The Solar Power Decision: A Matter Of Interest

Introduction

On January 10, 2018 the Ontario Superior Court of Justice released its decision in Solar Power Network Inc. v ClearFlow Energy Finance Corp, 2018 ONSC 7286; leave to appeal granted on February 15, 2018 (the "Solar Decision"). This decision, absent reversal upon appeal, could significantly alter long-standing Canadian commercial law and practice. The effects of this decision could extend to virtually all non-consumer loan and credit agreements and other contracts or documents pursuant to which interest is payable.

In light of this decision and in order to ensure compliance with s. 4 of the Interest Act, RSC 1985, c I-15 (the "Act"), creditors and lawyers need to carefully consider how they incorporate and calculate interest, and fees that may be classified at law as interest, into agreements as an annual rate, for interest amounts calculated based on any period less than a year of 365 or 366 days as the case may be (daily, weekly, monthly, etc.).