Community Savings Credit Union v. Bodnar

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Community Savings Credit Union v.

Bodnar,

2022 BCCA 263

Date: 20220729

Docket: CA46551

Between:

Community Savings Credit Union, North Shore Credit Union,

Chemainus Credit Union, Comox Valley Credit Union,

Kootenay Savings Credit Union, VantageOne Credit Union,

Village Credit Union, Greater Vancouver Community Credit Union,

Coastal Community Credit Union and Vancouver City Savings Credit Union

Appellants

(Defendants)

And

Andrew Bodnar and John Humphrey

Respondents

(Plaintiffs)

Brought under the Class Proceedings Act, R.S.B.C. 1996, c. 50

Before:

The Honourable Mr. Justice Groberman

The Honourable Mr. Justice Harris

The Honourable Mr. Justice Grauer

On appeal from: An order of the Supreme Court of British Columbia, dated

November 4, 2019 (Bodnar v. Community Savings Credit Union, 2019 BCSC 1885,

Vancouver docket S047104).

Counsel for the Appellant:

(via videoconference)

P.R. Bennett

M.W. Mounteer

Counsel for the Respondent:

(via videoconference)

R.J.H. Berrow

J.M. Campbell

Place and Date of Hearing:

Place and Date of Judgment:

Vancouver, British Columbia

November 12–13, 2020

Vancouver, British Columbia

July 29, 2022

Community Savings Credit Union v. Bodnar

Page 2

Written Reasons by:

The Honourable Mr. Justice Groberman

Concurred in by:

The Honourable Mr. Justice Harris

The Honourable Mr. Justice Grauer

Community Savings Credit Union v. Bodnar

Summary:

Page 3

Under the Criminal Code, credit union charges exceeding $5.00 per transaction for

overdrafts are considered interest. Until 2003, the defendants, unaware of the

provision, imposed higher overdraft charges. Where overdrafts were small or

outstanding for short periods, the resulting interest rate exceeded the criminal

interest rate. In this class proceeding, the plaintiffs seek damages for unjust

enrichment, or under provincial consumer protection legislation. At trial, the judge

determined several common issues, finding that unjust enrichment could be

determined on a class-wide basis, and that the appropriate remedy was to allow the

credit unions to retain only $2.50 of the overdraft charges. He found that

infringement of the Criminal Code provision constituted an “unconscionable act or

practice” for the purpose of provincial legislation. Further, he held that for

transactions that occurred more than six years before the writ was filed, the

postponement provision of the Limitation Act could be invoked based on the

plaintiffs’ lack of knowledge of the Criminal Code provision. On appeal, held: Appeal

allowed in part. The only error made by the trial judge was in the exercise of

remedial discretion. Forjay Management Ltd. v. 625536 B.C. Ltd., 2020 BCCA 70,

decided after the judge’s decision, indicates that the court’s discretion over remedy

is limited: it may deny the lender all recovery; limit its recovery to principal only; or

limit the recoverable interest to the maximum under the Criminal Code. Here, the

judge should have allowed the credit unions to retain a $5.00 overdraft charge per

transaction.

Community Savings Credit Union v. Bodnar

Page 4

Table of Contents

Paragraph

THE CRIMINAL CODE PROVISION AND THE

OVERDRAFT FEES

[7]

UNJUST ENRICHMENT

[12]

[13]

[19]

[36]

[37]

[42]

Enrichment of the Defendants

Corresponding Deprivation of the Plaintiffs

Lack of Juristic Reason for the Enrichment

The First Stage of the Analysis – Established Categories

Second Stage of the Analysis – Residual Reasons to Deny

Recovery

Enforceability of Contracts that Violate the Criminal Interest

Provision of the Criminal Code and the Concept of Notional

Severance

[54]

Did the Judge Err in Exercising his Remedial Discretion?

[75]

[78]

[83]

[86]

[87]

[94]

The Judge’s Reasons

Were the Judge’s Conclusions Based in Evidence?

The Addition of a Fifth Consideration

Providing a Remedy not Allowed under Forjay

The Appropriate Remedy

DID A VIOLATION OF THE CRIMINAL CODE

PROVISION RENDER THE TRANSACTIONS

UNCONSCIONABLE UNDER THE PROVINCIAL

STATUTES?

ISSUES SURROUNDING THE LIMITATION PERIOD

[102]

[105]

[111]

Does s. 6(3)(f) Apply to Mistakes of Law?

Was the Question of Whether a Reasonable Person Would

Have Sought Legal Advice Properly Answered as a Common

Issue?

CONCLUSION

[152]

Community Savings Credit Union v. Bodnar

Page 5

Reasons for Judgment of the Honourable Mr. Justice Groberman:

[1]

This is an appeal from the determination of common issues in a class

proceeding. The representative plaintiffs, on behalf of the class, allege that overdraft

fees charged by eight credit unions until 2003 frequently resulted in effective interest

rates that exceeded the 60% legal limit established by s. 347 of the Criminal Code,

R.S.C. 1985, c. C-46. They claim that those who paid such interest rates are entitled

to be reimbursed under the principles of unjust enrichment, or, alternatively, that

damages are available to them under the provisions of two British Columbia

statutes: the Trade Practice Act, R.S.B.C. 1996, c. 457 and the Business Practices

and Consumer Protection Act, S.B.C. 2004, c. 2 (together, the “Provincial Statutes”).

[2]

This longstanding action is now approaching its conclusion. It is clear that up

until 2003, the eight credit unions imposed overdraft fees that exceeded $5.00 per

transaction. In a previous judgment, Bodnar v. Community Savings Credit Union,

2018 BCCA 121, this Court affirmed a finding that the full amount of such overdraft

charges constituted interest under the Criminal Code. In the judgment under appeal,

the judge dealt with the remaining common issues in this action, as well as an

interpretation issue with respect to the limitation period.

[3]

The judge determined that, where the imposition of the overdraft charges

served to increase the effective interest rate beyond the 60% permitted by the

Criminal Code, the credit unions were unjustly enriched at the expense of the

members who paid the charges. He was of the view that an equitable remedy would

be to allow the credit unions to retain only $2.50 of the overdraft charge in respect of

each transaction.

[4]

The judge held, further, that in charging interest rates beyond those permitted

by the Criminal Code, the credit unions committed unconscionable acts or engaged

in unconscionable practices under the Provincial Statutes. In the result, members of

the plaintiff class are entitled to pursue claims for damages under those statutes.

Community Savings Credit Union v. Bodnar

Page 6

[5]

Finally, the judge considered whether the limitation period for bringing the

action would have been postponed in respect of members who did not have

knowledge of the Criminal Code provision or its applicability to their situations. He

found that, in such circumstances, the provisions of the former Limitation Act,

R.S.B.C. 1996, c. 266 (which applies to this action) would postpone the running of

the limitation period.

[6]

The credit unions appeal. They argue that:

a) the question of whether a credit union was unjustly enriched by charging

interest in excess of the amount allowed by the Criminal Code depended

on the circumstances of each individual transaction, and ought not to have

been determined on a class-wide basis;

b) for those transactions where the overdraft charge pushed the interest rate

beyond the rate permitted by the Criminal Code, the judge ought to have

allowed the credit unions to retain an overdraft fee of $5.00 rather than

$2.50, since a fee of $5.00 would not have been included as “interest”

under the Criminal Code provision;

c) the fact that the Criminal Code provision was contravened was not, in and

of itself, sufficient to make the transactions unconscionable under the

Provincial Statutes;

d) the judge erred in finding that the limitation period could be postponed by

virtue of class members’ lack of awareness that the overdraft charge was

unlawful, and further erred in making determinations with respect to the

postponement provision on a class-wide basis.

The Criminal Code Provision and the Overdraft Fees

[7]

At material times, the Criminal Code provision establishing a criminal rate of

interest read as follows:

347. (1)… [E]very one who enters into an agreement or arrangement to

receive interest at a criminal rate … is

guilty of … [an offence].

…

(2) In this section,

“credit advanced” means the aggregate of the money … advanced …

under an agreement or arrangement …;

Community Savings Credit Union v. Bodnar

“criminal rate” means an effective annual rate of interest calculated in

Page 7

accordance with generally accepted actuarial practices and principles

that exceeds sixty per cent on the credit advanced under an

agreement or arrangement;

…

“interest” means the aggregate of all charges and expenses … paid or

payable for the advancing of credit under an agreement or

arrangement, … but does not include any … overdraft charge …;

…

“overdraft charge” means a charge not exceeding five dollars for the

creation of or increase in an overdraft, imposed by a credit union …

…

[8]

It is common ground that, at least for periods between November 20, 1997

and February 1, 2003 the charges imposed by the eight credit unions for creating or

increasing an overdraft exceeded $5.00:

 Chemainus Credit Union imposed a $15 overdraft charge beginning

December 3, 2000;

 Community Savings Credit Union imposed a $17 overdraft charge;

 Comox Valley Credit Union imposed a $15.00 overdraft charge beginning

June 1, 2000;

 Greater Vancouver Community Credit Union imposed a $6 overdraft charge

beginning February 1, 2002;

 Kootenay Savings Credit Union imposed a $10 overdraft charge, which was

increased to $12.50 on July 1, 1998. In addition, it imposed a daily overdraft

charge of $5.00 for each day that an account remained in overdraft. In some

situations (including all cases where the overdraft was less than $25.00),

these charges may have been waived or refunded;

 North Shore Credit Union imposed a $20 overdraft charge;

 VantageOne Credit Union imposed a $6 overdraft charge; and

 Village Credit Union imposed an $8 overdraft charge, which was increased to

$25 in May 1998.

[9]

The remaining two credit union defendants are joined in this action as

successors to three of the eight credit unions in the list above. Coastal Community

Credit Union acquired Chemainus Credit Union on July 31, 2004 and Comox Valley

Credit Union on January 1, 2005; Vancouver City Savings Credit Union (which does

business under the name “VanCity”) acquired Village Credit Union on July 1, 2005.

Community Savings Credit Union v. Bodnar

Page 8

For the sake of completeness, I should also note counsel’s advice that North Shore

Credit Union is now known as “BlueShore Financial.”

[10] Because credit union overdraft fees exceeding $5.00 are considered interest

charges, the interest on modest overdrafts that were outstanding for short periods of

time often exceeded the Criminal Code’s limit of 60% per annum. The actuarial

evidence in this case established, for example, that with a $6.00 overdraft charge

and an overdraft period of one week, the overdraft charge alone would exceed the

criminal rate of interest where the overdraft amount was less than $662.66. The

evidence indicates that overdrafts of less than $500 and overdraft durations of less

than one week were common.

[11] It is not suggested that the credit unions deliberately flouted s. 347 of the

Criminal Code. Rather, they seem not to have been aware of it until it was brought to

their attention in February 2003. By July of that year, all the credit unions had

reduced their overdraft charges to $5.00.

