J. Steele Fall 2009: Freya Kodar

Debtor Creditor Relations

J. Steele → Fall 2009: Freya Kodar

Limitation Periods & Interpretation of Time

Limitation Act(be alive to limitation periods)

s. 3(3)Actions governed by limitation Period: 10 years

(a)share of an estate

(b)Trustee for fraud/breach of trust

(c)Trustee for conversion

(d)Recover property from trustee (traceable)

(e)Money from wrongful distribution of trust property

s. 3(3)(f) – on a judgment for the pmt of money or the return of personal ppty: 10 years
s. 3(4) actions not governed by limitation periodsex abuse, secured collateral,
s. 3(6) specific actions w/ 6 year limits
s.(5) – Catch All:any other action not specifically provided for by this act = 6 yrs
s. 5(1) – Confirmation – if, after limit period has begun to run, a person confirms right of action against them, time before confirmation does not count in reckoning of limit period for the action of a person having benefit of confirmation against person bound by confirmation.
s. 5(2)Confirmation and Acknowledgment: effect – restarts time clock

(a)Confirmation =

(i)Acknowledge (admits) a cause of action OR

(ii)makes a payment in respect of cause of action right or title.

(b) acknowledgement has effect

(I).whether or not promise to pay can be inferred AND

(II).whether or not accompanied by refusal to pay

(c) confirmation of cause of action to recover interest (on debt) = confirmation of debt(principal)
(d)confirmation to recover income due = confirmation of action

s.8(1)(c) – ultimate limitation = 30 yrs.
s. 9(1) – cause of action extinguished on expiry of limitation period
s.9(2) – expiration of limitation period in re cause of action specified in column 1 extinguishes ppty right in column 2
s. 11(1) – Possible actions on expiration: Despite ss. 3 and 9, on the expiration of a limitation period set by this act with respect o actions on judgment, there is an enforcement process outstanding, the JC or JC’s successors may do any of the following:

(a)continue proceedings on an unexpired writ of execution, but the writ may not be renewed
(b) commence or continue proceedings against land on a judgment registered under Part 5 of the COEA, but reg may not be renewed unless those proceedings have been commenced
(c) continue proceedings in which a charging order is claimed

s.11(2) – If ct makes order staying execution on a judgment, the running of time w/r/t the lim period set by this act for actions on that judgment is ppd or suspended as long as that order is in force.

Interpretation Act

s. 25 – Calculation of Time or Age:

(2) If falls on holiday then time extended to next non-holiday day

(3) If dealing w/ business and expiry falls on non-business day then extend to next regular business day

(4) If expressly stated as “clear days, weeks etc” don’t count 1st and last days.

(5) If not sub (4) then don’t count 1st day.

(6) If end falls on month w/ no 31st or 29th day then expiry is last day of month.

(7) All time is PST unless expressly states Daylight Saving Time

s.29 – Dispose: definition: transfer by any method – assign, give, sell, grant, charge convey, bequeath, devise, lease, divest, release or agree to do so.

Introduction

Ian Ramsay “Access to Credit in the Alternative Consumer Credit Market”

Payday loan users pay much higher interests than those allowed by law
Class actions possible against Payday Lenders under s. 347 of CCC Garland v Consumer Gas SCC
Payday lenders structure operations to avoid regulation – recommends regulation

Credit reporting

Broadly discuss credit file; what is on it, what you owe – to whom, address etc.
Consumer report must be accurate (s. 109)
Who may access consumer credit files (s.108)

Regulation of Credit Reporting Agencies

Part 6 of Business Practices and Consumer Protection Act (BPCPA)

s.107 must have consumersconsent to view file

s. 108BPCPA: Who can access file: report can only be given out where person using it deciding to issue credit or attempting to cllect debt, granting tenancy/employement, underwiritng insurance. Can also be released to govt agency, can be released to law enforcement agency.
s. 109Prohibited info:laundry list of info that cannot be included. Info not based on the most reliable evidence available, no info on legal proceeding where person is nominal defendant, where legal proceedings statute barred, where judgment 6 years or more ago, bankruptcy more than 6 yrs later, criminal/summary charges unless result in conviction, race, belief, sex-or, political affiliations etc etc.
s.110: written notice required If person who rec’s report uses report to deny credit or any benefit or to increase the cost thereof, must give written notice of denial to the subject of the report. If subject requests, must give name of credit reporting agency.
S. 24 of Privacy ActIf erroneous information in report and agency won’t fix it then Privacy Commissioner can order them to.

