Ontario Court Of Appeal Overturns Lower Courts, Certifies Criminal Interest Cash-Advance Class Action

Originally published by LexisNexis, June 2007

Markson v. MBNA Canada Bank, 2007 ONCA 334

The Court of Appeal for Ontario recently overturned the decisions of two lower courts in this class proceeding, which had twice been refused certification as a class action.

The Plaintiff, Markson, alleged that MBNA's transaction fees and interest in connection with cash advances from credit cards are in violation of s. 347 of the Criminal Code, which prohibits the charging of "interest" that exceeds a rate of 60% per annum. "Interest" is very broadly defined in the Criminal Code to include all charges incurred for the advancing of credit, not limited to interest as commonly understood. In other cases the term has likewise been interpreted very broadly. Markson sought an injunction, damages for breach of contract and a restitutionary remedy in unjust enrichment.

Mr. Justice Cullity of the Superior Court had refused to certify the class action on the grounds that the contractual and restitution claims did not raise common issues and because a class proceeding was not the preferable procedure. The majority of the Divisional Court agreed, with a dissent by Mr. Justice O'Driscoll (see our Class Action Update, June 2007).

In the Court of Appeal, Mr. Justice Rosenberg identified the "fundamental issue" as whether a class proceeding would be appropriate where all members of the proposed class were at risk of being charged interest at a criminal rate, but where only a small portion of that group actually were charged interest at that rate - and where, in fact, some members of the class may not mind being charged the interest if it means they can continue to receive cash advances on the cards without restrictions on the size of advances or repayment terms.

As a matter of general principle, Justice Rosenberg disagreed with the position that a class proceeding should not be certified in cases where the defendant had caused widespread but individually minimal harm. This is, in his view, the ideal case for a class action, as it may be the only avenue to redress the wrong and hold the wrongdoer to account.

Justice Rosenberg did agree with the motions judge on certain points. The difficulty and expense to which MBNA would be put in determining which of its customers had, in fact, been charged interest at a criminal rate was a relevant factor in the analysis. If a large number of transactions had to be examined individually, that did suggest that the claims of...