Capital One v. Jonathan, 2022 ONSC 836

COURT FILE NO.: DC-19-63

DATE: 20220207

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Capital One Bank (Canada Branch), Appellant/Plaintiff

AND:

Landon K. Jonathan, Respondent/Defendant

BEFORE: D.A. Broad

COUNSEL: Regan S. Christensen, for the Appellant

No one for the Respondent

HEARD: September 15, 2021

ENDORSEMENT

Background

[1] This is an appeal, brought before a single judge of the Divisional Court, from a judgment issued in the Small Claims Court at Brantford on motion by the plaintiff in writing for an assessment following the defendant being noted in default.

[2] On April 19, 2019 the plaintiff issued a Plaintiff’s Claim against the defendant in the Small Claims Court at Brantford for payment of $2,801.58 due as of April 9, 2018 pursuant to a written credit card agreement (the “Customer Agreement”), plus prejudgment and post-judgment interest at the contractual rate specified in the customer agreement of 19.8% per annum, plus costs in accordance with the Customer Agreement.

[3] As no defence was received within the prescribed time, the plaintiff’s legal representative submitted a draft default judgment to the court on September 4, 1919. On the same date the plaintiff’s legal representatives received a court submission notice advising that the request for default judgment had been denied on the basis that the documents provided with the plaintiff’s claim did not support the amount claimed, and advising that the plaintiff may file a request for an assessment hearing.

[4] The plaintiff thereupon brought a motion supported by an affidavit, seeking assessment of the amount owing in writing and an order granting judgment pursuant to rule 11.03(2)(a) of the Small Claims Court Rules.

[5] The affidavit of Deborah Forrest filed in support of the motion for an assessment sought judgment in the amount of $2,801.58 with prejudgment interest at the contractual rate of 19.8% per annum from April 9, 2018 and post-judgment interest continuing at the contractual rate of 19.8% per annum as well as costs totaling $640.75 made up of $102 to issue the Plaintiff’s Claim, $100 for preparing the plaintiff’s claim, $197.75 for service of the claim (citing special circumstances pursuant to r. 19.01(3)), $121 for the disbursement for applying for default judgment, and $120 for the notice of motion for assessment.

[6] By Endorsement dated November 6, 2019 the Deputy Judge conducting the assessment (the “Assessment Judge”) granted judgment for the full principal amount claimed in the sum of $2,801.58 plus prejudgment interest at the contractual rate of 19.8% per annum from April 9, 2018 to November 6, 2019 of $873.86 plus costs of $283, for a total of $3,958.44 and post-judgment interest from November 7, 2019 “in accordance with the CJA” [the Courts of Justice Act].

[7] It is noted that although prejudgment interest was allowed by the Assessment Judge at the contractual rate of 19.8%, post-judgment interest was not, but rather was allowed at the rate prescribed by the Courts of Justice Act. Moreover, the full amount of the costs sought was not allowed. The Assessment Judge gave no reasons for refusing to allow post-judgment interest at the same rate provided for prejudgment interest, or for disallowing the full claim for costs.

Appeal

[8] In the Supplementary Notice of Appeal the plaintiff asks that the judgment be varied to provide for post-judgment interest at the rate of 19.8% per annum, from November 6, 2019 (rather than November 7, 2019 as provided in the judgment) and for the full amount claimed for costs in the sum of $640.75, resulting in a total judgment in the amount of $4,317.71 plus post-judgment interest from November 6, 2019 at 19.8 % per annum.

[9] The plaintiff also asked that leave be granted to appeal the final costs order of the Assessment Judge.

[10] I am satisfied, that the amount of the judgment being over the prescribed amount in effect under s. 31 of the Courts of Justice Act of $2,500, the plaintiff has a right to appeal to this court.

[11] I am also satisfied that, the defendant, having been noted in default, need not have been served with the Notice of Appeal (see r. 61.04(1)(1.1) of the Rules of Civil Procedure).