Unjust Enrichment

[12] It is well-established that there are three elements that must be proven to

establish unjust enrichment: an enrichment of the defendant; a corresponding

deprivation of the plaintiff; and an absence of a juristic reason for the enrichment

(see Garland v. Consumers’ Gas Co., 2004 SCC 25 at para. 30).

Enrichment of the Defendants

[13] In the Court below, the credit unions contended that they had not been

enriched by the receipt of overdraft charges. They said that because they are non-

profit entities and are member owned, their receipt of overdraft charges did not

benefit them. Rather, the benefits were wholly distributed to the credit union’s

members in the form of enhanced services, reduced fees for other services,

dividends, or other benefits.

[14] In this Court, while the credit unions continue to emphasize that they did not

profit from the impugned transactions, they do concede that the first element of

Community Savings Credit Union v. Bodnar

Page 9

unjust enrichment is made out — and properly so. The Supreme Court of Canada

has endorsed a “straightforward economic approach” to the question of whether

there has been an enrichment of the defendant and a corresponding deprivation of

the plaintiff (Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75 at

para. 15). It has consistently rejected arguments to the effect that broader

considerations should be taken into account to determine whether the transfer of a

tangible benefit actually enriched the defendant.

[15] For example, in Pacific National Investments, the City of Victoria argued that

the transfer to it of roads, parkland, walkways, and a new seawall did not constitute

an enrichment. Rather, it argued that the benefits accrued to its residents and

visitors, and that the City of Victoria, itself, merely acquired a duty to expend money

to maintain the amenities. The Court rejected the argument outright, saying simply:

[19]

The City’s present argument that the extra works and improvements it

demanded are not an enrichment but something of a burden should be

rejected.

[16] Similarly, in Garland the defendant charged late payment penalties on gas

bills. Those penalties were found, like the overdraft charges in the current case, to

constitute interest and to cause the level of interest to exceed the rate permitted

under s. 347 of the Criminal Code. In the Ontario Court of Appeal, Consumers’ Gas

succeeded in its argument that the late payment fees did not enrich it, because the

increased revenue it received was used to decrease gas rates rather than to

increase profits. The Supreme Court of Canada summarized the reasoning of the

majority of the Ontario Court of Appeal as follows:

[33]

… McMurtry C.J.O. found that while payment of money would

normally be a benefit, it was not in this case. He claimed to be applying the

“straightforward economic approach” as recommended in [Peter v. Beblow,

[1993] 1 S.C.R. 980], but accepted the respondent’s argument that because

of the rate structure of the [Ontario Energy Board], the respondent had not

actually been enriched. Because [Late Payment Penalties] were part of a

scheme designed to recover the respondent’s overall revenue, any increase

in [Late Payment Penalties] was off-set by a corresponding decrease in

regular rates. Thus McMurtry C.J.O. concluded, “[t]he enrichment that follows

from the receipt of [Late Payment Penalties] is passed on to all [Consumers’

Gas] customers in the form of lower gas delivery rates” (para. 65). As a

Community Savings Credit Union v. Bodnar

Page 10

result, the real beneficiary of the scheme is not the respondent but is rather

all of the respondent’s customers.

[17] The Supreme Court rejected that reasoning, preferring the view of the

minority in the Ontario Court of Appeal. Iacobucci J, speaking for the unanimous

Court, said:

[36]

I agree with the analysis of Borins J.A. on this point. The law on this

question is relatively clear. Where money is transferred from plaintiff to

defendant, there is an enrichment. Transfer of money so clearly confers a

benefit that it is the main example used in the case law and by commentators

of a transaction that meets the threshold for a benefit (see [Peel (Regional

Municipality) v. Canada, [1992] 3 S.C.R. 762] at p. 790; Sharwood & Co. v.

Municipal Financial Corp. (2001), 53 O.R. (3d) 470 (C.A.), at p. 478;

P.D. Maddaugh and J.D. McCamus, The Law of Restitution (1990), at p. 38;

Lord Goff and G. Jones, The Law of Restitution (6th ed. 2002), at p. 18).

There simply is no doubt that Consumers’ Gas received the monies

represented by the LPPs and had that money available for use in the carrying

on of its business. The availability of those funds constitutes a benefit to

Consumers’ Gas. We are not, at this stage, concerned with what happened to

this benefit in the ongoing operation of the regulatory scheme.

[18] The analysis in Garland governs the case before us, and the trial judge

properly rejected the credit unions’ argument. The credit unions’ use of the funds to

enhance their operations or to benefit their members is not relevant to the threshold

issue of whether there was an enrichment. The payment of overdraft charges by

members of the plaintiff class to the credit unions amounted to an enrichment.

Corresponding Deprivation of the Plaintiffs

[19] Though now conceding the element of enrichment, the credit unions still

maintain that members of the plaintiff class who paid the overdraft charges did not

necessarily suffer a deprivation corresponding to the enrichment, so that the second

element of unjust enrichment has not been made out on a class-wide basis.

[20] In fact, the credit unions contend that most members who paid the overdraft

fees were actually benefitted by doing so. They say that the credit unions, rather

than granting the overdrafts and collecting the fee, could simply have refused to

honour cheques or transfers that put accounts into overdraft. A cheque or payment

refused on the basis that there were not sufficient funds in the account to cover it

Community Savings Credit Union v. Bodnar

Page 11

(generally referred to as an “NSF” return) could have serious negative repercussions

for the member, particularly if it resulted in a default on a legal obligation. Even

without legal repercussions, however, an NSF return would, in many cases, result in

personal embarrassment and inconvenience for the member. Further, the credit

unions point out that their charges for NSF returns were at least as high as their fees

for creating or increasing an overdraft. The comparison is as follows:

Institution

Overdraft Charge

(as detailed earlier in

this judgment)

$15.00

Corresponding

NSF Return

Fee

Chemainus Credit Union

Community Savings Credit Union

Comox Valley Credit Union

Greater Vancouver Community

Credit Union

$20.00

$22.00

$25.00

$26.00

$17.00

$15.00

$6.00

Kootenay Savings Credit Union

$10.00,

then $12.50

plus daily overdraft fee

$20.00

$17.50

then $20.00

North Shore Credit Union

VantageOne Credit Union

Village Credit Union

$20.00

$21.00

$28.00

$6.00

$8.00

then $25.00

[21] The members who overdrew their accounts, the credit unions argue, did not

experience any deprivation. Rather, they were afforded the privilege of having their

NSF cheques or payments honoured and were not charged a premium for that

privilege.

[22] The credit unions quote from Air Canada v. British Columbia, [1989] 1 S.C.R.

1161 at 1202, for the proposition that “[t]he law of restitution is not intended to

provide windfalls to plaintiffs who have suffered no loss.”

[23] I am not convinced that the issue is as straightforward as the credit unions

suggest. Air Canada involved a claim by airlines that British Columbia had been

unjustly enriched through the imposition of an unconstitutional gasoline tax. The

case raised several complex issues. Among the defences advanced by British

Columbia was that the airlines had increased their fares to cover the tax, and had

Community Savings Credit Union v. Bodnar

Page 12

not, therefore, suffered a resulting deprivation. This has been termed the “passing

on defence.”

[24] Only six judges participated in the Air Canada decision. The judgment of

Justice La Forest was the majority judgment, attracting the support of five members

of the Court. While the quotation cited by the credit unions comes from that

judgment, it comes from a portion endorsed by only three judges.

[25] It is important to note that the Air Canada case pre-dates the systematic

approach to unjust enrichment articulated in Garland. Justice La Forest, himself,

commented that “it will take some time for the courts to work out the limits of the

developing law of restitution” (at 1202). His statement that “[t]he law of restitution is

not intended to provide windfalls to plaintiffs who have suffered no loss” was not

posited as the overarching principle of the law of restitution, but rather as a rationale

for the passing on defence. Even in respect of that passing on defence, however,

the Supreme Court of Canada has subsequently refused to endorse what was said

in Air Canada. In Kingstreet Investments Ltd. v. New Brunswick (Finance), 2007

SCC 1, the Court said:

[45]

The defence of passing on has developed almost exclusively in the

context of recovery of taxes and other charges paid under a mistake of law.

If, as La Forest J. suggests in Air Canada, “[t]he law of restitution is not

intended to provide windfalls to plaintiffs who have suffered no loss” (p.

1202), then the defence ought to have arisen in other contexts as well. At the

very least, the defence of passing on should also apply to mistaken

payments, whether of fact or law, but such has generally not been the case in

Canada (see [Peter D. Maddaugh and John D. McCamus. The Law of

Restitution, Aurora, Ont.: Canada Law Book, 2004 (loose‑leaf updated

September 2005)] at p 11-46). Professors Maddaugh and McCamus suggest

that the reason the defence has not been applied outside the context of ultra

vires taxes is because it is inconsistent with the basic principles of

restitutionary law. They argue that “the mere fact that the taxpayer has

mistakenly paid, with its own money, the revenue authority is sufficient to

establish an unjust enrichment at the plaintiff’s expense. As between the

taxpayer and the Crown, the question of whether the taxpayer has been able

to recoup its loss from some other source is simply irrelevant” (p. 11-45).

[26] The framework for analysis of unjust enrichment claims has been

comprehensively set out in cases subsequent to Air Canada, particularly in Garland,

Community Savings Credit Union v. Bodnar

Page 13

Kerr v. Baranow, 2011 SCC 10, and in Moore v. Sweet, 2018 SCC 52. It is, in my

view, neither necessary nor helpful to try to reconcile the obiter comments of Justice

La Forest in Air Canada with the subsequent jurisprudence. It is that subsequent

jurisprudence that must govern.

[27] It will often be the case that a defendant in an unjust enrichment action can

show that the plaintiff has received some benefit from the transactions giving rise to

the claim, and was, in some sense, “better off” than they would have been if the

impugned transactions had not occurred. In applying the “straightforward economic

analysis”, the Supreme Court of Canada has consistently refused to consider

collateral benefits at the initial stages of the unjust enrichment analysis.

[28] For example, in Peter v. Beblow, [1993] 1 S.C.R. 980, the defendant argued

that his common-law wife and her children had enjoyed rent-free accommodations

during the relationship, so that her contributions to the acquisition, maintenance and

improvement to property did not give rise to unjust enrichment. That argument was

not successful.

[29] In Pacific National Investments, Victoria argued that the developer had, in the

end, made a profit on its development, and so, notwithstanding that it had made

contributions to municipal infrastructure, was better off than it would have been had

the project not gone forward. Again, the argument was not successful.

[30] In Kerr, complex issues of “mutual benefits” within a common law relationship

were discussed at length. The Court provided a framework for dealing with those

issues and indicated that they were not to be resolved at the initial stages of the

unjust enrichment analysis (see also earlier statements to similar effect by the

majority in Wilson v. Fotsch, 2010 BCCA 226 at para. 19).

