and creditors --- Interest — Calculation — Rate
Plaintiff bank issued credit card to defendant in 2004 at interest rate of 10.9 percent — Defendant's account fell into arrears and was closed by bank in December 2007 — In May 2008, interest rate increased to 18.5 percent — One month later, bank brought small claims action for repayment — Bank sought prejudgment and post judgment interest on balance claimed at rate of 18.5 percent — Settlement conference and terms of payment hearing was held — Bank entitled to contractual rate of 10.9 percent — Court has discretion under s. 130 of Courts of Justice Act whether to award prejudgment and post judgment interest at rates prescribed under ss. 128 and 129 of Act — Court also has discretion where exceptional circumstances are found to exist — Exceptional circumstances existed — It could not have been in contemplation of parties that, if account was closed due to arrears, bank could wait until dramatically-increased interest rate came into force six months later and then claim that higher rate for both prejudgment and post judgment interest on balance claimed — Most just result was not to set aside contractual rate in favour of rate under Act, but to apply contractual rate of 10.9 percent.
Cases considered by J.S. Winny D.J.:
Bank of America Canada v. Mutual Trust Co. (2002), 287 N.R. 171, 211 D.L.R. (4th) 385, 49 R.P.R. (3d) 1, 159 O.A.C. 1, 2002 SCC 43, 2002 CarswellOnt 1114, 2002 CarswellOnt 1115,  2 S.C.R. 601 (S.C.C.) — followed
Jacobs v. Ottawa Police Services Board (2008), 2008 CarswellOnt 1635, 234 O.A.C. 140 (Ont. Div. Ct.) — considered
McGowan v. Toronto (City) (2008), 2008 CarswellOnt 2175, 45 M.P.L.R. (4th) 128 (Ont. S.C.J.) — followed
Roskam v. Rogers Cable (2008), 2008 CarswellOnt 2958 (Ont. Div. Ct.) — followed
Courts of Justice Act, R.S.O. 1990, c. C.43
Generally — referred to
s. 25 — referred to
s. 128 — referred to
s. 129 — referred to
s. 130 — considered
s. 130(1) — considered
s. 130(2) — considered
Small Claims Court Rules, O. Reg. 258/98
Generally — referred to
R. 9.03(5) — referred to
R. 12.02 — referred to
R. 13.05 — considered
R. 13.05(2)(a) — referred to
R. 13.05(2)(a)(i) — considered
R. 13.05(2)(a)(iv) — considered
R. 13.05(2)(a)(v) — considered
HEARING to determine terms of payment.
J.S. Winny D.J.:
1 This matter came before me as a combined settlement conference and terms of payment hearing. For the following reasons, judgment is granted for the plaintiff in the amount of $4,457.25, together with prejudgment interest at 10.9% from October 14, 2007 to this date and postjudgment interest at the same rate.
2 This is a claim on a Mastercard credit card issued by the plaintiff to the defendant. The claim is for a principal amount of $4,952.21 with prejudgment and postjudgment interest at a contractual rate of 18.5%, plus costs.
3 In the defendant's amended Defence dated July 28, 2008, she admits liability for the sum of $4,457.25 and challenges the interest rate claimed at 18.5% and the claim for costs.
4 In submissions before me on this settlement conference, Ms. Pink advised that the sole basis of the dispute over the principal amount claimed, which dispute amounted to approximately only $500.00, was a matter of interest. She submitted that the plaintiff ought to have terminated this credit card account several months sooner than it did and had it done so less interest would have accrued before issuance of the Plaintiff's Claim.
5 The defence also submitted that the prejudgment and postjudgment interest rates should be those prescribed under the Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 128 & 129.
6 Based on the positions contained in the pleadings and the submission before me, the only reason why a trial would be required in this case would be if the question of the applicable interest rate warranted a trial. In my view, it does not.