[12] The grounds of appeal relied upon by the plaintiff are that:

(a) the Assessment Judge erred in law in failing to award post-judgment interest from the date of the judgment at the contractual rate of 19.8% per annum in accordance with binding authority, and in failing to provide reasons for the decision; and

(b) the Assessment Judge erred in law by failing to provide reasons for refusing to award the plaintiff all of the disbursements to which it was presumptively entitled under Small Claims Court Rule 19.01 and the Customer Agreement.

[13] The plaintiff submits that although the amounts involved in the appeal are small, the issues involved are important to collection actions generally and to the overall functioning of the Small Claims Court.

Discussion

(a) Post-judgment Interest Rate

[14] The case at bar is indistinguishable from the recent case of Capital One Bank v Carroll, 2019 ONSC 6261 (Div. Ct.) in which Kumaranayake, J., sitting on appeal as a single judge of the Divisional Court, stated as follows at paras. 20-23:

In Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601 (S.C.C.), at paras. 49-50, the Supreme Court of Canada states:

. . . 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 unjust to the lender.

This analysis applies equally to pre-judgement interest and post-judgment interest. Pre-judgment interest is necessary to compensate a plaintiff for the period from when the money was initially owed until the date of the judgement. Contract law principles may require such interest to be compounded so as to award the plaintiff the benefit of the bargain. Damage awards, however, are not necessarily paid at the date judgement is rendered. Contract law entitles the plaintiff to the full value of the benefit of the bargain at the time payment is finally made. Where the parties have earlier agreed on a compound rate of interest, or there are circumstances warranting it, it seems fair that a court have the power to award compound post- judgment interest as damages to enable the plaintiff to be fully compensate when the award is finally paid.

MacKenzie J. followed this direction in Capital One Bank v. Matovska, [2007] O.J. No. 3368 (Ont. Div. Ct.), which was similar on its facts to the case before me. With respect to what constitutes exceptional circumstances, MacKenzie J. stated, at para. 13, that:

In 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 fore the determination of both pre- and post-judgment interest.

I agree with MacKenzie J.

In the matter before me, there was authority that was binding on the Deputy Judge.

[15] The provisions respecting interest in the credit card contract that was in issue in Carroll were the same as the corresponding provisions in the Customer Agreement in the case at bar. Recognizing that the release of the Carroll decision preceded the Judgment in the case at bar by only a few days, I find that there was binding authority on the Assessment Judge, as exemplified by the authorities cited by Kumaranayake, J., calling for the application of the contractual rate of 19.8% per annum not only to prejudgment interest but also to post-judgment interest.

[16] At para. 15 of Carroll Kumaranayake, J. found that the Deputy Judge in that case made an error in law by not providing reasons for his decision with respect to post-judgment interest noting that, without reasons, effective appellant review is not possible, citing Loans Till Payday v Brown, 2010 ONSC 6639 a decision of Herman, J.

[17] As noted by Herman, J. at para. 16 of Loans Till Payday, although a Small Claims Court judge cannot be expected to provide lengthy reasons for his or her decision in every case, this does not mean that the Small Claims Court judge is relieved of any requirement to provide reasons.

[18] I am satisfied that the Assessment Judge did err in law in failing to follow binding authority with respect to the applicable post-judgment interest rate and in failing to provide any reasons for departing from the interest rate provided for in the Customer Agreement.

[19] I am also satisfied that the start date for post-judgment interest should be the date of judgment, being November 6, 2019, rather than the date following the date of judgment.

[20] S. 129(1) of the Courts of Justice Act provides that money owing under an order bears interest at the post-judgment interest rate, calculated from the date of the order. Pursuant to s. 127(1) “date of the order” is defined, inter alia, to mean the date the order is made, in this case November 6, 2019. Although it could be considered de minimis, as a matter of principle, there is no basis in law to deprive the plaintiff of one day of interest, and a ruling on this issue may be of assistance in promoting a consistent approach to awards of interest in the Small Claims Court.

(b) Costs

[21] R. 19.01 of the Small Claims Court Rules provides as follows:

A successful party is entitled to have the party’s reasonable disbursements, including any costs of effecting service or preparing a plaintiff’s or the defendant’s claim or a defence and expenses for travel, accommodation, photocopying and experts’ reports, paid by the unsuccessful party, unless the court orders otherwise.”

