Great America Leasing Corp v. Yates [Indexed as: Great America Leasing Corp. v. Yates]

68 O.R. (3d) 225

[2003] O.J. No. 4689

Docket No. C40052

Court of Appeal for Ontario

Moldaver, Borins and MacPherson JJ.A.

December 4, 2003

Conflict of laws -- Foreign judgments -- Enforcement -- Public policy -- Ontario resident entering into business partnership in Michigan to build golf course in that state -- Defendant signing Lease Agreement and personal guarantee to obtain financing for equipment -- Assignee of Lease Agreement bringing action in Michigan following default and obtaining summary judgment against defendant -- Defendant initially defending action on basis that Lease Agreement provided for usurious interest rate but not responding to motion for summary judgment and not appealing Michigan judgment -- Public policy defence to enforcement of Michigan judgment in Ontario not applying -- Michigan proceedings were open and fair and defendant was represented by counsel and received proper notice of each step in proceedings -- On plaintiff's motion for summary judgment in action to enforce Michigan judgment in Ontario defendant not meeting evidentiary burden on him to present evidence capable of supporting his defence that Lease Agreement provided for criminal interest rate.

The defendant, a Canadian citizen residing in Ontario, entered into a business partnership and incorporated a company with two Michigan residents for the purpose of building a golf course in Michigan. They obtained financing for a GPS tracking system for the company's golf carts by executing a Lease Agreement. The Lease Agreement contained a provision that it was to be governed and interpreted by the laws of the State of Michigan. The defendant and his two business [page226] partners signed personal guarantees to secure the loan. The guarantee also contained a provision that the agreement was governed by Michigan law. The company defaulted on the loan and the plaintiff, the assignee of the Lease Agreement, brought an action in Michigan against the company, the defendant and the two Michigan residents. The defendant defended the action and, among other defences, pleaded that the interest and other fees claimed by the plaintiff were usurious. The defendant filed no responding material when the plaintiff brought a motion for summary judgment. Summary judgment was granted against all of the defendants. The defendant did not appeal the Michigan judgment. The plaintiff brought an action in Ontario seeking to enforce the Michigan judgment against the defendant and moved for summary judgment. The motions judge rejected the defendant's main substantive argument, which was that the legal fees, when included in the interest being claimed after default, resulted in a criminal interest rate. The motions judge held that the provision relating to legal fees was a term of the lease which the defendant had signed and that contingency fees are legal in Ontario. He concluded that there were no public policy grounds why the foreign judgment should not be enforced. The defendant appealed.

Held, the appeal should be dismissed.

Per MacPherson J.A. (Moldaver J.A. concurring): To determine whether enforcement of a particular foreign judgment would be contrary to the public policy of Ontario, the court must consider the historical and factual context of the proceedings which led to the granting of the judgment, and where there are competing public policy imperatives, whether overall, registration would be contrary to public policy.

There was no suggestion of any procedural irregularity in, or natural justice concern relating to, the Michigan court proceedings. The defendant was represented by counsel throughout the proceedings, received proper notice of each step and actually participated at some stages. However, in the end, he chose to let the case proceed by way of summary judgment against him, and also chose not to pursue an appeal. There was not a single factor relating to either the commercial activity in Michigan or the Michigan litigation that suggested any impropriety in what happened to the defendant in that jurisdiction. The courts must guard against defendants who choose not to participate in foreign proceedings and then attempt to relitigate the merits of the foreign proceedings in the action to enforce the foreign judgment. The Michigan court proceedings were open and fair. Having regard to the principle of comity, the Michigan judgment was entitled to respect in Ontario.

In terms of the substance of the Michigan judgment, the defendant had not met the evidentiary burden on him to present evidence capable of supporting his defence based on s. 347 of the Criminal Code, R.S.C. 1985, c. C-46, or the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2. Apart from bald statements and speculative assertions, the evidence fell short of showing that the Lease Agreement even came within the ambit of s. 347 of the Code, let alone offended it. Likewise, apart from speculation, it did not show that the Lease Agreement offended against the provisions of the Unconscionable Transactions Act or that it was otherwise so patently unfair or unconscionable that enforcement of the judgment would conflict with the essential moral values of Canadian society.

