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ARTICLE · 05 OCTOBER 2018

Sunny Day For Lenders: ClearFlow Energy Appeal Successful

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Lenders can breathe a sigh of relief: the use of formulas to express annual interest rates can satisfy Section 4 of the Interest Act (Canada).

CanadaFinance and Banking
Alyssa Gebert
Alyssa Gebert
Jonathan Yantzi
Jonathan Yantzi
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Lenders can breathe a sigh of relief: the use of formulas to express annual interest rates can satisfy Section 4 of the Interest Act (Canada).1

The Court of Appeal for Ontario (the "Court"), in reasons written by Justice Sharpe,2 allowed an appeal of a surprising decision by the Superior Court of Justice,3 which held that a common loan agreement interest rate provision contravened Section 4.

Section 4 requires that any written agreement for the payment of interest at a rate or percentage per day, week, month or any period less than one year contain an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent. Justice Sharpe held that an annualizing formula in a loan agreement between borrower Solar Power Network Inc. ("Solar") and lender ClearFlow Energy Finance Corp. ("ClearFlow") met this requirement.

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