Supreme Court of Canada
Hossack v. Shaw, (1918) 56 S.C.R. 581
Date: 1918-06-25
Donald C. Hossack and Lucinda E. Hossack (Defendants) Appellants;
and
John E. Shaw and Frank E. Shaw (Plaintiffs) Respondents.
1918: June 17, 25.
Present: Sir Charles Fitzpatrick, C.J., and Idington, Anglin, Brodeur JJ. and Cassels J. (ad hoc).
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Contract—Loan of money—Interest at specified rate “until paid”—Maturity of loan—Payment of interest after maturity.
Where a contract is made for the loan of money “with interest at 2½ per cent. per month till paid” the borrower is not obliged to pay interest at said rate after maturity of the loan.
Payment of interest at such rate after maturity is voluntary and the excess over the statutory rate cannot be recovered back.
Judgment of the Appellate Division (40 Ont. L.R. 475), reversing that on the trial (39 Ont. L.R. 440), reversed in part.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario, reversing the judgment at the trial, in favour of the defendants.
The appellants gave promissory notes for money borrowed from respondents agreeing to pay interest at the rate of 2½ per cent. a month. In an action on the notes two defences were offered, that the respondents were money-lenders and the transaction was harsh and unconscionable and therefore void under the Dominion or Ontario “Money-Lenders Act.” The Supreme Court held that they were not money-lenders and these Acts did not apply.
The second ground of defence was that in any case
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the rate of 2½ per cent. a month would only govern until maturity of the notes.
The trial Judge held, that respondents were money-lenders and the transaction harsh and unconscionable. The Appellate Division, reversed his decision and gave judgment against appellants for the full amount claimed.
J.M. Ferguson and Coffey for the appellants.
A.A. MacDonald and W.J. McCallum for the respondents.
THE CHIEF JUSTICE.—I am of opinion that this appeal should be allowed in part and the judgment modified as stated by Mr. Justice Anglin.
IDINGTON J.—At the close of the argument of counsel for appellant the substantial part of the appeal was held untenable.
He failed to establish either that respondents were money-lenders within the meaning of the Ontario “Money-Lenders Act,” R.S.O., [1914] ch. 175, or that the rate of two per cent. per month for such loans as in question could be held harsh and oppressive within the meaning of section 4 of said Act, even if it is applicable to transactions, between a borrower and another not such a money-lender, that fall within the meaning of the Act.
The appellants’ counsel took, however, the further point that the contracts in question did not provide for such an excessive rate of interest as two per cent. per month after maturity.
As to so much of said interest at said excessive rate as was paid (if any) in respect of interest falling due
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after maturity, the payments must be held to have been voluntary, and hence not recoverable or to be interfered with in the accounting.
Beyond the date of maturity, or time after maturity up to which interest may have been paid, and up to the signing of judgment for the principal, the rate should only be computed at the rate of five per cent. per annum unless a higher rate clearly is stipulated for in the respective contracts in question.
The $2,500 note bore no rate of interest as expressed on its face and such contract as existed relative thereto does not seem to extend to renewals of which that sued on seems to have been one of many.
The same would seem to hold good of the two smaller notes sued upon.
The note for $950 reads at end thereof; “Int. 2% per mo. till paid.” It is dated 22nd November, 1915. There appears in the case a letter of 22nd July, 1915, which refers no doubt to the original note for same loan which expressly provides for interest at the rate of two per cent. per month until paid, but I cannot see how that can be extended to renewals, for it is not so expressed.
The note sued on therefore must in such case stand on what it expresses. It has been held that such like expressions mean, primâ facie, when due but this note is on demand. And the evidence shews such demand was made within a few days after given.
A moderate rate of interest even exceeding the rate of five per cent. per annum might well be held as extended beyond the due date when coupled with later payments at such moderate rates but that reasoning from conduct does not extend to such an excessive rate as two per cent. per month. See Leake on Contracts,
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(4th ed.), p. 784, and cases there cited, also cases of St. John v. Rykert, and The Peoples Loan and Deposit Co. v. Grant, cited by appellants’ counsel in argument.