[31] The “straightforward economic approach” to the first two elements of unjust

enrichment is not, then, a complex accounting exercise. Where a defendant has

transferred a tangible benefit to the plaintiff, a court simply considers what the

plaintiff gave and what the defendant received. It is not the function of the court, at

Community Savings Credit Union v. Bodnar

Page 14

that stage of the analysis, to consider collateral benefits received by the plaintiff, nor

is it to consider what events might have transpired if the impugned transaction had

not occurred. The initial analysis was succinctly summarized by Justice Cromwell

speaking for a unanimous Court in Kerr:

[36]

The first and second steps in the unjust enrichment analysis concern

first, whether the defendant has been enriched by the plaintiff and second,

whether the plaintiff has suffered a corresponding deprivation.

[37]

The Court has taken a straightforward economic approach to the first

two elements — enrichment and corresponding deprivation. Accordingly,

other considerations, such as moral and policy questions, are appropriately

dealt with at the juristic reason stage of the analysis: see Peter, at p. 990,

referring to [Pettkus v. Becker, [1980] 2 S.C.R. 834], Sorochan v. Sorochan,

[1986] 2 S.C.R. 38, and [Peel (Regional Municipality) v. Canada] affirmed in

Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at

para. 31.

[38]

For the first requirement — enrichment — the plaintiff must show that

he or she gave something to the defendant which the defendant received and

retained. The benefit need not be retained permanently, but there must be a

benefit which has enriched the defendant and which can be restored to the

plaintiff in specie or by money. Moreover, the benefit must be tangible. It may

be positive or negative, the latter in the sense that the benefit conferred on

the defendant spares him or her an expense he or she would have had to

undertake (Peel, at pp. 788 and 790; Garland, at paras. 31 and 37).

[39]

Turning to the second element — a corresponding deprivation — the

plaintiff’s loss is material only if the defendant has gained a benefit or been

enriched (Peel, at pp. 789-90). That is why the second requirement obligates

the plaintiff to establish not simply that the defendant has been enriched, but

also that the enrichment corresponds to a deprivation which the plaintiff has

suffered (Pettkus, at p. 852; [Rathwell v. Rathwell, [1978] 2 S.C.R. 436], at

p. 455).

[32] Here, the credit unions received overdraft charges (and interest) on

overdrafts. The money received by the credit unions was paid directly by the

members who overdrew their accounts. Those facts establish the first two elements

of the unjust enrichment analysis.

[33] The difficulty with the credit unions’ argument that the judge should have

considered the consequences of an NSF return is that it conflates the consequences

of not being granted credit with the deprivation that a member experienced in paying

an overdraft charge. The transaction impugned in the current action is that of the

credit union furnishing an overdraft but charging excessive interest on it. It is that

Community Savings Credit Union v. Bodnar

Page 15

transaction that must be analysed to determine whether the credit unions were

enriched and the borrowers correspondingly deprived. The consequences of an NSF

return are not directly relevant to that inquiry.

[34] I note, in any event, the credit unions’ underlying presumption — that the only

possibilities were that the borrowers paid the unlawful overdraft charge or faced the

inconvenience, embarrassment, and costs of an NSF return — does not stand up to

scrutiny. An obvious third possibility is that the credit union could have allowed the

overdraft without charging an illegal fee for it. Indeed, after February 2003, credit

unions lowered their overdraft charges to $5.00. All continued to evaluate situations

where there were insufficient funds to cover a cheque or transfer, and all continued

to grant overdrafts when they considered it prudent to do so. Further, there is no

evidence of any increase in the rate of NSF returns by the credit unions after the

change was made, except in the case of Kootenay Savings Credit Union, which

does say that its criteria for granting overdrafts became more stringent after the fees

were lowered.

[35] The judge correctly determined that the credit unions were enriched when

they received overdraft fees, and those that paid the overdraft charges suffered a

corresponding deprivation.

Lack of Juristic Reason for the Enrichment

[36] Once it has been shown that the defendant was enriched and the plaintiff

suffered a corresponding deprivation, the unjust enrichment analysis turns to the

question of whether there is an absence of “juristic reason” for the enrichment. The

structure of the analysis was established by the Supreme Court of Canada in

Garland, particularly at paras. 44–46. The Court summarized and elaborated upon

the analysis in the majority judgment in Moore v. Sweet:

[56]

In Garland … Iacobucci J. formulated a juristic reason analysis that

proceeds in two stages.

[57]

The first stage requires the plaintiff to demonstrate that the

defendant’s retention of the benefit at the plaintiff’s expense cannot be

justified on the basis of any of the “established” categories of juristic reasons:

a contract, a disposition of law, a donative intent, and other valid common

Community Savings Credit Union v. Bodnar

Page 16

law, equitable or statutory obligations (Garland, at para. 44; Kerr, at para. 41).

If any of these categories applies, the analysis ends; the plaintiff’s claim must

fail because the defendant will be justified in retaining the disputed benefit.

For example, a plaintiff will be denied recovery in circumstances where he or

she conferred a benefit on a defendant by way of gift, since there is nothing

unjust about a defendant retaining a gift of money that was made to him or

her by (and that resulted in the corresponding deprivation of) the plaintiff. In

this way, these established categories limit the subjectivity and discretion

inherent in the unjust enrichment analysis and help to delineate the

boundaries of this cause of action (Garland, at para. 43).

[58]

If the plaintiff successfully demonstrates that none of the established

categories of juristic reasons applies, then he or she has established a prima

facie case and the analysis proceeds to the second stage. At this stage, the

defendant has an opportunity to rebut the plaintiff’s prima facie case by

showing that there is some residual reason to deny recovery (Garland, at

para. 45). The de facto burden of proof falls on the defendant to show why

the enrichment should be retained. In determining whether this may be the

case, the court should have regard to two considerations: the parties’

reasonable expectations and public policy (Garland, at para. 46; Kerr, at

para. 43).

[59]

This two-stage approach to juristic reason was designed to strike a

balance between the need for predictability and stability on the one hand, and

the importance of applying the doctrine of unjust enrichment flexibly, and in a

manner that reflects our evolving perception of justice, on the other.

The First Stage of the Analysis – Established Categories

[37] In respect of the first stage of the juristic reason analysis, the “established

category” of juristic reason in this case is contract. The overdraft charges were, in all

cases, imposed pursuant to the terms of the credit unions’ account agreements with

its members. The difficulty, of course, is that the agreements provided for overdraft

charges that, in many cases, resulted in violations of the Criminal Code. A

contractual provision that is inoperative because it conflicts with the criminal law is

not a juristic reason for enrichment: see Kilroy v. A OK Payday Loans Inc., 2006

BCSC 1213 at paras. 26–27, aff’d. 2007 BCCA 231; and Garland at para. 51.

[38] The fact that the contracts contravened the Criminal Code, however, does not

preclude them from furnishing a juristic reason for at least part of the enrichment.

Canadian courts have long since abandoned the proposition that contractual

provisions that violate statutory enactments are necessarily void ab initio. In

Transport North American Express Inc. v. New Solutions Financial Corp., 2004 SCC

Community Savings Credit Union v. Bodnar

Page 17

7, the Court specifically addressed the question of the degree to which contracts that

violate s. 347 of the Criminal Code can be enforced. Justice Arbour, speaking for the

majority, said:

[4]

There is broad consensus that the traditional rule that contracts in

violation of statutory enactments are void ab initio is not the approach courts

should necessarily take in cases of statutory illegality involving s. 347 of the

Code. Instead, judicial discretion should be employed in cases in which

s. 347 has been violated in order to provide remedies that are tailored to the

contractual context involved….

[39] Though the Supreme Court of Canada ultimately overturned the judgment of

the Ontario Court of Appeal (reported as Transport North American Express Inc. v.

New Solutions Financial Corp. (2002), 60 O.R. (3d) 97), the judgment of the majority

in the Supreme Court of Canada quoted from the following passage of the majority

judgment of the Ontario Court of Appeal with approval at para. 31:

[33]

I agree with the British Columbia Court of Appeal in [Terracan Capital

Corp. v. Pine Projects Ltd. (1993), 100 D.L.R. (4th) 431(B.C.C.A.)] that a

judge has discretion to apply the doctrine of severance to an agreement that

offends the criminal interest rate provisions of the Code. This discretion gives

rise to a spectrum of available remedies. Where the loan transaction

resembles a traditional loan sharking arrangement, the court may refuse to

apply the doctrine of severance and hold the entire loan agreement

unenforceable, including the obligation to repay the principal. While this

remedy leaves the borrower with a windfall, this result may be justified in

some cases by the need to denounce such usurious practices. See C.A.P.S.

International Inc. v. Kotello, [2002] M.J. No. 205 [(QL)] (Q.B.). At the other

end of the spectrum, in the case of a good faith commercial transaction

where the equities favour the lender and severance does not undermine the

policy of the legislation, the court may sever only those provisions of the loan

agreement that put the effective interest rate over 60 per cent, leaving intact

the borrower's obligation to repay the principal and pay some interest. See

e.g., [Milani v. Banks (1997), 145 D.L.R. (4th) 55 (O.N.C.A.)]. Closer to the

centre of the spectrum lies a case like Terracan, where the court severed all

the interest provisions but upheld the debtor's obligation to repay the

principal.

[Emphasis added by Arbour J.]

[40] I will, later in this judgment, discuss the principles of severance established by

the Supreme Court of Canada in Transport North American Express, and the degree

to which they support the validity of the credit unions’ charges. First, though, I will

Community Savings Credit Union v. Bodnar

Page 18

consider whether there is any other plausible juristic reason that can justify the

enrichment at issue in this action.

[41] With respect to the first stage of the juristic reason analysis, the credit unions

have not suggested that any established category of juristic reason for enrichment,

apart from contract, exists in this case. Accordingly, I will turn, briefly, to the second

stage of the juristic reason analysis, the search for a residual juristic reason.

Second Stage of the Analysis – Residual Reasons to Deny Recovery

[42] As discussed in Garland, where a defendant contends that there is a residual

juristic reason for enrichment (i.e., a reason outside an established category), they

must demonstrate that it is supported by the reasonable expectations of the parties

and by public policy.

[43] In the case before us, the credit unions say that the overdraft charges that

they imposed were consistent with the reasonable expectations of the parties and

were not contrary to public policy.

[44] In making their arguments, the credit unions emphasize that the overdraft

fees compensated the credit unions for real work and expenses. In the case of each

overdraft, the credit union was required to make an expeditious decision on whether

to honour the cheque or payment or, instead, to process it as an NSF return. The

decision was made only after speedy but thorough examinations of the

circumstances. Those examinations included such matters as the history of the

account, the member’s other assets with the credit union, and the likelihood the

situation of insufficient funds in the account would be transitory. In making the

decision, the credit union might make extensive inquiries, including attempts to

contact the member.

[45] The credit unions were put to expense and effort in dealing with overdrafts.

The affidavits filed in this case show that some credit union staff spent a significant

proportion of their working hours dealing with inquiries into whether cheques or

payments that would result in overdrafts should be granted.