[22] The Assessment Judge did not provide any reasons identifying any inappropriate conduct on the part of the plaintiff that would justify the withholding of costs and departing from the normative approach that the plaintiff was entitled to its reasonable disbursements (see Maritime Life Assurance Co. v. Anderson, 2005 CarswellOnt 6637 (S.C.J.)).

[23] S. 133 of the Courts of Justice Act provides: "No appeal lies without leave of the court to which the appeal is to be taken... (b) where the appeal is only as to costs that are in the discretion of the court that made the order for costs."

[24] In the case of Mullin v. Lagace, 2015 ONCA 757 the Court of Appeal stipulated at para. 8 that, when the appeal is both substantial and as to costs, leave is required for the cost component.

[25] In the case of Smith v Mackinnon, 2017 ONSC 4638 (Div. Ct.) Mew, J. summarized the principles governing motions for leave to appeal a costs order at para. 13 as follows:

a. Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are "strong grounds upon which the judge erred in exercising his discretion";

b. Leave to appeal a costs order, standing alone, is granted only sparingly;

c. A court should set aside a costs award on appeal only if the trial judge has made an error in principle or the costs award is "plainly wrong";

d. A costs award is a discretionary order and the judge at first instance is in the best position to determine the entitlement, scale and quantum of any such award.

See: McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2008 ONCA 597 (Ont. C.A.) , at paras. 24-27; F.L. Ravin Ltd. v. Southwestern Ontario Student Transportation Services, 2013 ONSC 6500 (Ont. S.C.J.) at para. 16.

[26] Mew, J. went on to observe at para. 15 that “it would present an unwarranted burden on an already overburdened system if every decision on costs had to be supported by reasons. This is particularly so in the Small Claims Court, which is intended to provide an inexpensive, speedy and user-friendly forum to accommodate civil disputes involving modest amounts.”

[27] However, in referring to the decision of Low, J. in Mayer v. Zuker, (2009), 249 O.A.C. 1 (Div. Ct.) Mew, J. noted that, where there is departure from the usual practice, in that case that costs should follow the event, then the absence of reasons itself may provide an impetus to appeal where the presence of reasons, however brief, may have informed a decision to accept the result.

[28] At para. 23 Mew, J. noted that, where there are no reasons given by judge for the exercise of his or her discretion, it may nevertheless be possible to find in the record before the court grounds upon which he or she could properly have exercised his or her discretion not to award costs to the successful party.

[29] In the case of Jane Conte Professional Corporation v. Smith, 2014 ONSC 6009 (Div. Ct.) Nordheimer, J. (as he then was) stated at para. 8: “The giving of reasons for any decision made is a critical part of a judge's role. While the reasons do not have to be lengthy or particularly detailed, the reasons must, at the very least, explain why the decision was reached and thus allow for proper appellate review.”

[30] There is nothing in the record in the case at bar which would offer insight into the basis upon which the exercise of discretion by the Assessment Judge was carried out, and specifically why the plaintiff’s request for disbursements of $100 for preparing the plaintiff’s claim, $197.75 for service of the plaintiff’s claim, due to the special circumstances set out in the supporting affidavit, and the $120 court fee for filing the plaintiff’s notice of motion and supporting affidavit were disallowed.

[31] There is therefore good reason to doubt the correctness of the costs order made by the Assessment Judge.

Disposition

[32] The appeal is therefore allowed, and the Judgment dated November 6, 2019 is varied to state as follows:

“Judgment in favour of the plaintiff Capital One Bank (Canada Branch) against the defendant Landon K. Jonathan in the amount of $2,801.58 plus prejudgment interest at 19.8 percent per annum from April 9, 2018 to November 6, 2019 of $873.86 plus costs of $640.75, for a total of $4,316.19, plus post-judgment interest from November 6, 2019 at the contractual rate of 19.8 percent per annum.”

[33] There shall be no order as to costs of the appeal.

D.A. Broad

Date: February 7, 2022