A mortgage appeal addressed whether s. 8 of the Interest Act invalidates a default-triggered charge structure framed as a discounted pay-rate.
The majority held that substance governs over drafting labels and that terms producing a higher effective charge on arrears than on principal not in arrears offend s. 8.
The Court also held that a rate increase triggered solely by passage of time does not itself breach s. 8.
The impugned 25 percent effect under the second renewal arrangement was void, and the lower pay-rate formula governed.