Community Savings Credit Union v. Bodnar

Page 19

[46] It should be recognized that the provision of the Criminal Code excluding

overdraft fees from interest calculations has not changed materially since its

enactment more than forty years ago. The original enactment (as s. 9 of the Small

Loans Act and Criminal Code Amendment Act, S.C. 1980-81-82-83, c. 43) allowed

overdraft charges to be excluded from interest calculations, but only if they were

$5.00 or less. The $5.00 maximum has applied since the provision was brought into

force on April 1, 1981 (SI/81-63). The original intent of the Criminal Code provision

appears to have been to allow a reasonable fee to be charged for processing an

overdraft without that fee being counted as interest. The $5.00 maximum may well

have been reasonable in 1981, but based on the material before the court, it seems

probable that by the mid-1990s it would not have been sufficient to compensate

credit unions for the costs of assessing whether or not to honour a cheque or

payment that would put an account into overdraft.

[47] The charges made by the credit unions, then, do not appear to be exorbitant.

They were excessive, it would seem, only by the standards of the Criminal Code.

The evidence strongly suggests that the parties believed that their affairs were

governed by the account agreement. The judge made a finding that the credit unions

were unaware that their overdraft charges put them in violation of the Criminal Code.

No customer raised the issue until legal action was commenced.

[48] Nonetheless, it is doubtful that it can be said that the parties had a

“reasonable expectation” that their affairs would be governed by the account

agreements. The advancement of overdrafts was an ordinary part of the business of

credit unions, and it was the credit unions’ obligation to be aware of the laws that

applied to that part of their business. While I accept that the Criminal Code would not

be the first place they would look for regulatory provisions, their failure to be aware

of the provision cannot, as a matter of law, be excused.

[49] Even if, for the sake of argument, we were to accept that the parties had a

reasonable expectation that the applicable overdraft charges were those set out in

the account agreements, it would be difficult to accept that those charges were

Community Savings Credit Union v. Bodnar

Page 20

consistent with the public interest. Section 347 of the Criminal Code specifically

outlaws the charging of interest in excess of sixty percent per annum. Further it

explicitly and unequivocally includes all overdraft fees in calculating the interest,

unless the overdraft fees are $5.00 or less.

[50] The Criminal Code provisions must have been enacted with full knowledge

that credit unions perform work in deciding whether to honour a cheque or payment

that puts an account into overdraft. Those provisions represent Parliament’s

assessment of the public interest. In maintaining the Criminal Code provision in

place without modification, it must be assumed that Parliament continues to consider

that overdraft fees that are over $5.00 should be treated as interest, and that interest

rates above 60% are contrary to the public interest.

[51] In that regard, the decision in Garland is instructive. Consumers’ Gas charged

its customers a late payment penalty that had been approved by the Ontario Energy

Board. The company had every reason to believe that the charge was a valid one,

as it had been endorsed by an order of the provincial regulator. Further, the approval

of the Ontario Energy Board indicates that the charge was not objectively

unreasonable. In 1994, however, an action against Consumers’ Gas was

commenced. It alleged that the Ontario Energy Board’s order was inoperative

because it conflicted with the Criminal Code provision. At that point, Consumers’

Gas was under notice that its authority to charge the late payment fee was

challenged.

[52] The Supreme Court of Canada accepted that the Ontario Energy Board’s

order constituted a residual juristic reason for the enrichment, but only up until the

point that Consumers’ Gas had notice that the validity of the order was being

challenged. Accordingly, the Court required the late payment fees imposed after the

commencement of the action to be returned to customers. Once Consumers’ Gas

was aware that the Ontario Energy Board’s order might not be valid, it could no

longer maintain that it was in the public interest to impose the charges.

Community Savings Credit Union v. Bodnar

Page 21

[53] In the case we are considering, there is nothing akin to an order of a

Provincial regulatory body that would have been capable of casting doubt on the

applicability of s. 347. The credit unions have no basis for arguing that it was in the

public interest for them to violate a clear and subsisting provision of the Criminal

Code. As such, there is no residual juristic reason for the credit unions’ enrichment.

Enforceability of Contracts that Violate the Criminal Interest Provision of

the Criminal Code and the Concept of Notional Severance

[54] In the result, the only juristic reason capable of supporting the enrichment lies

in the contractual arrangements between the credit unions and their members. Only

to the extent that the law is prepared to enforce those contracts do they justify the

enrichment of the credit unions.

[55] I return, then, to the decision in Transport North American Express. The main

issue for the Supreme Court of Canada in that case was how a court can go about

severing unlawful provisions in a contract from those that are unobjectionable. The

traditional approach was described as the “blue-pencil” approach, in which a court

could strike specific clauses from the contract, leaving the balance intact. The judge

at first instance in Transport North American Express recognized that striking

specific clauses would do more violence to the parties’ agreement than simply

reading down the interest payment provisions so that they allowed interest to be

charged at a rate that was lawful. He described the reading down as a “notional

severance.”

[56] The majority judgment of the Ontario Court of Appeal rejected the idea of

notional severance, holding that the blue-pencil approach was the appropriate one.

The Supreme Court of Canada reinstated the judgment of the chambers judge,

finding that “notional severance” was an available remedy:

[32]

If the case is an appropriate one for the court to sever only those

provisions of the loan agreement that put the effective interest rate over 60

percent, and if it is conceded, as it must be, that such a rewording alters the

agreement of the parties, the question becomes only a choice of the

appropriate technique of severance. The preferred severance technique is

the one that, in light of the particular contractual context involved, would most

appropriately cure the illegality while remaining otherwise as close as

Community Savings Credit Union v. Bodnar

Page 22

possible to the intentions of the parties expressed in the agreement. The

blue-pencil technique may not necessarily achieve that result.

[57] The Court described the appropriate approach as follows:

[40]

… [T]he appropriate approach is to vest the greatest possible amount

of remedial discretion in judges in courts of first instance. The spectrum of

available remedies runs from a court holding contracts in violation of s. 347

void ab initio, in the most egregious and abusive cases, according to the

criteria identified in [William E. Thomson Associates Inc. v. Carpenter (1989),

61 D.L.R. (4th) 1], to notional severance. In the determination of where along

the spectrum a particular contract lies, the considerations identified in

Thomson by Blair J.A. should be referred to and analysed carefully. Although

Blair J.A. was considering the desirability of severing illegal interest from

principal, the same factors are helpful in determining whether to reduce illegal

interest to a legal level.

[58] The Court described the Thomson criteria as follows:

[42]

As outlined above, in Thomson, Blair J.A. identified four

considerations relevant to the determination of whether public policy ought to

allow an otherwise illegal agreement to be partially enforced rather than being

declared void ab initio in the face of illegality in the contract:

1. whether the purpose or policy of s. 347 would be subverted by

severance;

2. whether the parties entered into the agreement for an illegal purpose

or with an evil intention;

3. the relative bargaining positions of the parties and their conduct in

reaching the agreement;

4. the potential for the debtor to enjoy an unjustified windfall.

[59] In Forjay Management Ltd. v. 625536 B.C. Ltd., 2020 BCCA 70, the Court

clarified the nature of the discretion given to a trial judge in giving a remedy involving

“notional severance.”

[60] The parties in Forjay had entered into a second mortgage agreement for a

one-year term. The nominal interest rate on the mortgage was 12%, but of the

$10 million amount secured by the mortgage, $4 million represented fees paid to the

lenders (two fees of $2 million each). The judge accepted actuarial evidence

establishing that the effective interest rate on the transaction was 91.28%.

Community Savings Credit Union v. Bodnar

Page 23

[61] The judge purported to impose a notional severance remedy. She severed

one of the $2 million fees, removing the obligation to pay it entirely, and increased

the nominal mortgage rate to 18%. She further ordered that the overall effective

annual interest rate should not exceed 40%.

[62] This Court considered that the judge had misinterpreted the scope of the

discretion granted in Transport North American Express:

[52]

… [T]he judge understood Transport’s “spectrum of remedies” to

include a reading down to any legal rate of interest in combination with

severance and/or modification of terms. In my view, the spectrum of remedies

identified at para. 40 in Transport is much narrower. It consists of three

options:

1)

2)

3)

voiding the contract ab initio;

striking out a term or terms of the contract; or

reading down the interest rate to 60%.

[63] These three remedies are those specifically mentioned in Transport North

American Express. While the Supreme Court of Canada stated, in that case, that its

intention was to “vest the greatest possible amount of remedial discretion in judges

in courts of first instance”, Forjay appears to interpret that comment as being

directed to which of the three remedies is chosen rather than to the ability to fashion

more creative remedies.

[64] Forjay, then, indicates that in deciding the extent to which a contract that

provides for the payment of interest at a criminal rate is enforceable, the judge’s

discretion is limited to choosing among three forms of remedy: holding that the

contract is void, severing particular provisions of the contract (what has been called

the “blue-pencil” approach to severance), and notional severance to bring the

interest rate down to the legal rate. Forjay does not allow for a judge to adopt a

“chancellor’s foot” approach to remedy, fashioning an arbitrary solution that seems

to do justice according to the judge’s own conscience. That is not to say, however,

that judge may not adapt the form of remedy approved in Forjay to fit the nature of

the particular transaction in question.

Community Savings Credit Union v. Bodnar

Page 24

[65] In Forjay, this Court cites two of its earlier judgments: Wei v. Li, 2019 BCCA

114, and Eha v. Genge, 2007 BCCA 258. In Wei, the plaintiff sued to enforce a

judgment rendered in China that included a provision for interest to run at 0.2% per

day. The trial judge accepted that the rate was equal to 73% per annum and agreed

that the rate should reduced through notional severance to 60% per annum. On

appeal, the majority in this Court agreed:

[42]

… Transport v. New Solutions calls for the severance of a criminal

rate of interest and its replacement by the rate of 60% where the four criteria

discussed above are met. According to the summary trial judge’s findings,

they were met in this case. Why should notional severance not be available in

respect of foreign judgments in the same way as it is for domestic

judgments?

[66] In Eha v. Genge, an individual lent money to a friend, with an agreement for

interest at a rate of 10% per month. The trial judge concluded that the loan

arrangement was objectionable and held the contract to be void ab initio, such that

the lender was disentitled from claiming repayment of the principal as well as

interest.

[67] This Court found that the judge had erred in giving such a remedy:

[13]

… I consider the judge was required to do a much fuller contextual

analysis than he performed in the present case. The reliance placed upon

[Kotello v. Dimerman, 2006 MBCA 77] was misplaced and greater weight

should have been placed on the case of Transport. If the judge had

performed the sort of analysis suggested by the Supreme Court of Canada at

para. 41 of that case, I am satisfied he would not have reached the

conclusion he did.

[68] This Court considered that the circumstances were not akin to loan-sharking,

and that the judge had exceeded his discretion in finding the transaction to be void

ab initio. This Court severed the interest payment provisions, and ordered that the

defendant repay the principal, along with pre-judgment interest at the more modest

statutory rates.

[69] The jurisprudence of this Court, then, requires a trial judge to carefully

consider the four considerations set out in Transport North American Express before

arriving at a remedy, and places limits on the remedy that may be implemented.

