Executive Summary: Key Legal and Evidentiary Issues

• Steers Group Limited sought pre-judgment contractual interest at 24% per annum on a $30,839.06 debt despite delaying prosecution of its action for over eight years.

• The Wellons signed a Credit Application and Agreement on behalf of BCL and a Personal Guarantee in their personal capacity, both providing for a 2% monthly service charge on overdue accounts.

• The Court examined whether it possesses common law and equitable jurisdiction to depart from awarding contractual interest to a successful party.

• Reliance on Tribute (Springwater) Limited v. Atif and Bank of America Canada v. Mutual Trust Co. established that "special circumstances" justify departure from contractual interest rates.

• Patricia Wellon, appearing on her own behalf, stated she did not believe contractual interest should be paid and that there was no money to pay it, but offered no formal evidence or submissions at trial.

• Contractual interest was limited to a two-year period, with statutory pre-judgment interest applying thereafter, to prevent rewarding the Plaintiff for its litigation delay.

The credit arrangement between Steers and Blackwood Contractors

Steers Group Limited ("Steers"), engaged in the wholesale and distribution of, among other things, plumbing and heating products, sells to building contractors, installers and retail stores. Blackwood Contractors Limited ("BCL"), a contractor, entered into a Credit Application and Agreement with Steers on November 18, 2009. In it, BCL requested credit of $50,000. The agreement's credit terms, which were bolded and underlined, stipulated that invoices were payable net 30 days from the date of invoice and that invoices not paid in accordance with the credit terms were in default and subject to a 2% service charge per month, or an annual equivalent rate of 24%. Patricia Wellon and her husband, Brian Wellon (since deceased), signed the terms and conditions on behalf of BCL. On the same date, Patricia Wellon and Brian Wellon signed a Personal Guarantee, agreeing to be jointly and severally liable with BCL, as principal debtors and not as sureties, for the due payment of all monies payable to Steers, including all service charges of 2% per month or 24% per annum on amounts owing for more than 30 days.

The outstanding debt and default

Between June and November 2012, Steers sent six invoices to BCL totalling $35,453.98. The largest invoice, dated June 6, 2012, was for $29,391.30 in relation to a special order for two water heaters, which were non-stock items that Steers purchased from a third party in order to fill BCL's order. The principal amount ultimately established at the previous summary trial as owing was $30,839.06. Steers' solicitors (not present counsel) wrote a demand letter to BCL on November 9, 2012, providing formal notification that unless the account of $35,741.36 was paid in full within ten days, Steers would proceed with legal action claiming the amount outstanding, interest thereon, and costs.

The prolonged litigation and delay

Steers issued its Statement of Claim on May 14, 2013. The Defendants filed their Defence on June 10, 2013, denying the claim and putting Steers to strict proof. Patricia Wellon pleaded non est factum, duress and lack of consideration in relation to the claim against her on the Personal Guarantee. Steers filed its List of Documents on June 27, 2013 but took no further steps in the litigation until November 24, 2020, when its current solicitor filed a Notice of Change of Solicitor and a Notice of Intent to Proceed. Steers subsequently filed an application for summary trial on September 17, 2021 — more than eight years after its last substantive step. Allan Kendall, a director and manager of Steers, testified at trial and quite candidly acknowledged that the action did not progress because "life got in front of us." He stated there was renewed interest in the action when Steers learned from a collection agency that other creditors of BCL had been paid in 2018 or 2019. After several procedural delays — including a failure by Steers to serve notice of the hearing on the Defendants and adjournments to allow Patricia Wellon an opportunity to seek legal advice — the summary trial application was heard on March 7, 2023. Judgment of $30,839.06 was granted on April 28, 2023.

The contractual interest dispute

While Steers had claimed entitlement to contractual interest, the Court did not grant judgment on the contractual interest claim at the summary trial. At the time of that hearing, the contractual interest claim stood at $79,230 on a principal amount owing of $30,839.06. The Court held that the lengthy period that Steers' action had lain dormant, taken together with the disproportionate size of the contractual interest claim, gave rise to a genuine issue for trial which had not been fully addressed and argued. Steers was granted leave to set the matter down for trial on this issue. That trial was subsequently held on December 10, 2024. Steers submitted that the contractual rate was commercially reasonable for an unsecured credit account and that courts routinely order contractual interest as part and parcel of their function in relation to enforcement of contracts. BCL was not represented at the trial and provided no evidence. Patricia Wellon attended the trial but did not give evidence and did not file or make submissions, other than to state that she did not believe that she or BCL should have to pay contractual interest and that there was no money to pay it in any event.

The Court's analysis of its authority

Justice Johnson examined whether the Court had the authority to decline to award contractual interest to a successful party. The Newfoundland and Labrador Court of Appeal in St. John's (City) v. Coady Construction and Excavation Ltd., 2005 NLCA 68, had indicated that a court could depart from awarding contractual interest, stating it would be "a highly unusual circumstance" where the successful party should not be entitled to interest at the agreed upon rate, but did not elaborate on the source of that authority or what would constitute such a circumstance. The Ontario Court of Appeal in Tribute (Springwater) Limited v. Atif, 2021 ONCA 463, subsequently addressed this, finding that the statutory discretion provisions are not exhaustive of the court's discretion. Justice van Rensburg held that in the exercise of the court's common law and equitable jurisdiction, the departure from a contractual rate of interest can be justified by "special circumstances." Justice Johnson adopted this reasoning and held that the Act in s. 3(3) is not exhaustive of the Court's discretion, and that a departure from contractual interest can similarly be justified by special circumstances under this Court's common law and equitable jurisdiction.

The ruling and outcome

Justice Johnson held that Steers' delay in prosecuting its action was excessive and constituted special circumstances justifying a departure from contractual interest. After filing its List of Documents on June 27, 2013, Steers took no further substantive steps in the litigation for more than eight years until it filed an application for summary trial on September 17, 2021, during which contractual interest was accruing at 24% per annum. The Court emphasized that there was no duty upon the Defendants to bring the matter to trial; the onus lies with a plaintiff. Steers let its action languish for years, and awarding contractual interest for the full period from default to judgment would lead to inequity and reward Steers financially for delaying the litigation. However, the Court did not totally deny contractual interest but limited the period to which it would apply. Steers was awarded pre-judgment interest on the judgment amount of $30,839.06 at the contractual rate of 2% per month (not compounded) from the date of default on November 9, 2012 to November 9, 2014, and pre-judgment interest pursuant to subsection 3(1) of the Judgment Interest Act from November 10, 2014 to the date of judgment on April 28, 2023. Steers was also awarded its costs of the trial taxed on Column III of the Scale of Costs in the Appendix of Rule 55 of the Rules. The exact total monetary amount inclusive of interest was not specified in the decision.