36123 Krayzel Corporation v. Equitable Trust Company
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The Lougheed Block Inc., et al. v. Equitable Trust Company
Interest — Mortgages — Rate of interest
On appeal from the Court of Appeal of Alberta. The Lougheed Block Inc. (“LBI”) owned a heritage office building in downtown Calgary. The mortgage principal amount was $27 million. When it matured in June 2008, the borrower and the lender entered into two successive renewal agreements. The First Renewal Agreement was effective August 1, 2008. It made the 25 percent interest rate effective one month before maturity and would apply equally to arrears and money owing that is not in arrears.
When the First Renewal Agreement matured on March 1, 2009, LBI failed to repay. Equitable offered a Second Renewal Agreement and it was executed April 28, 2009. The essence of the Second Renewal Agreement was the imposition of a 25 percent interest rate. The principal amount owing would be reduced in the event of timely monthly payments and repayment of principal by the end of the term.
Following the execution of the Second Renewal Agreement, Equitable gave LBI written notice of default and demanded payment of the total amount owing based on the interest rate of 25 percent.
Some of the applicants sought a declaration that the 25 percent interest rate was contrary to s. 8 of the Interest Act, R.S.C. 1985, c. I-15. The Master found the First and Second Renewal Agreements violated s. 8 of the Act. The trial judge allowed the appeal finding s. 8 had not been violated. A majority of the Court of Appeal dismissed the appeal. The dissent allowed the appeal in part finding the Second Renewal Agreement violated s. 8. The Court of Appeal of Alberta dismissed the appeal.