Community Savings Credit Union v. Bodnar

Page 25

[70] I would observe that the four considerations do not constitute a simple

“checklist.” Rather, each reflects different concerns underlying the exercise of

discretion. The first consideration — that of whether the purpose or policy of s. 347

would be subverted by severance — recognizes that a judge’s discretion cannot be

allowed to override the legislative intent of the Criminal Code provision. It would be

an error for a judge to grant a remedy that fails to respect the rationale for the

provision.

[71] The second consideration — whether the parties entered into the agreement

for an illegal purpose or with an evil intention — takes into account the broader goals

of the criminal law and of regulation. Parties must be discouraged from deliberately

defying or subverting the law. Courts cannot countenance transactions that are

criminal, corrupt, or malevolent.

[72] The third consideration — the relative bargaining positions of the parties and

their conduct in reaching the agreement — recognizes that the law is aimed at

preventing lenders from exploiting vulnerable or desperate borrowers.

[73] The fourth consideration — the potential for the debtor to enjoy an unjustified

windfall — also reflects a desire to avoid exploitation, this time exploitation of the

lender by the borrower. A borrower should not generally be allowed to exploit a

situation of unknowing violation of the criminal interest provision to obtain a windfall

from an unsuspecting lender.

[74] Together, the four considerations set out in Transport North American

Express are designed to place transactions on a spectrum. The most egregious

violations of the Criminal Code provisions will result in the courts refusing, entirely, to

enforce the debt obligation. Other transactions may result in a court refusing to allow

the plaintiff any interest on the debt. This remedy may be appropriate in a situation

where the lender, though not intending to act criminally, takes advantage of another

person by demanding an exorbitant interest rate. In most cases where the parties

have entered into a commercially defensible loan arrangement not knowing that it

Community Savings Credit Union v. Bodnar

Page 26

violated the criminal interest provision of the Criminal Code, courts have applied a

remedy of notional reverence, simply reducing the interest rate to 60%.

Did the Judge Err in Exercising his Remedial Discretion?

The Judge’s Reasons

[75] The trial judge briefly considered each of the four factors set out in Transport

North American Express:

[84]

On factor 1, the purpose and policy of s. 347 is largely a neutral

factor. As stated in Transport North American Express at para. 43, “[s]ince it

is very difficult to identify the policy objective behind s. 347 of the Code

beyond the prevention of loan-sharking, violations of this section that clearly

do not involve loan-sharking should be approached cautiously, keeping in

mind that there is no need to deter, through the criminal law, effective interest

rates of up to 60 percent per year”. In that case, the interest rate was read

down to 60%. In Forjay Management Ltd. v 0981478 B.C. Ltd., 2019 BCSC

238, the Court found that a “commercial lending transaction intended for

normal purposes” could be read down to 60% without subverting the policy

underlying s. 347: paras. 242–46.

[85]

On the other hand, as stated in Garland at para. 57, “[a]s a matter of

public policy, a criminal should not be permitted to keep the proceeds of his

crime.” In my view, this applies even if the Overdraft Charges are collected in

ignorance of s. 347.

[86]

… [F]actor 2 is not present. Clearly, the parties did not enter into an

agreement for an illegal purpose or with evil intention.

[87] Factor 3 favours the plaintiffs. The relative bargaining power of

individual Class members was very weak compared to that of the Credit

Unions. This was far from a transaction between equal parties. By contrast, in

Transport North American Express, the offending interest rate was read down

to the 60% threshold, as opposed to the full interest being returned, in part

because that case involved a commercial arrangement negotiated by

sophisticated parties with the benefit of independent legal advice.

[88]

Factor 4 favours the defendants. The plaintiffs did receive a significant

benefit in the form of the shortfalls in their account being temporarily covered.

Also, I accept that the defendants would have incurred some costs in

administering the Overdraft Charges.

[76] He then went on to consider a further factor, the need for an incentive to

ensure that agreements comply with the law:

[89]

More generally, I recognize the defendants’ argument that the $5.00

limit on overdraft charges in s. 347 of the Criminal Code has been unchanged

since its enactment and has been outpaced by inflation. However, in my view,

giving legal effect to such a policy consideration is best left to Parliament. As

Community Savings Credit Union v. Bodnar

Page 27

well, in Terracan at para. 59, the decision respecting notional severance was

made after a caution that “the courts should not be too quick to rewrite

agreements by picking and choosing from alternative provisions which would

result in a legal rate of interest.” Otherwise, the Court stated, “there will be

little incentive for lenders to ensure that their agreements provide for interest

at legal rates.” Similarly here, the Credit Unions ought not to be

disincentivized from being proactive in ensuring their agreements comply with

the Criminal Code. Hence, I would avoid a mechanical approach by simply

rewriting the commercial arrangement between the parties to the maximum

benefit of the defendants.

[77] The judge then provided a remedy:

[90]

As noted in Transport North American Express, “[i]n each case, the

determination of where along the spectrum a given case lies, and the

remedial consequences flowing therefrom, will hinge on a careful

consideration of the specific contractual context and the illegality involved.”

Hence, a spectrum of remedies is available, and I need not confine the

choice of remedies to the binary alternatives of full recovery or severance of

the offending portion of the interest rate.

[91]

Overall, balancing the above factors in all the circumstances, I would

exercise my discretion to order that the defendants retain 50% or $2.50 of the

$5 legitimate portion of the impugned Overdraft Charges. This figure falls

within the legal limit and represents half of the lawful fees the defendants

were entitled to charge. Such a remedy would recognize the unequal

positions of the parties, acknowledge the value the Class members received

by their overdrafts being covered by the defendants, but also prevent the

defendants from being rewarded with a free pass through retroactive

retention of the full $5 they were entitled to charge had they been properly

cognizant of the law and their commercial responsibilities.

Were the Judge’s Conclusions Based in Evidence?

[78] In my view, the judge’s approach reflected three errors. The first lay in his

failure to fully evaluate the evidence in considering the third Transport North

American Express factor. As reproduced above, the judge’s finding in respect of that

factor was:

The relative bargaining power of individual Class members was very weak

compared to that of the Credit Unions. This was far from a transaction

between equal parties.

[79] It is true that the credit unions are substantial institutions, and that individuals

who overdraw their accounts are not likely to have substantial economic clout, but

the third Transport North American Express consideration is not just concerned with

Community Savings Credit Union v. Bodnar

Page 28

the relative size or economic power of the parties. The evidence did not support the

judge’s finding that the members were in a “very weak” bargaining position vis à vis

the credit unions. It is important to recognize that credit unions differ from ordinary

commercial savings and loan institutions in that they are run by their members. The

individual class members, therefore, had the ability to initiate and vote on changes in

policy with respect to overdraft transactions. Further, the evidence shows that, in at

least some instances, credit unions waived or reduced their fees to account for the

situations faced by individual members. There is also evidence showing that some

members reached arrangements with their credit unions that exempted them from

the fees.

[80] Finally, although there is limited evidence on this issue, it is clear most class

members had a choice of credit unions and other financial institutions with which

they did business. If they considered a particular institution’s overdraft charges to be

overly high, they could shop around for a better arrangement at another institution.

[81] The judge also failed to consider the rationale for the third Transport North

American Express consideration. The evidence does not support the idea that the

interest rates charged by the credit unions exploited the weakness of their members.

[82] In saying this, I recognize that the credit unions had the responsibility to

ensure that their transactions did not contravene the criminal interest provision, and

that the individual members did not have any such responsibility. Thus, the credit

unions were “at fault” in charging criminal interest rates. However, that factor,

standing alone, was insufficient to find that a remedy beyond notional severance

was necessary in this case.

The Addition of a Fifth Consideration

[83] The second error identifiable in the judge’s reasons is in paragraph 89, which

appears to add a fifth consideration to the existing North American Transport

Express considerations, saying that “the Credit Unions ought not to be

disincentivized from being proactive in ensuring their agreements comply with the

Criminal Code.”

Community Savings Credit Union v. Bodnar

Page 29

[84] It is important to recognize that the Transport North American Express criteria

apply only in situations where a criminal interest rate has been charged. The four

criteria (and particularly the first three) allow a court to take into account the need for

deterrence and for disincentives to violate the law.

[85] In treating deterrence and disincentive as if they were additional factors to

consider beyond the four set out in Transport North American Express, the judge

allowed those considerations a disproportionate effect on the remedy.

Providing a Remedy not Allowed under Forjay

[86] Finally, in finding that the contracts were enforceable to the extent of allowing

a $2.50 overdraft charge in place of the overdraft charge that had been assessed by

the credit unions, the judge fashioned a remedy that is not one of the three

subsequently found by this Court in Forjay to be available.

The Appropriate Remedy

[87] The parties accept that, if there has been unjust enrichment, the remedy for

that enrichment should take the form of notional severance, as discussed in

Transport North American Express. They disagree, however, on the appropriate

outcome of such severance. The credit unions argue that they should be entitled to

retain an overdraft fee of $5.00 for each transaction, and only refund the amount of

the overdraft charge that exceeded $5.00. The representative plaintiffs support the

judge’s conclusion that an overdraft fee of only $2.50 for each transaction should be

allowed.

[88] As I have indicated, the judge’s conclusion that an overdraft fee of only $2.50

should be permitted for each transaction is the product of an analysis carried out

without the benefit of this Court’s reasons in Forjay, and it is inconsistent with those

reasons.

[89] The parties were correct to suggest that notional severance was the

appropriate remedy in this case. As I read Forjay, that means that the court’s task

was to reduce the interest rate to the maximum legal level.

Community Savings Credit Union v. Bodnar

Page 30

[90] In the case before us, the most obvious way to do that is to reduce the

overdraft charge on each transaction where a criminal rate of interest was charged

to $5.00. In that way, the overdraft charge would not be included in the calculation of

interest, and all of the transactions would be legal under the Criminal Code

provision.

[91] While I accept that the interest rate could be reduced to 60% in ways other

than reducing the overdraft charge to $5.00, the reduction of the overdraft charge, in

this case, is the simplest and most obvious solution, and recognizes that the error

committed by the credit unions was in applying a flat fee that ignored the Criminal

Code provision.

[92] While I acknowledge that the remedies said to be available in Forjay did not

include a remedy of reducing an overdraft charge, that is because Forjay was not a

case involving overdraft charges. Adapting the remedy of reading down the interest

rate by reducing the overdraft charge to $5.00 — the level that would not, under the

statute, be considered interest — is, as I see it, consistent with the underlying

rationale of Forjay, and is the most reasonable way to notionally sever the loan

agreements to make them lawful.

[93] Accordingly, based on the analysis undertaken by the judge, he ought to have

exercised his discretion in favour of reducing the overdraft fees on each transaction

to $5.00. It was an error to go further and reduce the fees to $2.50.

Did a Violation of the Criminal Code Provision Render the Transactions

Unconscionable Under the Provincial Statutes?