Haskett v Equifax(2003)(ONCA)

Facts: Debtor went bankrupt and was discharged. He applied for credit more than 6 years after d/c and was denied credit despite significant earnings and assets. Equifax disclosed information about B which was prohibited due to legislation.

Credit reporting agency argued liability would open up watershed of litigants. The Trial judge agreed and dismissed action.

Held: Court of Appeal reversed action;

No unlimited amount of litigants; only needed to get information correct to avoid liability.
Harm to P reasonably foreseeable by D
P wouldn’t be able to get proper remedies (punitive damages) by going through the complaint process.
CA stressed importance of credit in society;Equifax fiduciary.

Note: s.171 BPCPA: remedies against Credit Reporting Agencies and collectors

Note:Credit reporting agencies have minimum debt requirements; won’t accept information about unpaid parking tickets.

Criticisms:

lack of transperancy; not all jurisdictions have requirement to inform consumer when credit denied.
Vulnerable for Privacy & identity theft
All jurisdictions not harmonized – 6 year info drop-off in some, 7 in others

Financial Literacy

s. 139, 140 BPCPA allows for a fund (collected from penalties obtained under the act) to educate consumers ($95K in it at present)

Canada’s literacy(general literacy) rates are among lowest in OEC. People with low literacy levels are more susceptible to exploitation.
We have regulations are in place but no requirement to be in plain language – so may be in compliance but not comprehendible by public at large.
Term increasingly to describe more complex understanding of market and general financial management skills.
Federal gov’t developed task force on financial literacy in Canada to provide advice to minister on national strategy on financial literacy: Criticisms: gov’t cutting regular literacy programs but funding financial literacy? Neo-Con philosophy is that if you can’t retire then it’s your own damn fault and concern that gov’t dereg leads to erosion of social safety net.

Credit Cards: Part 8 BPCPA

Credit cards can only be issued on application

s. 95 (1) Credit Cards can only be issued by application
s. 97 (1) (a) Issuer must disclose interest rates,

(d) non interest charges

Payday Loans:

Criticism: Federal Gov’t investing in financial literacy education but cutting funding to basic literacy programs.
Consumer Advancement Fund: BPCPA s. 139 enablines fund
s. 140 BPCPA says that compliance with the act ($95K in fund) fund is created by penalties that are collected for infractions of the act.
Payday loan industry was not regulated until recently.
Usually people who can’t access reg bank use PD loans – vulnerable consumers: low income families, young families, renters, people unable to pay down credit card balances or behind in payments and people who already tried to pawn stuff use these places. Almost 50% did know that they were paying higher rates of interest. Manitoba public utilities board said 4.8 million payday loans issued.

s.347 CCC – criminal rate of interest

s. 347 makes it a criminal offence to enter into an agreement to charge interest in excess of 60%; PD lenders say not interest – user fees. Original leg aimed at loan sharking not PD (enacted in 1980)
Paymax(2006) is the only PD case prosecuted for criminal rate of interest.
s. 347 (7) Need consent of AG to prosecute (need egregious or unusual circumstances)
s. 347.1 (2) CCC (2007 Amendment)meant to prevent unjust enrichment. PDL’s exempt from criminal prosecution if:

(a)Loans less than62 days and less than $1500.00

(b)PDL is licensed by the province

(c)Doesn’t apply to regular banks - can’t give out these types of loans

BC Payday Lender Legislation

Comes into force Nov. 2009
All payday loan co’s have to be licenced
Max rate in BC is $23/100 – annualized this is over 60% PA
Can’t issue loan for more than 50% of expected pay check
PDL not allowed to access bank accounts

October 6

Payday Loans Con’t:

BPCPA: PART 6.1 – Pay Day Loans (Amended 2007)

S. 112.01definitions “payday loans” ; “roll-over” – same definitions as federal government.
S. 112.02cabinet authority to set limits – attempt to set limits and lump fees into limits
S. 112.04 makes sure fees & penalties are prohibited
S. 112.05(1):cancellation rights: borrower has right tocancel loan by end of next business dayby paying out principal and filling in a form.
S.112.05(3): consequences for non-advisement of cancellation rights: says if borrower not advised of cancellation rights thencan cancel at any time
s. 112. 06 required terms and disclosure:
S. 112.06(2)(k)lender must disclose total cost of loan and translate that into APR (annual Percentage rate);

(2)(p)must inform borrower this is a “high cost loan”
(2)(q)Cancellation rights must be in loan agreement.