Per Borins J.A. (concurring in the result): The law is unsettled in respect to the circumstances in which the court will decline to enforce a foreign judgment on the [page227] basis of a foreign policy exemption. As it was possible to decide this appeal by the application of a different analysis, it would be preferable not to express an opinion on the public policy exemption.

This was an appeal from a summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The plaintiff had established that there was no genuine issue for trial. On that ground alone, the appeal should be dismissed. The defendant failed to meet his Rule 20 evidentiary burden of presenting evidence capable of supporting his defences that the Lease Agreement violated s. 347(1)(a) of the Criminal Code, or that it constituted an unconscionable transaction.

APPEAL by the defendant from a judgment in an action to enforce a foreign judgment.

Cases referred to Beals v. Saldanha, 2003 SCC 72, 234 D.L.R. (4th) 1, 39 B.L.R. (3d) 1, 39 C.P.C. (5th) 1, [2003] S.C.J. No. 77 (QL), affg (2001), 2001 27942 (ON CA), 54 O.R. (3d) 641, 202 D.L.R. (4th) 630, 10 C.P.C. (5th) 191 (C.A.), revg in part (1998), 1998 14709 (ON SC), 42 O.R. (3d) 127, 27 C.P.C. (4th) 144 (Gen. Div.); Boardwalk Regency Corp. v. Maalouf (1992), 1992 7573 (ON CA), 6 O.R. (3d) 737, 88 D.L.R. (4th) 612 (C.A.), revg (1988), 1988 4833 (ON SC), 68 O.R. (2d) 753, 59 D.L.R. (4th) 760, 43 B.L.R. 83 (H.C.J.); Degelder Construction Co. v. Dancorp Developments Ltd., 1998 765 (SCC), [1998] 3 S.C.R. 90, 58 B.C.L.R. (3d) 1, 165 D.L.R. (4th) 417, 231 N.R. 122, [1999] 5 W.W.R. 797, 129 C.C.C. (3d) 129, 20 R.P.R. (3d) 165, 20 C.R. (5th) 77, 5 C.B.R. (4th) 1; Four Embarcadero Center Venture v. Kalen (1988), 1988 4828 (ON SC), 65 O.R. (2d) 551, 27 C.P.C. (2d) 260 (H.C.J.); Garland v. Consumers' Gas Co., 1998 766 (SCC), [1998] 3 S.C.R. 112, 40 O.R. (3d) 479n, 165 D.L.R. (4th) 385, 231 N.R. 1, 129 C.C.C. (3d) 97, 49 M.P.L.R. (2d) 77, 20 C.R. (5th) 44; Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 2001 24049 (ON CA), 52 O.R. (3d) 97, 11 B.L.R. (3d) 197, 4 C.P.C. (5th) 35 (C.A.); Lang v. Kligerman, 1998 4866 (ON CA), [1998] O.J. No. 3708 (QL) (C.A.); McIntyre Estate v. Ontario (Attorney General) (2002), 2002 45046 (ON CA), 61 O.R. (3d) 257, 218 D.L.R. (4th) 193, 23 C.P.C. (5th) 59 (C.A.), revg (2001), 2001 28040 (ON SC), 53 O.R. (3d) 137, 198 D.L.R. (4th) 165, 11 C.P.C. (5th) 267 (S.C.J.); Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, 52 B.C.L.R. (2d) 160, 76 D.L.R. (4th) 256, 122 N.R. 81, [1991] 2 W.W.R. 217, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1; Occidental Chemical Corp. v. Sovereign General Insurance Co. (2002), 2002 42028 (ON CA), 157 O.A.C. 180, [2002] O.J. No. 1220 (QL) (C.A.); Society of Lloyd's v. Meinzer (2001), 2001 8586 (ON CA), 55 O.R. (3d) 688, 210 D.L.R. (4th) 519, [2002] I.L.R. Â1-4047, 13 C.P.C. (5th) 71 (C.A.), affg [2000] I.L.R. Â1-3788, 44 C.P.C. (4th) 246 (Ont. S.C.J.) (sub nom. Society of Lloyd's v. Saunders); United States of America v. Ivey (1996), 1996 991 (ON CA), 30 O.R. (3d) 370, 139 D.L.R. (4th) 570, 27 B.L.R. (2d) 243 (C.A.) [Leave to appeal to S.C.C. refused (1997), 218 N.R. 159n], affg (1995), 1995 7241 (ON SC), 26 O.R. (3d) 533, 130 D.L.R. (4th) 674, 27 B.L.R. (2d) 221 (Gen. Div.) Statutes referred to Criminal Code, R.S.C. 1985, c. C-46, s. 347 Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20