[94] The plaintiff class contends that in charging interest beyond the rate allowed

by the Criminal Code, the credit unions engaged in unconscionable acts or practices

contrary to the Provincial Statutes. It says that class members are entitled, where it

is of benefit to them, to elect to pursue claims for damages under those statutes

instead of seeking a restitutionary remedy involving notional severance of the loan

contracts. The idea that class members are entitled to make such an election was

affirmed by this Court in Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd.,

Community Savings Credit Union v. Bodnar

Page 31

2010 BCCA 357. Class members are not required to make the election until matters

have progressed to the point where they are able to gauge which remedy is most

advantageous.

[95] The credit unions say that the issue of whether they engaged in

unconscionable acts or practices requires a detailed examination of the

circumstances of each transaction and is not a question that can be decided on a

class-wide basis. The plaintiff class, on the other hand, says that proof that a

criminal interest rate was charged is enough to establish that the credit unions

engaged in unconscionable acts or practices.

[96] Section 8 of the Business Practices and Consumer Protection Act describes

the circumstances in which an act or practice is unconscionable:

8 (1) An unconscionable act or practice by a supplier may occur before,

during or after the consumer transaction.

(2) In determining whether an act or practice is unconscionable, a court must

consider all of the surrounding circumstances of which the supplier knew or

ought to have known.

(3) Without limiting subsection (2), the circumstances that the court must

consider include the following:

(a) that the supplier subjected the consumer or guarantor to undue

pressure to enter into the consumer transaction;

(b) that the supplier took advantage of the consumer or guarantor's

inability or incapacity to reasonably protect his or her own interest

because of the consumer or guarantor's physical or mental infirmity,

ignorance, illiteracy, age or inability to understand the character,

nature or language of the consumer transaction, or any other matter

related to the transaction;

(c) that, at the time the consumer transaction was entered into, the

total price grossly exceeded the total price at which similar subjects of

similar consumer transactions were readily obtainable by similar

consumers;

(d) that, at the time the consumer transaction was entered into, there

was no reasonable probability of full payment of the total price by the

consumer;

(e) that the terms or conditions on, or subject to, which the consumer

entered into the consumer transaction were so harsh or adverse to

the consumer as to be inequitable;

(f) a prescribed circumstance.

Community Savings Credit Union v. Bodnar

Page 32

[97] The Trade Practice Act was predecessor legislation, repealed in 2004.

Section 4 of that statute is in similar terms to s. 8 of the Business Practices and

Consumer Protection Act. Sections 4(2) and 4(3)(e) of the earlier statute are

materially identical to ss. 8(2) and 8(3)(e) of the Business Practices and Consumer

Protection Act.

[98] The plaintiffs’ claims engage s. 8(3)(e) of the Business and Consumer

Protection Act and s. 4(3)(e) of the Trade Practice Act. This Court has previously

held that claims under those provisions may be determined as common issues, In

Bodnar v. The Cash Store Inc., 2006 BCCA 260, the defendants argued, at the

certification hearing, that a claim involving unconscionable acts or practices under

the legislation could not be certified as a common issue, because statute required an

examination of “all of the surrounding circumstances of which the supplier knew or

ought to have known” to determine whether the claim was made out. They took the

position that the surrounding circumstances of each consumer’s transaction would

be unique. The plaintiff class was successful in having the issue certified as a

common issue and the defendants appealed. This Court upheld the certification,

finding that individualized inquiries would not be necessary:

[13]

… The appellants say that the first four of the s. 8(3) factors all require

individualized assessment.

[14]

The respondents intend to limit their allegations to those falling under

s. 8(3)(e) … and advance a general submission that the terms or conditions

of all transactions are so harsh or adverse to the consumer as to be

inequitable. Relying on the direction in s. 8(2) that the court must consider all

of the surrounding circumstances in determining whether an act or practice is

unconscionable, the appellants contend that they are permitted to raise

factors referred to in ss. 8(3)(a) to (d) on an individualized basis in answer to

the respondents' allegations under subparagraph (e). In my view, that is a

misreading of the provisions. Subsections (a) to (d) are intended to identify

factors from which an inference of unconscionability may be drawn. They do

not outline defences to clams of unconscionability. If the respondents limit

their claims to subsection (e) unconscionability, I do not think subsections (a)

to (d) could be of any assistance to the appellants in defending those claims.

In my view, the commonality of issues … as defined by the Chambers judge

is not undermined by the statutory direction in s. 8 of the [Business and

Consumer Protection Act]. The restriction of consumer transactions by

definition under the [Act] to transactions “for purposes that are primarily

personal, family or household” should be capable of application by general

inference from the small size of the loans without involving individual inquiry.

Community Savings Credit Union v. Bodnar

Page 33

[99] A similar conclusion was reached by this Court in Kilroy v. A OK Payday

Loans Inc. In that case, the trial judge found that the imposition of late fees by the

defendant resulted in interest rates that contravened the Criminal Code provision.

She found the defendant’s actions constituted unconscionable acts or practices

under the statutes. The defendant appealed. This Court upheld the findings of the

trial judge:

[27]

The learned judge concluded that contravention of s. 347 of the Code

was sufficient for the loans, as consumer transactions, to contain an

unconscionable act or practice in breach of the [Business and Consumer

Protection Act] and [Trade Practice Act]. …. A OK contends that s. 347 of the

Code essentially creates a strict liability offence and contravention of that

provision is not per se unconscionable. It submits that at a minimum it is

entitled to discover individual class members on the circumstances referred

to in s. 8(3)(a) to (d) of the [Business and Consumer Protection Act] to

support a defence that A OK did not engage in conduct that would offend

those criteria. The respondent’s position is that the class does not rely on any

s. 8(3)(a) to (d) circumstances to demonstrate unconscionability. The

respondent argues contravention of s. 347 is conclusive that the terms of the

transaction were so harsh or adverse to the consumer as to be inequitable

within s. 8(3)(e). On this theory individual circumstances of particular class

members become irrelevant and there are no grounds for discovery of

individual class members on unconscionability issues.

[28]

… The learned judge applied [Bodnar v. The Cash Store, Inc.] and

concluded that individual assessments were unnecessary. Accordingly there

was no need to canvass individual circumstances on discovery. She went on

to conclude that illegality under s. 347 of the Code could be equated with

unconscionability under s. 8 of the [Business and Consumer Protection Act],

relying on the statement of Lambert J.A. in Harry v. Kreutziger (1978), 9

B.C.L.R. 166 at p. 178 (C.A.) that: “In my opinion, it is … appropriate to seek

guidance as to community standards of commercial morality from legislation

that embodies those standards in law.” I agree that interest charged at a rate

determined to be illegal under the criminal law is unconscionable for the

purposes of the [Business and Consumer Protection Act] and the [Trade

Practice Act], in the context of standard form consumer transactions. I would

reject that ground of appeal.

[100] The credit unions seek to distinguish Bodnar v. The Cash Store Inc. and

Kilroy on the basis that the payday loan business at issue in those cases was

materially different from the business of the credit unions in this case. The trial judge

was not convinced by that argument.

Community Savings Credit Union v. Bodnar

Page 34

[101] I agree with the trial judge that this case is not distinguishable from Bodnar v.

The Cash Store, Inc. or from Kilroy on any principled basis. In the result, I would

affirm the trial judge’s finding that the violations of the criminal interest provision of

the Criminal Code constituted unconscionable acts or practices contrary to the

Provincial Statutes.

Issues Surrounding the Limitation Period

[102] The final issues to be resolved on this appeal concern the postponement of

the limitation period. This action was commenced with the filing of a writ of summons

and statement of claim on December 21, 2004. Under s. 3(5) of the Limitation Act

that was then in force, the general limitation period was six years. Absent any

provision extending the limitation period, claims of members of the plaintiff class that

arose prior to December 21, 1998 would be statute barred. In recognition of the

potential for a Limitation Act defence in respect of such claims, subclasses have

been designated within the plaintiff class for claimants whose claims arose before

December 21, 1998. Those subclasses — one in respect of each of the defendant

credit unions — have been designated the “Mistake Subclasses”, presumably

because the viability of their claims depends on the applicability of the following

provisions of the Limitation Act:

6 …

…

(3) The running of time with respect to the limitation periods set by this Act for

any of the following actions is postponed as provided in subsection (4):

…

(f) for relief from the consequences of a mistake;

…

(4) Time does not begin to run against a plaintiff with respect to an action

referred to in subsection (3) until … those facts within the plaintiff's means of

knowledge are such that a reasonable person, knowing those facts and

having taken the appropriate advice a reasonable person would seek on

those facts, would regard those facts as showing that

(a) an action on the cause of action would, apart from the effect of the

expiration of a limitation period, have a reasonable prospect of

success, and

Community Savings Credit Union v. Bodnar

Page 35

(b) the person whose means of knowledge is in question ought, in the

person's own interests and taking the person's circumstances into

account, to be able to bring an action.

(5) For the purpose of subsection (4),

(a) “appropriate advice”, in relation to facts, means the advice of

competent persons, qualified in their respective fields, to advise on

the medical, legal and other aspects of the facts, as the case may

require,

(b) "facts" include

(i) the existence of a duty owed to the plaintiff by the

defendant, and

(ii) that a breach of a duty caused injury, damage or loss to the

plaintiff,

…

(6) The burden of proving that the running of time has been postponed under

subsections (3) and (4) is on the person claiming the benefit of the

postponement.

…

[103] The credit unions acknowledge that their imposition of overdraft charges in

excess of $5.00 was a result of their mistaken belief that such charges were legal. It

is probable that the members of the Mistake Subclasses shared that belief, but that

is a matter that will have to be established on an individual basis.

[104] In respect of the limitation issue, there was a common issue certified arising

out of s. 6(4) of the statute. The parties also requested that the judge answer a

second question: whether “relief from the consequences of a mistake” in s. 6(3)(f)

was confined to issues of fact, or also included issues of law. While the parties

addressed the issue under s. 6(4) first (as did the judge), I will, instead, begin with

s. 6(3), as that is the threshold for the application of the postponement provision of

the Limitation Act.

Does s. 6(3)(f) Apply to Mistakes of Law?

[105] The plaintiff class argues that “relief from the consequences of a mistake”

includes relief from the consequences of a mistake of law. The judge accepted that

proposition. The credit unions, however, take the position that a mistake of law

cannot suffice as a basis for postponing a limitation period.

Community Savings Credit Union v. Bodnar

Page 36

[106] Historically, a distinction was drawn between actions based on mistake of law

and those based on mistake of fact. Restitutionary relief was available in cases of

mutual mistake of fact, but not in cases of mutual mistake of law. The history of this

distinction is discussed at length in the judgment of Justice Dickson (dissenting) in

Nepean Hydro Electric Commission v. Ontario Hydro, [1982] 1 S.C.R. 347 beginning

at 357, and by Lord Goff of Chieveley in Kleinwort Benson Ltd v. Lincoln City

Council, [1999] 2 A.C. 349 at 368–74.