7 Under the current rules applicable to settlement conferences in the Small Claims Court, and particularly rule 13.05 of the Small Claims Court Rules, O.Reg. 258/98 ("SCCR"), the settlement conference judge has a broad discretion to make a variety of orders. Settlement conferences in this court no longer involve a merely binary outcome of settlement or proceed to trial, but rather, the conference also serves a gatekeeping function and often results in procedural and substantive orders in appropriate cases.
8 Examples of substantive orders commonly made at settlement conferences include orders amending a pleading or striking out a pleading as disclosing no reasonable cause of action or defence; SCCR 13.05(2)(a)(iv). Parties may be added or deleted: SCCR 13.05(2)(a)(i). Claims may be stayed or dismissed: SCCR 13.05(2)(a)(v).
9 It was recently confirmed that the powers of a settlement conference judge include a power to finally determine a claim by means of either a pleadings ruling or a summary judgment determination that there is no genuine issue for trial. In Roskam v. Rogers Cable,  O.J. No. 2049 (Ont. Div. Ct.), the plaintiff sued a television network after he lost a municipal election. He attached no damages documentation to his claim and produced none at the settlement conference, A settlement conference judge dismissed the claim pursuant to rule 13.05(2)(a)(v) on the basis that the plaintiff "has no cause of action and has no provable damages".
10 On appeal to the Divisional Court, the dismissal was upheld by DiTomaso J., who confirmed the specific authority of a settlement conference judge to dismiss a claim under SCCR 13.05(2)(a)(v). He affirmed the dismissal of that claim as lacking a reasonable cause of action and on the basis that there was no genuine issue for trial as to damages.
11 Pleadings issues may be determined at settlement conferences, under SCCR 13.05(2)(a)(iv), which incorporates by reference rule 12.02. That rule permits the court to strike out pleadings which fail to disclose a reasonable cause of action or defence, and on other grounds. It was recently confirmed that this court has jurisdiction to determine a question of law raised by the pleadings: McGowan v. Toronto (City) (2008), 45 M.P.L.R. (4th) 128 (Ont. S.C.J.) at para. 8, Kiteley J.
12 I note that in Roskam v. Rogers Cable , supra, there is no reference to Jacobs v. Ottawa Police Services Board (2008), 234 O.A.C. 140 (Ont. Div. Ct.), decided only three months earlier. In that case it was held that a settlement conference judge had no jurisdiction to strike out a claim as disclosing no reasonable cause of action, unless on consent. The reasons in Jacobs , supra, contain no reference to SCCR 13.05(2)(a) nor to any of its sub-clauses, and no reference to SCCR 12.02.
13 It appears inescapable that Roskam , supra, and Jacobs , supra, are in direct conflict. Were I required to do so, I would choose to follow Roskam , supra, because it is consistent with both the relevant rules and with McGowan , supra. Respectfully, I do not see how the decision in Jacobs , supra, can be reconciled with the plain meaning of SCCR 13.05(2)(a)(iv) and 12.02 and the mandate of this court as set out in Courts of Justice Act s. 25. Issues which do not in law warrant a trial should not be sent on for trial.
14 In the case at bar, I am faced with a question of interest and not a pleadings deficiency. While this dispute over interest might well be characterized as a situation in which there is no genuine issue for trial, at the same time, the question of interest is a matter of law which requires no evidence or at least no further material than the present contents of the court file. The issue can and should be determined summarily at this time, keeping in mind the mandate of the Small Claims Court to hear and determine matters summarily, pursuant to s. 25 of the Courts of Justice Act, R.S.O. 1990, c. C.43. I see no good reason to send this case on to a trial over interest only.
15 The plaintiff has filed copies of the monthly statements for the period from January 2004 to May 2008. The contractual interest rate for the period from January 2004 to March 2008 was 10.9%. The statement for April 2008 was not produced. The statement for May 2008 reflects a significantly-increased interest rate of 18.5%.
16 The account for December 2007 contains a message that the account had been closed by the bank due to the arrears. It appears that the last payment was that reflected on the September 2007 statement and the last purchases were those reflected on the August 2007 statement.