S. 112.08: list of prohibited practices:
(1)(a) no rollovers
(1)(b) only 1 loan at a time
(1)(j) no assignment in wages
(1)k) no security
(1)(m) catch all

S. 112.10Remedies:bars PDL from charging more than allowed by statute – borrower entitled to immediate refund.
Store front Lendersmust have clearly visible:

2 signs need to be visible – in specific colors as well as text size;

maximum borrowing charges;
Lenders must state what they charge as well as APR;
must also include payday lender’s license number.

Internet lenders: Near the top of index must list same items as store front; must be listed over the phone as well

Payday Loan Regulations

s. 17:max allowable rate is (23%)of principal;max default allowable is 30% per year

Note: if you annualize the original interest rate it would be over 60% but this is capped at 30% if borrower defaults

S. 18payday loan for more than 50% of borrowers pay is prohibited.
S. 21(3)Bank account’s off limitslendersbarred from accessing borrowers bank account (other than preauthorized debit); also can’t give out prizes for entering into loan.
S.23 (2)On 3rd loan in 62 days lender has to spread repayment over 3 pay periods.
Money Mart is the largest payday loan lender in Canada.

Regulation of Debt Collection:

Lawyers – Professional Conduct

Ch. 8 Rule 12.1 Professional Handbook prohibits contact with witnesses who are represented (have to go through lawyer).
Ch. 4 Rule 2: Can’t threaten prosecution, bankruptcy proceedings, or referral to admin authority to get payment.
Ch 13 Rule 4: can’t use competency/disciplinary committee of LSBC to threaten lawyer into paying up.
Ch 11 Rule 12: can’t seek DJ if you know the other party has sought counsel – need to call other side and tell them your client is instructing you to proceed this way.
Division6 R3-44: If Lawyer JD: Lawyer has 7 days to satisfy judgment. If lawyer fails then he/she must notify ED of Law Society in writing w/ circumstances and whether JC is former client and his/her plan to satisfy. If not ED can refer to Disciplinary Committee.

Collection Agencies:

BPCPA (2004) sets out unlawful practices w/r/t collection, that apply to ppl beyond lawyers (also applies to lawyers: “collector” = anyone attempting to collect debt
Debt collectors must be licensed by Authority.

Part 7 BPCPA (debt collection)

s. 113:Collecting defined: broad definition

s. 114(1): harassmentis prohibited
s. 114(2): harassment defined

(a)using threats or intimidation

(b)unreasonable pressure

(c)publishing or threatening to publish info about debtor

s. 115(1): Demand letter

(1)Must notify debtor in writing of debt, how much it is, who it’s owed to, authority of collector to collect it and must not attempt to collect until sent.

(2)must wait 5 days after letter before contacting debtor.

Debt Collection Industry Regulations s. 2(2) lawyers and direct creditor exempt from sending the demand letter and waiting 5 days.

s. 116(1): Communication with debtor:

(1)Must not communicate w/ debtor at work

(a)can only communicate w/ debtor at work only if collector has no home phone number or address.

(2)Can only contact once for the reason in (a)

(3)Must inform debtor amount, who the debt is with and authority of collector to collect

(4)Collector must not continue to communicate w/ debtor if

(a)Except in writing if:

(I).Debtor tells debtor to communicate in writing only

(II).Debtor has provided mailing address to collector

(b) Except via debtor’s lawyer if:

(I).Told collector to call D’s lawyer and;

(II).Provided address for lawyer, or

(c)If debtor disputes debt and tells the creditor to take debtor to court

Note: s. 2: Debt Collection Industry Regulation → s.116(4)(c)COEA does not apply to debts due government
s. 117: Can only talk to other people to get info about debtor. (2) Can only call employer if don’t have debtor’s home address and phone number, can just confirm this and employment status.
S.118:Time of communication

Can only call debtor between 7:00 AM & 9:00 PM; except Sunday bt/w 1:00 & 5:00 PM and prohibited on statutory holidays.

s. 121: Legal proceedings:

121(1)Creditor cannot bring legal proceedings unless collector has authority to do so.
s.121(2)→ where collector acting for creditor cannot recommend court action.
s. 121(4)→ Creditor cannot threaten debtor w/ court action (

(a)w/o written authority or

(b)if the action is unlawful

s. 122prohibits seizure of goods without court order

s. 123can’t provide false information, misrep purpose of communication, misrep ID of collector, or if different, the collector, fake a court do

Fines/Penalties/Remedies

Administrative Fines in s. 165 BPCPA: $5K for individual/$50K for corporation. Fines go to “Consumer Advancement Fund” which is used to inform consumers/suppliers and to improve compliance.
There is a limitation period for imposition of fine under the BPCPA of 2 yrs, starting at the moment of the contravention
s. 171 BPCPA allows you to bring an action against supplier, debt collector who has violated the act. BC Provincial Court has jurisdiction unders.171(3). If bringing an action under the section, must notify Director (s.173).