[107] The distinction was subject to significant criticism, and several exceptions

were developed to the general principle that no recovery was available for money

paid under mistake of law. In Nepean Hydro Electric Commission, the dissenting

judges expressed the view that mistakes of law and mistakes of fact should be

placed on the same footing. In Air Canada v. British Columbia, La Forest J.,

speaking for the majority, adopted the views expressed in the dissent in Nepean

Hydro Electric Commission, saying, at 1201:

… In my view the distinction between mistake of fact and mistake of law

should play no part in the law of restitution. Both species of mistake, if one

can be distinguished from the other, should, in an appropriate case, be

considered as factors which can make an enrichment at the plaintiff's

expense "unjust", or "unjustified".

[108] The House of Lords reached a similar conclusion in Kleinwort Benson, a case

that interpreted limitations legislation. The English Legislation (s. 32(1) of the

Limitation Act 1980) was in the following terms:

[W]here in the case of any action for which a period of limitation is prescribed

by this Act … (c) the action is for relief from the consequences of a mistake

…. the period of limitation shall not begin to run until the plaintiff has

discovered the … mistake … or could with reasonable diligence have

discovered it.

[109] In my view, that legislation is analogous to s. 6(3)(f) of the Limitation Act, and

the House of Lords determination that the provision applied to mistakes of law as

well as to mistakes of fact is persuasive.

[110] Section 6(3)(f), is not, on its face, confined to mistakes of fact. Given the

modern inclination of the law of restitution not to distinguish between mistake of law

Community Savings Credit Union v. Bodnar

Page 37

and mistake of fact, I am not convinced that there is any reason to interpret s. 6(3)(f)

as being confined to mistake of fact. The judge was, in my view, correct in finding

that the provision applies equally to actions for relief from the consequences of

mistakes of law and of fact.

Was the Question of Whether a Reasonable Person Would Have Sought

Legal Advice Properly Answered as a Common Issue?

[111] The common issue certified in respect of s. 6(4) was:

[W]ould a reasonable person, having been charged an overdraft fee in

excess of $5 by the Credit Union, seek advice as to whether those acts

established a cause of action against the Credit Union, prior to February 5,

2003?

[112] The credit unions took the position that the question could not be answered

on a class-wide basis, and that individual inquiries would have to be made. The

judge did not accept that position:

[110] I do not agree with the defendants on this point. The fees in excess of

$5 charged by the Credit Unions, though prima facie illegal under the

Criminal Code, were simply too small to prompt a customer to seek advice

about the legality of the fees. As well, a reasonable person would place

reliance on the sophistication of the Credit Unions and would assume that

each of the defendants had made appropriate inquiries such that the basic

lawfulness of the interest charges had been determined.

[111] Moreover, the Overdraft Charges were incurred in return for the

service of the Credit Unions temporarily covering an overdrawn account. A

reasonable person in such circumstances would likely expect to pay some

minor fee for such a service. The fact that none of the Credit Unions received

any complaints about the overdraft fees prior to 2003 tends to confirm this

view.

[112] I find that a reasonable person, having been charged an overdraft fee

in excess of $5 by one of the defendants, would not have sought advice as to

whether those acts established a cause of action against the Credit Union,

prior to February 5, 2003.

[Emphasis in original.]

[113] The credit unions say that the judge erred in failing to appreciate that each

individual class member had different information at different times prior to February

5, 2003. They say that the court was not in a position to determine what advice a

Community Savings Credit Union v. Bodnar

Page 38

reasonable person would take on the information available without analysing, for

each person, what information they had.

[114] In my view the judge did not err in his reasoning. The answer to the question

of whether the amounts in issue were too small to reasonably prompt a person to

seek legal advice will be the same for every member of the Mistake Subclass. There

is no suggestion that the magnitude of the unlawful interest charges for any

individual rose to a level that would have prompted a person to engage a legal

advisor.

[115] Similarly, there is no basis to interfere with the judge’s assessment that it

would be reasonable for a person in the position of a class member to assume that

the credit union had taken steps to ensure that its charges were lawful.

[116] It is, of course, possible (though improbable) that some members of the

Mistake Subclasses had knowledge that the interest charges were unlawful. They

may have been aware of the Criminal Code provision, or they may have been more

generally aware of the existence of very low legal limits on overdraft charges without

necessarily being aware of the precise statutory provisions. A reasonable person

with such knowledge would have been in a position to seek legal advice. Such a

person, however, could not rely on s. 6 of the Limitation Act, because they could not

establish that their claims were “for relief from the consequences of a mistake.”

[117] As I have indicated, the question of whether a class member had actual

knowledge that the overdraft charges were unlawful is a question that must be

decided on an individual basis. It is conveniently answered in the course of inquiring

into whether an individual’s action qualifies as one “for relief from the consequences

of a mistake.” It need not be re-canvassed under s. 6(4).

[118] The credit unions contend, however, that regardless of actual knowledge,

members of the Mistake Subclasses should be presumed to know the law, and

therefore deemed to have had knowledge of Criminal Code provisions.

Community Savings Credit Union v. Bodnar

Page 39

[119] There is scope for an assumption that a “reasonable person” is one who is

familiar with basic aspects of the law. A reasonable person operating in a

specialized field might also be fixed with a responsibility to ascertain the law

applicable to that field. There is a principled distinction to be drawn, however,

between assuming that reasonable people are aware of fundamental aspects of the

law — for example, that assaulting a person is unlawful — and presuming that they

are aware of the details of regulatory provisions of limited applicability. Civil society

depends on people having a general awareness of broadly applicable legal

propositions, and it is appropriate to fix reasonable people with such awareness. On

the other hand, it is unrealistic to assume that a reasonable person will have an

encyclopedic knowledge of the law that includes every detail of every statutory

provision.

[120] The provision in question in this case is not one that can be assumed to be

within the knowledge of members of the public, or even the subset of the public that

were members of credit unions. Indeed, the evidence establishes that the credit

unions themselves did not have knowledge of the provisions. Further, as I have

indicated, what are essentially regulatory provisions governing credit unions would

not ordinarily be matters dealt with in the Criminal Code or, indeed, in a federal

statute. There is no reality to a presumption that members of the public are aware of

the provision.

[121] The credit unions, nonetheless, contend that there is a general proposition

that people are presumed to know the law. In support of this proposition, they have

cited several cases decided in the context of limitation provisions. In examining the

cases, it is important to appreciate that the structure and language of limitations

statutes in various jurisdictions and at various times differ. Caution must be

exercised in using cases decided under one statutory regime as precedents under a

different regime.

Community Savings Credit Union v. Bodnar

Page 40

[122] Many jurisdictions use the concept of “discoverability” to determine when a

limitation period begins. Typically, when they speak of “discoverability”, they are

referring to the discoverability of material facts, not law.

[123] The credit unions say that the British Columbia legislation should be

interpreted as if the test were simply one of discoverability. In support of their

argument, they cite dicta from the dissenting judgment of Iacobucci and Major JJ. in

Novak v. Bond, [1999] 1 SCR 808:

[10]

British Columbia has adopted a specific postponement provision

within the statute. The role of the postponement provision is the same as that

of the discoverability rule: to ensure that plaintiffs who, in the exercise of

reasonable diligence, cannot know that they have a viable claim against a

particular defendant or cannot reasonably bring an action, will not be barred.

[Emphasis added by the appellants.]

[124] While I do not doubt that s. 6 had the same role in the Limitation Act as the

discoverability rule has in other limitation legislation, that does not mean that it fulfils

that role in precisely the same way. In setting a test for determining the appropriate

time for a plaintiff to bring an action, s. 6 of the Limitation Act does not confine itself

to considering the plaintiff’s knowledge of material facts.

[125] The test under s. 6(4) is not one of simple discoverability of material facts.

Instead, it includes the idea that people are entitled to the benefit of professional

advice. Thus, it premises the running of the limitation period not on simple

knowledge of material facts, but on a finding that a reasonable person with

knowledge of those facts would seek appropriate advice and, having obtained that

advice, would recognize the existence of a cause of action. Where the known facts

would not prompt a reasonable person to take advice, time does not begin to run.

[126] With this distinction in mind, I turn to the case law. The case most heavily

relied on by the credit unions is Boyce v. Toronto (City) Police Services Board, 2011

ONSC 53 at para. 23, aff’d 2012 ONCA 230. In Boyce the plaintiff claimed that he

suffered damages as a result of an assault committed on him by peace officers while

he was incarcerated in a holding cell. The action was commenced after the expiry of

Community Savings Credit Union v. Bodnar

Page 41

the limitation period. The plaintiff did not dispute that he had knowledge, from the

outset, of all information that he needed to commence a claim, including knowledge

that assaults are unlawful. He said, however, that he “was not aware that a

limitations period existed”, and so waited until after the officers had been criminally

convicted before commencing his action.

[127] The applicable limitation legislation was the Limitation Act, 2002, S.O. 2002,

c. 24, Sched. B. The statute provided for the limitation period of two years from the

date on which the claim was “discovered”. The relevant section was as follows:

5. (1) A claim is discovered on …

(a) the day on which the person with the claim first knew,

…

(iv) that, having regard to the nature of the injury, loss or damage, a

proceeding would be an appropriate means to seek to remedy it ….

[128] The appellant contended given that he did not know there was a limitation

period, he was entitled to hold the view that an action was not an appropriate means

to seek a remedy until after the criminal proceedings were concluded. The chambers

judge rejected that argument:

[23]

Section 5(1)(a)(iv) does not import an idiosyncratic limitation period

calibrated by the claimant’s familiarity with or ignorance of the law. The test is

an objective one. While it is possible to envisage that a new kind of right

might arise that has not been hitherto protected, thus making it arguable that

a civil proceeding might not be seen objectively as an appropriate means to

seek to remedy, a battery causing personal injury is a classic example of the

kind of wrong that is appropriate for redress by court action. A citizen is

presumed to know the law of the land.

[129] The Ontario Court of Appeal affirmed the decision, in a brief written

endorsement in which it indicated that it agreed with the reasons of the chambers

judge.

[130] In my view, the structure and language of the legislation considered in Boyce

is not sufficiently close to the legislation in issue in this case to provide much

guidance. The Ontario statute based the limitation period on discoverability alone. It

is noteworthy that even within that regime, the judge was prepared to accept that in

Community Savings Credit Union v. Bodnar

Page 42

respect of novel legal rights, there might be room for a court to consider a

postponement in the running of the limitation period.

[131] The credit unions cite two further Ontario decisions for the proposition that

“error or ignorance of the law or legal consequences of the facts does not postpone

the running of the limitation period”: Lauesen v. Silverman, 2016 ONCA 327 and

Coveley v. Thorsteinssons LLP, 2018 ONSC 4804. Given that those cases were

decided under the Ontario statute, they are not of assistance in this case.

[132] The only British Columbia decision cited by the credit unions in support of the

proposition that ignorance of law cannot postpone the running of the limitation period

is Bank of Montreal v. Ricketts (1990), 44 B.C.L.R. (2d) 95 (C.A.). In that case,

Justice Locke, speaking only for himself, stated, at 110 that “[i]gnorance of the law or

a mistaken opinion is on principle no excuse and has been held on similar legislation

not to be a ‘fact’, within the meaning of s. 6(3).”

