Capital One Bank v. Matovska; Capital One Bank v. Blackwell; Capital One Bank v. Semple, 2007 CanLII 37015 (ON SCDC)

COURT FILE NO.: DC-05-009964-00 DC-05-010277-00 DC-05-010278-00

DATE: 20070904

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: CAPITAL ONE BANK v. ZORICA MATOVSKA CAPITAL ONE BANK v. GAYLE BLACKWELL CAPITAL ONE BANK v. JANET SEMPLE a.k.a. J. SEMPLE

BEFORE: MACKENZIE J.

COUNSEL: T.R. Christensen, for the Plaintiff, Appellant No one appearing, for the Defendants/Respondents

REASONS FOR JUDGMENT

1By my Endorsement dated January 12, 2007, the appeals in each of the above noted-cases were allowed and judgments issued accordingly. The resulting judgments were entered at Brampton on January 18, 2007.

2In each of these cases, the plaintiff sought recovery of a debt pursuant to a written credit card agreement for outstanding principal, interest and pre-proceeding collection expenses. Although the defendants each failed to deliver defences and were noted in default, the Small Claims Court clerk did not sign default judgment on requisition and the matter went to trial on an uncontested basis. The trial judges declined to award any amount for interest as stipulated in the credit card agreement nor for any pre-proceeding collection expenses of the plaintiff pursuant to terms of the credit card agreement.

3The appeals were based on alleged error by the trial judges in failing to find that pre-proceeding collection expenses claimed by the plaintiff were a liquidated demand for money and in failing to make an award for pre- and post-judgment interest at the rate stipulated in the credit card agreement.

4In my view, the pre-proceeding collection expenses claimed in the credit card agreement are a claim for a liquidated demand for money, within the meaning of the Small Claims Court Rules 11.10(1) and 11.02(1). In Holden Day Wilson v. Ashton, 14 O.R. (3d) 306, this Court held that a solicitor’s account, where “the quantum owing on the account can be ascertained from the contract itself or by calculation or fixed by a scale of charges agreed upon in the contract or by it, is a liquidated demand for money in respect of which a plaintiff is entitled to default judgment from the clerk of the Small Claims Court”: See also Cantalia Sod Co. v. Patrick Harrison Co., [1968] 1 O.R. 169 (H.C.J.): the test of a liquidated demand is whether the amount to which amount the plaintiff is entitled (if he is entitled to anything) can be ascertained from the contract itself or by calculation or fixed by a scale of charges agreed upon by the contractor implied by it: page 171.

5In these actions, the plaintiff has a liability to pay its counsel herein on a contingent basis, being a fixed percentage of the outstanding debt (principal and interest) on account of “debt collection services prior to commencing legal proceedings … retainer agreement.”

6These pre-proceeding collection expenses can be ascertained by calculation as agreed in the contract between the plaintiff and its counsel. In such event, counsel’s claim against the plaintiff in accordance with the retainer agreement for his account for these expenses constitutes a claim for a “liquidated demand” for money, in respect of which plaintiff’s counsel would be entitled, in the absence of a defence, to default judgment against his client, the plaintiff.

7In the credit card agreements, the defendants agreed to pay the plaintiff “any expenses we [the plaintiff] incur to collect your debt”. In my view, the claim for pre-proceeding collection expenses charged by the plaintiffs’ counsel pursuant to a retainer agreement providing for a fixed percentage of the outstanding indebtedness is a “liquidated demand for money” and by necessary implication, it is enforceable as a liquidated demand for money by the plaintiff against the defendants.

8I now turn to the failure of the trial courts to award pre-judgment interest and post judgment interest in accordance with the credit card agreements.

9The Courts of Justice Act, R.S.O. 1990, c.C.43, as amended, sets out the rules respecting an award of pre-judgment interest (s.128) and post judgment interest (s.129), subject to the overriding discretion of the court to, among other things, disallow interest under either sections 128 and 129 or to allow interest at a rate higher or lower than that provided in either of those sections: See s.130(1)(a) and (b).

10In Bank of America Canada v. Clarica Trust Co. (2002) 2002 SCC 43, 211 D.L.R. (4th) 385, the Supreme Court of Canada interpreted the above sections of the Courts of Justice Act. In particular, reference was made to s.128(4)(g) which provided that “interest shall not be awarded under ss.1 … where interest is payable by a right other than under this section.” Reference was also made to s.129(5) for a similar provision relating to post-judgment interest.

11The court gave a detailed analysis of the circumstances under which interest was payable by another right, i.e. a contractual rather than a statutory basis, and canvassed the principles of contract law as it relates to the recovery of expectation damages by a creditor in relation to default under loan arrangements by the debtor. Finding that judgment interest is essentially compensation for the lending of money, the court concluded that absent exceptional circumstances, the interest rate which should govern the loan prior to breach or default would be the appropriate rate to govern the loan after the breach or default and that the application of a lower interest rate would be unjust to the lender. The court concluded this analysis applied equally to pre-judgment interest and post-judgment interest: See paragraphs 49 and 50 on page 400.

12The question then arises whether there were "exceptional circumstances" within the meaning of the above dicta in the credit card agreements and the circumstances of the defendants as borrowers/debtors.

13In my view, unless the terms respecting interest rates in the credit card agreement are vague or unclear or unless the interest rate derived from the written agreement infringes a statutory provision such as the Interest Act, effect should be given to the contractual rate for the determination of both pre- and post-judgment interest.

MacKenzie J.