Gino Morga, Q.C., for respondent. David M. McNevin, for appellant. [page228]

MACPHERSON J.A. (MOLDAVER J.A. concurring): --

A. Introduction

[1] The leading case dealing with the enforcement of foreign judgments is Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, 76 D.L.R. (4th) 256 ("Morguard"). The overarching theme of the decision is that in a mobile global society it is both necessary and desirable that governments and courts respect the orders made by courts in foreign jurisdictions with comparable legal systems.

[2] Morguard addressed the enforcement of a court order across Canadian provincial boundaries. However, its rationale has been extended to the enforcement of orders made by courts in foreign countries, including the United States: see, for example, United States of America v. Ivey (1996), 1996 991 (ON CA), 30 O.R. (3d) 370, 139 D.L.R. (4th) 570 (C.A.); Beals v. Saldanha (2001), 2001 27942 (ON CA), 54 O.R. (3d) 641, 202 D.L.R. (4th) 630 (C.A.); and Occidental Chemical Corp. v. Sovereign General Insurance Co. (2002), 2002 42028 (ON CA), 157 O.A.C. 180, [2002] O.J. No. 1220 (QL) (C.A.).

[3] The general proposition that foreign judgments should be enforced by Canadian courts admits of some important exceptions. The leading Ontario case dealing with these exceptions is probably Four Embarcadero Center Venture v. Kalen (1988), 1988 4828 (ON SC), 65 O.R. (2d) 551, 27 C.P.C. (2d) 260 (H.C.J.), in which Henry J. enumerated five such exceptions, including, at p. 571 O.R., the rule that a foreign judgment would not be enforced if its enforcement would be contrary to public policy in Ontario.

[4] This appeal involves an attempt by a successful party in an action in the state of Michigan to enforce its judgment in Ontario against an Ontario resident. The Ontario resident resists the enforcement on the basis of the public policy exception to the general rule of enforceability. Specifically, he submits that enforcement of the judgment of the Michigan court should be rejected because the judgment is predicated on an agreement that charges a criminal rate of interest contrary to s. 347 of the Criminal Code, R.S.C. 1985, c. C-46.

B. Facts

(1) The parties and the events

[5] The appellant, John Yates, is a Canadian resident who lives near Windsor, Ontario. He entered into a business partnership with two Michigan residents, Andrew Soley and Leonard Norwood, for the purpose of building a golf course in Michigan. The three partners incorporated a company known as Golf Club of [page229] Michigan ("Golf Club"). The golf course was completed, and opened for business, in 2001.

[6] Shortly after opening the course, Golf Club required additional financing for the purchase of a GPS tracking system for its golf carts. The corporation executed a Lease Agreement with Equipment Leasing Specialists, Inc. ("ELS") to obtain the necessary financing. Yates, Soley and Norwood signed personal guarantees to secure the loan.

[7] The GPS equipment was purchased for $207,915.75 (U.S.) by ELS from a Florida company known as ParView. The Lease Agreement provided for 51 monthly payments of $5,565. Golf Club made five payments and then defaulted in November 2001.

[8] In February 2002, the respondent Great America Leasing Corporation ("GALC"), which had become an assignee of the Lease Agreement, commenced an action in Michigan against Golf Club, Soley, Norwood and Yates.