[133] The comment referred to does not appear to me to be essential to the

reasoning of Justice Locke. Indeed, it is not at all clear that the appellant in the case

was relying on any error of law or mistaken opinion: the case turned on the question

of whether the plaintiff had been diligent in determining the identities of parties that it

proposed to add as defendants to the action. The majority of the court (including

Justice Locke) found that the appellant had been dilatory, and that its explanation for

the delay was inadequate.

[134] Justice Locke spoke only for himself, and neither the judge that concurred in

the result nor the dissenting judge made any reference to the role of “ignorance of

the law” in the limitations context. Accordingly, Justice Locke’s observation does not

bind the Court.

[135] The case cited as having been decided “on similar legislation” is Do Carmo v.

Ford Excavations Pty Ltd. (1984), 154 C.L.R. 234 (Aus. H.C.). The facts of

Do Carmo were straightforward. Mr. Do Carmo was a worker from Portugal who

immigrated to Australia in 1971, at which time he secured employment as a

Community Savings Credit Union v. Bodnar

Page 43

labourer. He was often exposed to silica dust in the course of his work. He left his

employment in June of 1974. and was diagnosed with silicosis in 1976 after showing

signs of a progressive pulmonary disability. He sought legal advice from his union’s

solicitors in late 1976 but was not told that he had a viable cause of action against

his employer. In late 1978, the solicitors gave him the impression that there was no

reasonable basis for commencing an action.

[136] In July 1979, Mr. Do Carmo sought independent legal advice, and in

September of that year, his solicitor obtained an expert report that established that it

was widely known in the industry throughout the period of Mr. Do Carmo’s

employment that the use of water hosing and face masks minimized the risk of

silicosis. Mr. Do Carmo’s employer did not provide that protection.

[137] On receiving the report, Mr. Do Carmo’s solicitor recommended commencing

a lawsuit, and the claim was filed shortly thereafter.

[138] The applicable limitation legislation was the Limitation Act 1969 (N.S.W.), as it

existed between 1971 and 1979. Under s. 14 of that statute, an action could not be

brought “after the expiration of … six years running from the date on which the

cause of action first accrue[d].” The courts considered it clear that the limitation

period had run before the action was commenced.

[139] The New South Wales Act did not have a provision that served to postpone

the running of a limitation period, but did have a provision giving the court discretion

to extend the limitation period if the plaintiff could show that

any of the material facts of a decisive character relating to the cause of action

was not within the means of knowledge of the [plaintiff] until a date after the

commencement of the year preceding the expiration of the limitation period

for the cause of action.

[140] The provisions of the legislation were complicated, prompting Murphy, A.C.J.

to note that the statute was

… derived from and cop[ied] the complexity and obscurity of the English

Limitation Act 1963 which Lord Reid in Smith v. Central Asbestos Co. (1973)

Community Savings Credit Union v. Bodnar

Page 44

A.C. 518, at p. 529 ("the Asbestos Case") stated had "a strong claim to the

distinction of being the worst drafted Act on the statute book".

[141] For better or for worse, the same influence is seen in the Limitation Act that

we are considering. Some of the concepts in the British Columbia statute mirror

those in the New South Wales statute, and some of the language is similar. There

are, however, also differences. Among those differences is that the British Columbia

statute does not employ the concept of “material facts of a decisive character.”

[142] The majority of the High Court of Australia held that because Mr. Do Carmo

did not know about the industry’s state of knowledge in 1971 until his solicitor

obtained the expert report, he lacked knowledge of “material facts of a decisive

character.” It also found that he had exercised due diligence in seeking out

information. Accordingly, the limitation period was extended.

[143] The majority of the court was of the view that a mere lack of knowledge of the

legal requirements for a negligence action would not have sufficed to extend the

limitation period. That appears to be the finding Justice Locke had in mind when he

said “[i]gnorance of the law or a mistaken opinion is on principle no excuse” for

extending a limitation period.

[144] In my view, Justice Locke’s statement overstated the scope of the finding in

Do Carmo as well as the similarity of the New South Wales regime to the British

Columbia legislation.

[145] Apart from the fact that British Columbia did not employ the concept of

“material facts of a decisive character” in its legislation, it is also noteworthy that the

provisions of the New South Wales statute considered in Do Carmo were only those

applicable to personal injury negligence actions. A separate, simpler, regime applied

to actions based on mistake:

56. (1)… [W]here there is a cause of action for relief from the consequences

of a mistake, the time which elapses after a limitation period … commences

to run and before the date on which a person having … the cause of action

first discovers, or may with reasonable diligence discover, the mistake does

Community Savings Credit Union v. Bodnar

Page 45

not count in the reckoning of the limitation period for an action on the cause

of action by him ….

[146] Given the important differences between the two statutes, and the specific

findings of fact in Do Carmo, little weight can be placed on it in interpreting the

British Columbia Limitation Act.

[147] Section 6(4) of the Limitation Act is not concerned merely with discovery of

material facts. In that respect, the legislation is more similar to the English statute

considered in Kleinwort Benson than it is to the Ontario legislation at issue in Boyce

or even to the New South Wales legislation at issue in Do Carmo.

[148] The credit unions raise one further concern with the postponement of the

limitation period, in the form of a floodgates argument. They say that if the chambers

judge was correct in finding that the limitation period is postponed in this case, then

“… there would never be a limitation period for an unjust enrichment claim premised

on a provision of a public statute that a set of proposed class members happened to

be unaware of.” I do not accept that proposition.

[149] First, as I have indicated, there is scope for finding that a reasonable person

should be aware of fundamental propositions of law, and also that a reasonable

person has a duty to ascertain the law relating to any specialized area in which they

do business. The evidence in this case demonstrated that few people were aware of

the special provision of the Criminal Code governing credit union interest charges.

[150] I would also note that while the Limitation Act provided for the postponement

of limitation periods, it did not allow them to be postponed indefinitely. Section 8 of

the Act set out an ultimate limitation period, which could not be extended or

postponed.

[151] In my opinion, the judge made no errors in his analysis of s. 6 of the

Limitation Act, or in his answer to the common question arising out of it.

Community Savings Credit Union v. Bodnar

Page 46

Conclusion

[152] The trial judge concluded his judgment by setting out his answers to the

common questions as follows:

[119] …:

(a) Does an Overdraft Charge exceeding $5.00 constitute interest as

defined by and for the purpose of s. 347 of the Criminal Code, either

in whole or in part?

Yes. … [T]his determination was made … in an earlier judgment.

(b) If an Overdraft Charge exceeding $5.00 constitutes interest under

s. 347 of the Criminal Code, either in whole or in part, has the

collection by the Credit Unions of such Overdraft Charges resulted in

the payment by Class members and the receipt by the Credit Unions

of interest at a criminal rate in respect of the overdrafts by Class

members of their accounts, contrary to s. 347(1) of the Criminal

Code?

Yes. The actuarial evidence provided by the plaintiffs establishes

that each Credit Union received interest at a criminal rate.

Whether each individual member of the Class paid interest at a

criminal rate can be ascertained at the next stage of the class

proceedings.

(c) If the Credit Unions have, through the collection of overdraft charges,

received interest at a criminal rate from Class members:

i. have the Credit Unions benefited by the receipt of such interest?

Yes.

ii. has the Plaintiff shown that no juristic reason from an established

category exists to deny recovery of such interest from the Credit

Unions?

Yes.

iii. have the Credit Unions established as a matter of law any residual

defence which constitutes a juristic reason for the enrichment of the

Credit Unions?

No, except that the appropriate remedy is to allow the

Credit Unions to retain $2.50 of each Overdraft Charge.

(d) If the Credit Unions have been unjustly enriched by the receipt of interest at a

criminal rate from members of the Class in respect of overdrafts of their

accounts, are the Credit Unions liable to account to those Class members for

the unlawful interest received from them and all profits earned therefrom?

Yes. Given the answer to common issue (c), the parties agree that

(d) must be answered in the affirmative.

Community Savings Credit Union v. Bodnar

Page 47

(e) If the Credit Unions have received interest at a criminal rate from Class

members pursuant to the terms upon which the Credit Unions created or

increased an overdraft in the Class members’ accounts:

i. are the individual circumstances of dealings between each Class

member and the Credit Unions relevant to the determination of

whether such receipt constitutes an unconscionable act or practice

within the meaning of s. 4 of the Trade Practices Act, R.S.B.C. 1996,

c. 457 and s. 8 of the Business Practices and Consumer Protection

Act, S.B.C. 2004, c. 2? and

No.

ii. considering any circumstances found to be relevant as aforesaid,

does the creation or increase of an overdraft by the Credit Unions and

its receipt of interest at a criminal rate in respect of an overdraft

constitute an unconscionable act or practice within the meaning of s. 4

of the Trade Practices Act and s. 8 of the Business Practices and

Consumer Protection Act?

Yes

(f) If the conduct of the Credit Unions in creating or increasing an overdraft in the

Class members’ accounts or collecting interest from Class members in

respect of those overdrafts constitutes unconscionable act or practice

pursuant to s. 4 of the Trade Practices Act and s. 8 of the Business Practices

and Consumer Protection Act, are the Credit Unions liable for damages or

restitution to those Class members who have suffered any loss or damage

because of the unconscionable act or practice, pursuant the Trade Practices

Act, s. 22(1) and the Business Practices and Consumer Protection Act,

ss. 104, 105, 171(1), and 172(3)?

Yes.

(g) If the Credit Unions have through the collection of overdraft charges received

interest at a criminal rate from Class members, have the Credit Unions

charged and collected those overdraft charges in the mistaken belief that the

charges were lawful?

Yes. The parties agree on this issue.

(h) If the answer to (g) is yes, did the Credit Unions receive any challenges or

questions from Class members concerning the legality of the overdraft

charges in excess of $5 charged by the Credit Unions, prior to February 15,

2003?

No. The parties also agree on this issue.

(i) If the answer to (g) is yes, would a reasonable person, having been charged

an overdraft fee in excess of $5 by the Credit Unions, seek advice as to

whether those acts established a cause of action against the Credit Unions,

prior to February 5, 2003?

No.

Community Savings Credit Union v. Bodnar

Page 48

[153] In my view, the only error in these answers is in respect of answer (c)(iii). As I

have indicated, the judge ought to have allowed the credit unions to retain $5.00 of

each overdraft charge rather than only $2.50. Accordingly, I would amend the

answer (c)(iii) to read: “No, except that the appropriate remedy is to allow the Credit

Unions to retain $5.00 of each Overdraft Charge.”

[154] Apart from the amendment to that answer, I would affirm the judge’s

conclusions.

“The Honourable Mr. Justice Groberman”

I AGREE:

“The Honourable Mr. Justice Harris”

I AGREE:

“The Honourable Mr. Justice Grauer”