Executive Summary: Key Legal and Evidentiary Issues

• The appeal concerned whether a loan agreement provided for simple or compound interest on an outstanding debt.
   
• Guarantors Sit Kin Cheung and Gregory Wong cross-appealed on the basis that promissory estoppel or a collateral agreement should have frozen interest and penalty obligations.
   
• Counsel for Edward Eng had abandoned the penalty clause and legal-cost claims during the trial, which the Court of Appeal found binding on his client.
   
• Contractual interpretation of the loan's interest provisions was reviewed on a standard of palpable and overriding error.
   
• New arguments raised for the first time on appeal, including promissory estoppel and collateral agreement, were found unsuitable for determination given the incomplete evidentiary record.
   
• Ultimately, the Court of Appeal upheld the trial judge's costs award and interest findings, dismissing both the appeal and cross-appeal.
   

Facts of the case

Edward Eng loaned $15,000 to Canada Construction Lift (2009) Ltd. ("CCL") on May 10, 2011, with Sit Kin Cheung and Gregory Wong acting as personal guarantors. The loan agreement, drafted by Mr. Eng, set a repayment deadline of August 11, 2011, an interest rate of 6% per annum on the principal term, a $7,000 late-payment penalty, and a 24% per annum interest rate on any unpaid balance thereafter. The loan was not repaid by the deadline. Mr. Sit repaid $5,000 in October 2011, leaving a $10,000 balance outstanding. Mr. Eng commenced a small claims action in January 2013, later transferred to the Supreme Court of British Columbia in 2018. At trial in 2024, Mr. Eng sought approximately $238,000, reflecting the outstanding balance plus compound interest at 24% annually. The trial judge found the guarantors jointly and severally liable for the $10,000 balance but concluded that the loan provided for simple, not compound, interest, and ordered costs at Scale B in favour of the defendants.

Policy and legislative provisions at issue

The central contractual provision was paragraph (b) of the loan agreement, setting an interest rate of "6% p.a.," alongside the clause stating that "the interest charged on any unpaid balance on the loan, including interest and any other costs as stated above, will be charged at the interest rate of 24% p.a." Also at issue was the penalty clause, which provided for "Penalty in the sum of $7,000.00 as late payment penalty" if the loan was not repaid by August 11, 2011, and paragraph (d), under which the guarantors agreed to cover "full cost of collection, including 100% recovery of legal fee the lender may incur in the collection of the loan, interest, penalty, collection and legal costs, etc." Mr. Eng's counsel had abandoned pursuit of the penalty clause and the legal/collection costs claim at trial, which the Court of Appeal treated as determinative of those issues on appeal.

Reasoning and analysis

The Court of Appeal found no basis to revisit the abandonment of the penalty clause or collection-cost claims, since Mr. Eng's trial counsel had explicitly confirmed those claims were not being pursued, and the judge was entitled to rely on that representation. On the question of simple versus compound interest, the court applied a palpable and overriding error standard, noting that Mr. Eng, as drafter of the agreement, had failed to specify compounding despite having the opportunity to do so. The court agreed with the trial judge's reliance on the three-month original repayment term as inconsistent with an intention for annual compounding, and rejected Mr. Eng's argument that repeated use of the word "interest" in the agreement implied compound interest. On costs, the court held that Mr. Eng could not challenge the Scale B award on appeal, particularly since he had never made submissions on costs despite being invited to do so, and noted that his primary claim (compound interest) had been unsuccessful at trial. Regarding the cross-appeal, the court declined to consider promissory estoppel or collateral agreement, doctrines never pleaded or argued at trial, finding the evidentiary record insufficiently developed to decide these new issues in the interests of justice.

Ruling and overall outcome

The Court of Appeal dismissed both the appeal and the cross-appeal, upholding the trial judgment in its entirety. The respondents, Mr. Sit and Mr. Wong, along with Canada Construction Lift (2009) Ltd., succeeded in defending the trial outcome, which held them liable for the $10,000 outstanding loan balance plus simple interest calculated in three periods (6% on $15,000 from May to August 2011, then 24% simple interest on $15,000 and later $10,000 through to judgment), with costs at Scale B awarded in the defendants' favour. No single consolidated monetary figure for the interest-inclusive total is stated in the decision.