[9] The appellant, through Michigan counsel, filed a Notice of Appearance, an Appearance and an "Answer and Affirmative Defenses" document in the Michigan action. One of his "affirmative defenses" was: "Interest and other fees claimed by Plaintiff are usurious."

[10] GALC brought a Motion for Summary Judgment, supported by a ten-page brief of fact and law, with relevant documentation attached. Yates filed no responding material.

[11] The Honourable George E. Woods of the United States District Court for the Eastern District of Michigan (Southern Division) granted summary judgment against all of the defendants. He released a six-page judgment in which he addressed the arguments made by Norwood, who had filed a response to GALC's motion. With respect to the other three defendants, Judge Woods held:

As to Defendants Golf Club of Michigan, Andrew G. Soley and John Yates, the Court observes that Rule 56(e) provides in relevant part that when the adverse party fails to respond"summary judgment, if appropriate, shall be entered against the adverse party." Fed.R.Civ.P. 56(e). Here, Plaintiff has satisfied the Court that summary judgment is appropriate.

[12] The formal order of the Michigan court gave judgment against the four defendants for "$354,192.95, which includes $267,476.29 on the accelerated lease amount, including costs and accrued late charges, as well as attorney fees in the amount of 33.33 [per cent] of the balance, or $86,716.66."

[13] Yates did not appeal the Michigan judgment and the time for commencing an appeal has expired. [page230]

(2) The Ontario proceedings

[14] GALC brought an action in Ontario seeking to enforce the Michigan judgment against Yates and moved for summary judgment. Yates brought a cross-motion seeking (1) leave to amend his Statement of Defence; and (2) a stay of GALC's action.

[15] Patterson J. dismissed Yates' cross-motion and granted judgment in favour of GALC. The motions judge stated:

In the case at hand, there was default, a demand was made of the amount owing, an action was started in Michigan, a defence and appearance was filed by Mr. Yates. A summary judgment application was subsequently made to which Mr. Yates did not attend, though properly notified. The summary judgment was granted with full reasons being provided by the Michigan court and are before me.

[16] The motions judge then addressed Yates' main substantive argument, namely, that "the legal fees, when included with the interest being claimed after default, results in a Criminal Code offence in Canada, being in total over 60 per cent." He rejected this argument on the basis that the provision relating to legal fees was a term of the lease which Yates had signed and that contingency fees were legal in Ontario following the decision of this court in McIntyre Estate v. Ontario (Attorney General) (2002), 2002 45046 (ON CA), 61 O.R. (3d) 257, 218 D.L.R. (4th) 193 (C.A.). Accordingly, he concluded: "I do not believe there are public policy grounds, why this foreign judgment should not be the basis of a summary judgment in Ontario."

[17] The appellant appeals the judgment of the motions judge.

C. Issue

[18] The issue on appeal is whether the motions judge erred by granting summary judgment to enforce the Michigan judgment in Ontario against the appellant.

D. Analysis

[19] The appellant contends that the enforcement of the judgment of the Michigan court would be contrary to public policy in Ontario because the Lease Agreement in effect establishes a criminal rate of interest.

[20] It is important to place the appellant's defence in its proper context. As expressed by Feldman J.A. in Society of Lloyd's v. Meinzer (2001), 2001 8586 (ON CA), 55 O.R. (3d) 688, 210 D.L.R. (4th) 519 (C.A.), at p. 719 O.R.:

To determine whether enforcement of the particular judgment would be contrary to the public policy of Ontario, the court must consider the historical and factual context of the proceedings which led to the granting of [page231] the judgment, and where there are competing public policy imperatives, whether overall, registration would be contrary to public policy.

[21] In my view, the historical and factual context which led to the granting of the judgment in the present proceedings is grounded almost entirely in the state of Michigan in terms of both the underlying commercial activity and the litigation that resulted from that activity.

[22] The underlying commercial activity was the construction of a golf course and the operation of a golf club in Michigan. To pursue this activity, a company was incorporated in Michigan. The three principals of the company were two Michigan residents and an Ontario resident.