17 The plaintiff issued several statements after closure of the account in December 2007, reflecting interest charges only. This claim is based on the total balance reflected in the May 2008 account and the interest rate claimed for both prejudgment and postjudgment interest is 18.5% although that rate only came into effect for the last month in the period of almost four years reflected in the statements produced.
18 Mr. Hwang argues that the contractual rate should apply at 18.5%. He cites Bank of America Canada v. Mutual Trust Co.,  2 S.C.R. 601 (S.C.C.). In that case the question was whether contractual compound interest should be applied as between financial institutions. In restoring the trial judge's finding that such interest should apply in that case, the Court stated at paragraph 49:
49 With respect to the failure to repay the loan in this appeal when due, it cannot be said that the cost of such delay was not in the contemplation of both parties at the time they made the contract, particularly as both parties were in the business of lending. A loan agreement with a specified interest rate is an agreement between parties on the cost of borrowing money over a period of time. Absent exceptional circumstances, the interest rate which had governed the loan prior to breach would be the appropriate rate to govern the post-breach loan. The application of a lower interest rate would be unfair to the lender.
19 Ms. Pink argues that apart from the contractual interest rate, the court has a discretion under ss. 128, 129 & 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43. She further argues that due regard should be had for the particular mandate of the Small Claims Court as established by s. 25 of that Act, namely to hear and determine matters in a summary way and to make such order "as is considered just and agreeable to good conscience."
20 Courts of Justice Act s. 130 provides as follows:
130.(1) Discretion of court — The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129,
(a) disallow interest under this section;
(b) allow interest at a rate higher or lower than that provided in either section;
(c) allow interest for a period other than that provided in either section.
21 In exercising its discretion under s. 130(1), the court shall take into account a number of factors set out in s. 130(2), including changes in market interest rates, the circumstances of the case, and any other relevant consideration.
22 In this case, the defendant is not a financial institution but an individual. Her account fell into arrears and was closed by the plaintiff in December 2007. Rather than initiating the claim sooner, the plaintiff happens to have initiated the claim six months later and just one month after the interest rate leaped from 10.9% to 18.5%.
23 In my view these circumstances warrant a different result than that contended for by the plaintiff. The court has a discretion under s. 130 of the Courts of Justice Act, keeping in mind s. 25 of that Act. The court also has a discretion as stated in Bank of America Canada , supra, where exceptional circumstances are found to exist I find such circumstances here.
24 I do not wish to be taken to suggest that contractual interest rates may or should be easily set aside. By definition, exceptional circumstances represent exceptions to the general rule, and based as it is on freedom of contract, it is a strong general rule.
25 In this case, the result which I find most just and agreeable to good conscience is not to set aside a contractual rate in favour of the court rate prescribed under the Courts of Justice Act. Rather, I find that the plaintiff should be entitled to the contractual rate of 10.9% which applied at the date the account was closed and continued to apply until May 2008 when it almost doubled, just before issuance of the Plaintiff's Claim.
26 In this particular case, I do not think it could have been in the contemplation of the parties, to use the language from paragraph 49 of Bank of America Canada , supra, that if the account were to be closed due to arrears, the plaintiff could wait until a dramatically-increased interest rate came into force six months later and then proceed to claim that higher rate for both prejudgment and postjudgment interest on the balance claimed.
27 I find it unnecessary to decide the defendant's submission that the bank was under a legal duty to close her account sooner than it did.
28 Accordingly, I grant judgment to the plaintiff in the amount of $4,457.25, together with prejudgment interest at 10.9% from October 14, 2007 to this date and postjudgment interest at the same rate. That is based on an amount and date put forward in submissions, but using the same interest rate, a different principal amount and start date would have made no difference to the net amount.
29 As to a payment plan for the principal amount which was admitted by the defendant, she has put forward no viable plan. Accordingly, I decline to make any order pursuant to SCCR 9.03(5).
30 I award costs of $245 to the plaintiff, consisting of the following: settlement conference $100, preparation of pleadings $50, service $20 and issue claim $75.
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