I conclude, therefore, that if the sum of $452.22 allowed by the Appellate Division is based, as claimed and not denied, upon the computation of interest at two per cent. per month on any of these several contracts there is an error in the judgment which should be rectified by a computing of the rate of interest at five per cent. per annum from the respective dates thus in question up to which the appellant had paid interest, down to the date when judgment was entered for the principal sum.
If the parties cannot agree as to the result of such computation the matter should be referred to the registrar to determine the amount.
The appeal to that extent should be allowed and the judgment appealed from reformed accordingly.
The appeal having failed in its main object, I cannot say there should be costs thereof allowed, but think under all the circumstances there should be no costs to either party here or in the Court of Appeal.
ANGLIN J.—The defendants in my opinion have failed to establish that
having regard to all the circumstances the cost of the loan(s) is excessive (or) that the transaction(s) (are) harsh and unconscionable
within the meaning of s. 4 of the Ontario “Money-Lenders Act” (R.S.O., ch. 175).
The male defendant is a solicitor and real estate dealer of considerable experience and is a most unlikely person to be the victim of a “harsh and unconscionable” bargain. He was in a position to know whether the
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rate of interest was or was not excessive, having regard to the conditions of the money market during the currency of the loans. Presumably he would also know the nature and value of such securities as he had to offer, and would appreciate the risk which the lender was taking. A perusal of the evidence does not enable me to say that the Appellate Division erred in finding that a case within section 4 of the “Money-Lenders Act” has not been made out.
The contention that the respondents were “money-lenders” within the meaning of either the Ontario “Money-Lenders Act” or of the “Dominion Interest Act” (R.S.C. ch. 122) is still more hopeless. There is no evidence whatever to support the suggestion that they carried on money lending as a business.
But on another branch of the appeal I think the plaintiffs are entitled to some relief. A stipulation for interest at a certain rate on a loan “until paid” is established by a long series of cases, of which it is needful to refer only to St. John v. Rykert, and People’s Loan and Deposit Co. v. Grant, in this court, to import a contract to pay interest at the specified rate only until the maturity of the loan. To carry the contract for the stipulated rate beyond the maturity of the loan explicit provision to that effect must be made. It follows that after the maturity of the several obligations taken by the plaintiffs (including any renewals which specified the rate of interest) the defendants were under no contractual liability to pay interest at the high rate agreed upon. They were liable only for the statutory rate of 5%.
But payments at the higher rate actually made cannot be recovered back. They were voluntary. If
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made under any mistake, it was a mistake of law. Union Bank v. McHugh, may be cited as a comparatively recent illustration of the application of this well-known doctrine of English law.
In respect of the periods whch have elapsed since the several dates at which the respective obligations (including such renewals as specified the rate of interest) matured, any interest unpaid can be recovered only at the statutory rate of 5%. The judgment in appeal should be modified accordingly.
In view of the divided success there should be no costs of this appeal or in the Appellate Division.
Our attention was called during the argument to what was said to be an accidental error in the judgment of the Appellate Division under which the female defendant might be required to pay $2,196 in addition to the amount recovered against her co-defendant. This was admittedly not intended and any correction necessary to limit the whole recovery to the amount for which Donald C. Hossack is found liable should be made. His co-defendant is jointly liable with him for a portion of that amount.
BRODEUR J. concurred with Anglin J.
CASSELS J. (ad hoc).—I have carefully considered the questions argued on appeal in this case. The question has resolved itself into the one question of what rate of interest should be allowed after maturity of the loans and from the date of the payments after maturity.
I have had the benefit of a perusal of the reasons for judgment of Mr. Justice Anglin, and can add nothing further to what he has stated. I concur with
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his conclusions and with the disposition of the appeal as stated in his reasons for judgment.
Appeal allowed in part.
Solicitors for the appellant, Donald C. Hossack: Day Ferguson & McDonald.
Solicitor for the appellant, Lucinda E. Hossack: D.J. Coffey.
Solicitors for the respondents: Lamport, Ferguson & McCallum.
[1913] A.C. 299; 44 Can. S.C.R. 473; 10 D.L.R. 562.
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