[23] The specific commercial action which ultimately gave rise to the litigation was the execution of a Lease Agreement for a GPS tracking system for the company's golf carts. The Lease Agreement contained a provision that it was to be "governed and interpreted by the laws of the State of Michigan". The appellant provided a personal guarantee in support of the Lease Agreement. He gave a Detroit address on this document. The guarantee also contained a provision relating to judicial forum and applicable law:

Law and Judicial Forum that apply: This agreement is governed by Michigan Law. The Guarantor agrees that any legal action or proceeding against it with respect to any of its obligations under this Guaranty may be brought in any court of the State of Michigan or of the United States of America for the Eastern or Western District of Michigan, as the Lessor in its sole discretion may elect. By the execution and delivery of this Guaranty, the Guarantor submits to and accepts, with regard to any such action or proceeding, for itself and in respect of its property, generally and unconditionally, the jurisdiction of those courts. The Guarantor waives any claim that the State of Michigan is not a convenient forum or the proper venue for any suit, action or proceeding.

[24] Turning to the litigation, the respondent commenced its action in the Michigan courts, as it was entitled to do by the Lease Agreement and the guarantee. The appellant retained a Detroit attorney who filed a Notice of Appearance and an Appearance on his behalf. A week later, the attorney filed an "Answer and Affirmative Defenses" document. Importantly, one of the "affirmative defenses" relied on by the appellant was the following: "Interest and other fees claimed by Plaintiff are usurious". This defence also serves as the foundation for the public policy exception advanced by the appellant in the Ontario enforcement proceedings.

[25] There is no suggestion of any procedural irregularity in, or natural justice concern relating to, the Michigan court proceedings. [page232] The appellant was represented by counsel throughout the proceedings, received proper notice of each step and actually participated at some stages. However, in the end, he chose to let the case proceed by way of summary judgment against him. He also chose not to pursue an appeal to which he was entitled.

[26] There is not a single factor relating to either the commercial activity in Michigan or the Michigan litigation that suggests any impropriety in what happened to the appellant in that jurisdiction. The appellant signed the Lease Agreement and the guarantee. He knew how much the respondent was seeking in its Michigan action. He was represented by a Michigan attorney who raised the issue of usurious interest and fees in his pleadings. However, the appellant chose not to develop this submission before the Michigan court for reasons that are not apparent.

[27] In Beals v. Saldanha, Doherty J.A., at p. 653 O.R., articulated the need to guard against this situation: "defendants who choose not to participate in the foreign proceedings, unlike those who do participate, will be able to relitigate the merits of the foreign proceedings in the action to enforce the foreign judgment."

[28] That is the situation in this case. The court proceedings in Michigan were open and fair. The trial judge wrote a full set of reasons dealing with the submissions (from Norwood) before him. Accordingly, having regard to the principle of comity, his judgment is entitled to respect in Ontario.

[29] In terms of the substance of the Michigan judgment, I am not satisfied that the appellant has met the evidentiary burden on him to present evidence capable of supporting his defence based on s. 347 of the Criminal Code or the Unconscionable Transactions Relief Act, R.S.O. 1990, c. U.2. Apart from bald statements and speculative assertions, the evidence falls short of showing that the Lease Agreement in issue even comes within the ambit of s. 347 of the Code, let alone offends it. Likewise, apart from speculation, it does not show that the Lease Agreement offends against the provisions of the Unconscionable Transactions Relief Act or that it is otherwise so patently unfair or unconscionable that enforcement of the judgment would conflict with the essential moral values of Canadian society: See Boardwalk Regency Corp. v. Maalouf (1992), 1992 7573 (ON CA), 6 O.R. (3d) 737, 88 D.L.R. (4th) 612 (C.A.), at p. 742 O.R., per Carthy J.A.

[30] In the end, having regard to the historical and factual context of the proceedings and the substance of the Michigan judgment, I am not persuaded that there is a genuine issue that would call into question the enforcement of the judgment on public policy grounds. [page233]

E. Disposition

[31] I would dismiss the appeal with costs fixed at $9,000 inclusive of disbursements and GST.

