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The BC Court of Appeal delivered reasons in Yoshikawa v. Dilon, 2022 BCCA 18. The defendants appealed a trial decision ordering repayment of two loans.  The case, argued by Christopher Schuld and Brooke Fortugno at a summary trial, involved:

  • the court’s finding of the existence of a valid forebearance agreement between parties extending the deadline for repayment of a promissory note, and
  • reading down a contractual penalty clause so that it did not run afoul of the criminal rate of interest, while still reflecting the parties’ intentions.

In addition to the appeal of the trial judge’s findings on these issues, the appellants sought to overturn the trial decision on the basis of deficient pleadings and the suitability of the matter for summary trial.  The Court of Appeal first addressed the threshold issue of standard of review, made complex by a different standard depending on the nature of an application to strike.  Since the pleadings deficiency argument was advanced at trial, and not in a stand-alone application, the court of appeal took a deferential approach to the trial judge’s acceptance of the sufficiency of pleadings, and determined that the trial judge had sufficient pleadings before him on all issues.

Mr. Schuld was successful in having the appeal dismissed.  On the substantive issue of forebearance, following the precedent set in Rosas v. Toca, 1028 BCCA 191, the Court of Appeal determined that the parties had validly amended the terms of agreement without fresh consideration.  The 6-month repayment deadline on a promissory note was extended by the parties informally acknowledging that the loan remained outstanding.  As for the issue of interest, the trial judge determined that a penalty clause of $65 / day resulted in a sum that exceeded the criminal rate of interest.  The Court of Appeal upheld that result, finding that the trial judge appropriately considered the evidence to reach the conclusion that the penalty clause should be characterized as interest.  The penalty clause was then read down to a 60% interest rate, following a judicial exercise of discretion in Forjay Management Ltd. v. 625536 BC Ltd., 2020 BCCA 70.

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JURISDICTION: British Columbia LEVEL OF COURT: Supreme Court of British Columbia
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