Total Credit Recovery v Roach (2007)

Facts: D didn’t inform P of debt (s.115); D called P at work, sent faxes, called P’s boss; P told D not to contact her at work. D finally called P’s work said “it’s urgent” P called out of important meeting P finally sued. TJ awarded damages for injury to reputation.

Held: Harassment under regulation established. Not enough evidence to establish damage to reputation. Awarded cost in amt of debt owed creditor.

Established guidelines for collection practices
If put undue pressure on debtor then liable
Judge hammered D b/c said was trying to technically abide by law but blatantly wasn’t.

If assisting debtor harassed by collectors:

Deliver in writinga proposal to resolve the debt
Inform the creditor that debtor doesn’t want direct contact
Inform debtor you will update them on status
Tell debtor to keep records of contact
Tell debtor to file complaint w/ BPCP Authority

Rarely imposes penalties (but can); record isn’t good: 1 compliance order in 60 investigations of debt collectors

Can also involve Crown Counsel if extreme harassment

Obtaining Judgment:

When exhausted all avenues…
Can be executed against property or income
First Step:Always check the limitation periods

Most debt claims are in K → s. 5 LA = 6 years
Judgment is good for 10 years s.3.3(f)
s.11(a)LA: judgment creditor can enforce unexpired writ of execution but 10 year limitation period won’t be renewed

Note: any judgment from a jurisdiction outside of BC is a “foreign”judgment

Default Judgment:

Rules17 and Rule 25 BCSC Rules (3-8(11))new Rules) / Rule 6 Small Claims Rules (up to $25K)

Where D fails to respond to P’s claim
Only for debts and liquidated damages (R 17(5) if un-liquidated can still file for judgment and assess damages later)
Counsel representing creditor has responsibilities: unprofessional to file for DJ if you know other side is represented without giving a warning first UNLESS expressly instructed to do so by your client (Ch 11 R 12 BC Prof Conduct Handbook)
Can proceed in ProvCt or BCSC only if liquid damages (can’t if damages need to be assessed)
Must file proof of service before proceeding under DJ (R 17(2))

DJ can be set aside on 2 grounds (Rule 25(15)/3-8(11)):

Procedural Defect – absolute right of D, D not required to show a defense.

Examples:

Defects in service; claim is not for liquidated damages/debt, where amount claimed exceeds court’s jurisdiction).
Bache Halsley Stuart Shields v Charles Estate – DJ set aside for procedural defect – D had no knowledge of possibility of DJ, especially as was unrepresented; court cited Marsh v Marsh (1945) A.C. 271 “a nullity is an irregularity which causes a failure of natural justice.” D was deprived of his right to be heard and this violated “natural justice”

Discretion of Ct, if meets 3 part test from Miracle Feeds:

D did not deliberately fail to appear / file defence
D made application to set aside DJ ASAP
D has meritorious defence (i.e. worthy of argument)
In Miracle Feeds, applicant had bad legal advice; no defense filed; told did not have meritorious defense; no attempt to void DJ; did have meritorious defense as claim ambiguous;New lawyer acted to get DJ set aside.

Summary Judgment: (Rule 18A BCSCOld Rules)(Rule 9-6 New Rules)

Judgment without trial
P just needs to show that judgment in P’s favor is obvious
D needs to show there is some issue that can only be resolved by trial

Available when there is no defense and no triable issues

Often used by Ds
Applicant must show that judgment in its favor obviously justified
American Buildings – D successfully applies for SJ because P’s claim has no merit – P had signed release for amount they were attempting to sue on, so no triable issue.

Summary Trial(R 18A BCSC Old Rules; Rule 9-7 New Rules)

If there are triable issues, R18A Summary Trial allows judgment based on affidavit evidence.

Principles to consider in whether to grant ST (MacMillan v. Kaiser)(2004)(BCCA)

1)conflict of evidence / issues of credibility → NO BAR solely b/c of conflicting affidavits

2)whether ct gan achieve a “just and fair result” by proceeding summarily

3)consider: amt involved, complexity, urgency, prejudice if ST not granted, cost of conventional trial v. amount in issue, course of proceedings