[32] BORINS J.A. (concurring): -- I have read the reasons of my colleague, MacPherson J.A., and while I agree that this appeal must be dismissed, I differ substantially from him in how I reach that outcome. While I am in substantial agreement with paras. 29-30, I have reservations respecting my colleague's analysis and conclusion in paras. 20-28. As I read the decision of this court in Society of Lloyd's v. Meinzer (2001), 2001 8586 (ON CA), 55 O.R. (3d) 688, 210 D.L.R. (4th) 519 (C.A.), at pp. 712-20 O.R., it appears that the law is unsettled in respect to the circumstances in which the court will decline to enforce a foreign judgment on the basis of a public policy exemption. As I am able to decide this appeal by the application of a different analysis, I prefer not to express an opinion on the public policy exemption.

[33] This is an appeal from a summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 enforcing a Michigan judgment. Applying the well-settled Rule 20 analysis outlined by this court in such cases as Hi-Tech Group Inc. v. Sears Canada Inc. (2001), 2001 24049 (ON CA), 52 O.R. (3d) 97, 4 C.P.C. (5th) 35 (C.A.), I am satisfied on the record in this case that the respondent has established that there is no genuine issue for trial. On this ground alone, I would dismiss the appeal.

[34] In reaching my conclusion, I have assumed that a foreign judgment that is contrary to the public policy of the domestic forum may not be recognized or enforced by that forum. I have also assumed that a foreign judgment predicated on an agreement that charges a criminal rate of interest within the meaning of s. 347 of the Criminal Code may be encompassed by the public policy exemption. Further, I have assumed that it is at least arguable that s. 347(1) may apply to the agreement on which the Michigan judgment is predicated. For the purpose of this appeal, therefore, the issue is whether the appellant provided evidence that the Equipment Lease Agreement on which the Michigan judgment is predicated provides for the advancement of credit to Golf Club, and if so, whether the cost of the credit advanced results in an effective annual rate of interest that exceeds sixty per cent.

[35] In para. 30 of Hi-Tech, Morden J.A. referred with approval to the Rule 20 analysis to be undertaken by the court on a motion for summary judgment described by this court in Lang v. Kligerman, 1998 4866 (ON CA), [1998] O.J. 3708 (QL) (C.A.), in para. 9: [page234]

The authorities are clear that the onus is on the moving party to establish that there is no genuine issue for trial with respect to a claim or defence. There is no onus on the responding party. However, where the evidence presented by the moving party prima facie establishes that there is no genuine issue for trial, and the moving party is entitled to summary judgment as a matter of law, to preclude the granting of summary judgment the responding party assumes the evidentiary burden of presenting evidence which is capable of supporting the position advanced by the responding party in its pleading. On the basis of this evidence, when considered with all the evidence before the motion judge, it will then be for the motion judge to determine whether the evidentiary record raises a genuine issue for trial.

[36] In this case, there is no doubt that before the motion judge the respondent prima facie established that there is no genuine issue for trial in respect to the enforcement of the Michigan judgment in Ontario, and that as a matter of law it was entitled to summary judgment. Before the motion judge and in this court, the appellant contended that the respondent was precluded from enforcing the Michigan judgment in Ontario on the ground that the Equipment Lease Agreement on which it was predicated engaged s. 347 of the Criminal Code. The appellant alternatively contended that the agreement resulted in an unconscionable transaction contrary to the Unconscionable Transactions Relief Act. Consequently, an evidentiary burden rested on the appellant to present evidence capable of supporting his defence based on either s. 347 of the Criminal Code or the Act.

[37] In determining whether the appellant has presented evidence that is capable of supporting his s. 347 defence, it is necessary to recognize that s. 347 creates two separate offences. Section 347(1)(a) makes it illegal to enter into an agreement or arrangement to receive interest at a criminal rate, while s. 347(1)(b) makes it illegal to receive a payment or partial payment of interest at a criminal rate: Garland v. Consumers' Gas Co., 1998 766 (SCC), [1998] 3 S.C.R. 112, 165 D.L.R. (4th) 385.

