CREDITOR-DEBTOR RELATIONSHIP - Interest - Rate

Law360 Canada (November 9, 2022, 6:36 AM EST) -- Appeal by the plaintiff Century Services Corp. (Century) from the trial judge’s decision to exercise an equitable jurisdiction to decline to calculate interest on the redemption amount at the contractual interest rate. To assist with the financial restructuring of her husband’s company (TLT), the defendant LeRoy provided a guarantee to Century, secured by a mortgage on LeRoy’s home. TLT defaulted under the new loan agreement, went into Companies’ Creditors Arrangement Act proceedings, and then bankruptcy. Century made demand to LeRoy under her guarantee and notified her of its intention to enforce the mortgage. More than 13 years later, the amount required to redeem under the order nisi was still the subject of contention. TLT appointed Price Waterhouse Coopers (PWC) as a private receiver. Eventually, the Court approved the holding of a public auction of various items of logging equipment as part of the liquidation of TLT’s business. PWC supervised the auction, which netted proceeds of over $9 million. When the time came for an order nisi to be issued in the foreclosure action against LeRoy, she contended that the sale had been carried out negligently and that certain charges had been improperly made by Century to TLT’s loan account. She argued that those circumstances prevented her from knowing the amount of her liability and the amount necessary to redeem the mortgage. The trial judge found that LeRoy had established that Century had never intended to administer the loan in accordance with the loan agreement but had impliedly made a representation to her that it would do so. LeRoy had relied on the implied representation in agreeing to provide her guarantee. The trial judge ruled that the representation was a fraudulent misrepresentation that vitiated the guarantee and rendered the mortgage unenforceable. Century successfully appealed, and this Court declared that the guarantee was enforceable. Subsequently, the trial judge purported to exercise an equitable jurisdiction that permitted her to decline to calculate the redemption amount at the contractual interest rate of 24 per cent per annum, compounded monthly. Instead, she found that the redemption amount was $378,000 and that interest should be calculated on that amount at prejudgment rates payable under the Court Order Interest Act, from February 26, 2009 to the date of the judge’s 2021 reasons, and at the contractual rate thereafter. Century took the position that the trial judge erred in several ways, including by finding Century vicariously liable for the actions of TLT’s consultant and a court supervised Monitor/Receiver. Century further submitted that the trial judge erred in finding that the Court could deny contractual interest rates to a lender based on its purported moral culpability and on the facts of this case....
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