[38] Where s. 347(1)(a) is engaged, it should be narrowly construed. Whether an agreement or arrangement for credit violates s. 347(1)(a) is determined as of the time the transaction is entered into. If the agreement or arrangement permits the payment of interest at a criminal rate but does not require it, there is no violation of s. 347(1)(a), although s. 347(1)(b) might be engaged. When s. 347(1)(b) is engaged, it should be broadly construed. Whether an interest payment violates s. 347(1)(b) is determined as of the time the payment is received. For the purposes of s. 347(1)(b), the effective payment is calculated over the period during which credit is actually outstanding: Degelder Construction Co. v. Dancorp Developments Ltd., 1998 765 (SCC), [1998] 3 S.C.R. 90, 165 D.L.R. (4th) 417. [page235]

[39] In submitting that the Michigan judgment is predicated on a lease agreement that violates s. 347, the appellant does not say whether the agreement violates s. 347(1)(a) or whether the respondent has received interest at a criminal rate contrary to s. 347(1)(b). As there is no evidence that the respondent received any payment of interest, necessarily the appellant's position must be that the agreement violates s. 347(1)(a). It follows that to raise a genuine issue for trial in respect to this defence, the appellant must satisfy the evidentiary burden of presenting evidence that is capable of supporting the defence that the agreement violates s. 347(1) (a), or his alternative defence that the agreement constitutes an unconscionable transaction.

[40] "Interest" is broadly defined in s. 347(2) and, as discussed in Garland, that definition includes not only common law interest, being a price for money which accrues day by day, but also fixed payments, such as fees, commissions and penalties, which may be incurred by a borrower for the advancing of credit by the lender. As pointed out in Degelder Construction, at para. 29:

Subsection (1)(a) is violated if a credit agreement expressly imposes an annual rate of interest above 60 percent, or if the agreement requires payment of interest charges over a period which necessarily gives rise to an annual rate exceeding the legal limit. See, e.g. R. v. Duzan (1993), 1993 14700 (SK CA), 79 C.C.C. (3d) 552 (Sask. C.A.). However, if there is merely a possibility that the rate of interest could become illegal under the agreement, subs. (1)(a) is not violated.

(Emphasis in the original)

[41] In submitting that the Equipment Lease Agreement is an agreement to receive interest at a criminal rate in violation of s. 347(1)(a), the appellant has focused primarily on clause 12 of the agreement that provides, in the case of default, for payment by the lessee of accelerated rent and, if legal proceedings are taken, payment of "a reasonable attorney's fee not to be less than an amount equal to 33.3 per cent of said balance of rentals payable".

[42] In my view, an examination of the record in this case discloses that the appellant has failed to meet his Rule 20 evidentiary burden of presenting evidence capable of supporting his defences that the agreement violates s. 347(1)(a), or that it constitutes an unconscionable transaction. While it is true that in paras. 13-14 of his factum the appellant has calculated an effective rate of interest exceeding 60 per cent per annum, he failed to present any supporting evidence. As support for his interest calculations, the appellant relied on similar calculations contained in his responding affidavit. [page236]

[43] Section 347(4) of the Criminal Code provides a convenient manner of proof of an effective annual rate of interest on any credit advanced under an agreement for the purpose of a prosecution under s. 347(1) by the production of a certificate of a Fellow of the Canadian Institute of Actuaries stating that he has calculated the rate under the agreement and setting out the calculations and the information on which they are based. Although s. 347(4) applies to prosecutions under s. 347(1), there is no reason why the appellant could not have relied on a similar certificate verified by an affidavit of the actuary to meet his evidentiary burden of presenting evidence that is capable of supporting his defence that the agreement would have been unenforceable in Ontario on public policy grounds because it violates s. 347.

[44] For the foregoing reasons, I would not interfere with the summary judgment awarded by the motion judge. Accordingly, I would dismiss the appeal with costs as proposed by MacPherson J.A.

Appeal dismissed.