No. 2]
RECENT CASES
Recent Cases
–
LOAN OF MONEY
–
OBLIGATIONS
POWER AND DISCRETION OF COURT –
OPERATION HARSH AND
UNCONSCIONABLE –
ARTICLE
1040c C.C. Boutin v. Corporation de Finance Belvedere, [1970]
C.A. 389; Fribourg Investment Inc. v. Savage and Dame Clavette,
[1970] C.A. 612.
In two recent decisions of the Quebec Court of AppeaJ, the terms
“harsh and unconscionable” of Article 1040c C.C. are given a nu-
merical definition. The Court has used the powers granted to it in
1964 by the Act to protect borrowers against certain abuses and
lenders against certain privileges’ and has reduced the interest on
a loan from 36% to 12%.
The Fribourg Investment 2 case dealt with a hypothec and this
fact must have been relied upon since the risk and the circumstances
involved must be considered in deciding whether the terms are
harsh and unconscionable. Owen, J., did not, unfortunately, expand
on his decision, and therefore, it is not known what criteria were
used to lower the interest rate to 12%.
More interesting for our purposes is Boutin v. Corporation de
Finance Belvedere.3 This action involved a loan of $25,000 taken
to finance the purchase of equipment. The cost of the loan to the
borrower is best stated in the words of Cr~te, J., the trial judge,
reproduced in Casey, J.’s decision:
La preuve a 6tabli clairement que, pour un pr~t de $25,000 consenti par la
d4fenderesse au demandeur, le 5 janvier 1.966, le demandeur a dfi payer h
la d6fenderesse, sur une p6riode d’un peu plus de quatre mois, une premiere
connission de $5,000, une seconde de $4,000 et des frais de perception de
$1,560, soit un total de $10,560.4
Casey, J., in his calculations, withdrew the $1,560 charged for
collection as this sum may be considered as not being a disguised
financing charge. Even without this sum, the return to the lender
was roughly 36%.
The issue was centered around the question of whether the Court
could review a transaction once the loan has been repaid. The trial
judge decided that once the obligation is extinguished by repayment,
112-13 Eliz. II, ch. 67.
2 [1’70] C.A. 612.
3 [179] C.A. 889.
4 Ibid., at p. 389.
McGILL LAW JOURNAL
[Vol. 16
the Court is without power to order a return of harsh and un-
conscionable interest.
On appeal, the Court agreed with the trial judge that, all cir-
cumstances considered, the cost of the loan was excessive. However,
Casey, J., disagreed with the trial judge in stating that the power
of the Court is not extinguished when the obligation under the
loan is extinguished. Furthermore, 1040c C.C. is stated to be of
public order and therefore the debtor cannot waive or renounce
his rights under this article.5
In deciding that the Court could still review the loan, Casey, J.,
stated that 1040c C.C. created an entirely new action. It is worth
quoting at length:
Article 1040c C.C. creates an entirely new action that becomes viable if the
circumstances of the loan make the operation, i.e. the whole matter, harsh
and unconscionable and its cost excessive. The moment this is shown, the
Court may intervene and since the rule is one of public order, this inter-
vention may occur at any stage and at any time. The Article empowers the
Court to look at all the circumstances, to reopen any loan and if in its
discretion it finds that the costs of the loan has been excessive, it may order
the creditor to return the excess over what it regards as fair.6
In deciding on 12% as a fair rate of return, Casey, J., considered
the Small Loans Act 7 and two rates that the parties had used in
computing interest. However, it seems that 12% is mainly a figure
that Casey, J., in his discretion, thought to be fair.
This case is a very welcome addition to jurisprudence. Not only
does it give a numerical interpretation to 1040c C.C., but it also
establishes that the borrower has a recourse even after he has
discharged his obligations. It is hoped that the Courts will now
clearly enunciate the circumstances which will be considered
in
deciding what is a fair rate in similar actions.
One final comment to be made deals with an aspect not considered
by the Court. The final paragraph of 1040c C.C. permits testimony
to prove the actual sum advanced. This is clearly an exception to
the rule in 1234 C.C. which does not allow testimony to contradict
a valid written instrument. However, it is a necessary corollary to
the first two paragraphs of 1040c C.C. since it would be all too
easy for a lender to circumvent these provisions by advancing a
lesser sum than that marked on the instrument.
A. T. M.
5Ibid., at p. 391.
6 Ibid.
7 R.S.C. 1952, ch. 251.
No. 2]
RECENT CASES
HIPPY HUSBAND
–
DIVORCE – MENTAL CRUELTY –
USE OF
DRUGS – ULTIMATUM TO WIFE – DIVORCE ACT, s. 3 (d) – F. V. F.
(1970), 11 D.L.R. (3d) 6Z1.
Use of narcotics, sale of drugs, living a “hippy life” from the
proceeds do not automatically amount to mental cruelty entitling the
spouse to obtain a divorce. This has been decided in F. v. F., 1 where
Washington, Co. Ct. J. outlined the activities of the husband and the
reactions of the wife to determine whether the particular facts in
that case would warrant a conclusion that there was, in effect, mental
cruelty.
The respondent, despite the “continuing, persistent and entreating
protests” of petitioner, continued to use and sell drugs. The husband
furthermore had drug parties literally every night.
However, Washington, J., in order to determine whether such
activity rendered continued cohabitation intolerable, considered peti-
tioner’s background. He found that the wife was “raised in a home
where love and happiness and good common sense prevailed.” Peti-
tioner had on several occasions asked her husband to give up the
hippy life but all this was to no avail. In fact, her husband had
gone to the extent of giving her an ultimatum, whereby she would
either join him in his style of life or get out.
The test used by the judge was the one adopted in Zalesky V.
Zalesky to the effect that:
The whole history of the marriage must be examined and a conclusion
reached after tating into account all relevant facts –
the question is whether
this conduct by this man to this woman, or vice vema is cruelty.3
What was the nature of the cruelty? The judge qualifies it as
a “short but nevertheless vivid period of exquisite mental torture.”4
Petitioner found her husband’s behaviour “repellent’ and “abhorrent”
and her counsel submitted that her feeling went deeper than a mere
moral or legal disapproval.
The more interesting aspect of this decision is that the court
seemed to rely on the testimony of petitioner and her mother to
establish mental cruelty. The only evidence of effect on mental
health seems to be the mother’s observations that petitioner’s health
was affected.
1 (10700), 11 D.L.R. (Sd) 621.
2 Ibid., at p. 624.
3 (1968), 1 D.L.R. (3d) 471 at p. 472.
4 F. V. F., at p. 626.
McGILL LAW JOURNAL
[Vol. 16
It
is submitted that the judge did not sufficiently consider
whether there was in effect mental cruelty. On the mere testimony
of petitioner and her mother, the judge was not sufficiently informed
to meet the standard of Knoll v. Knoll, which requires proof of injury
to “health as will give reasonable apprehension that the continuance
of such conduct will cause permanent injury of mind or body.”‘0
In such cases as F. v. F., the judge should require petitioner to
produce expert medical witnesses who can testify on the effect of a
certain behaviour on petitioner’s mental state. The mental torture
referred to by the judge does not have any medical basis. The Divorce
Act requires the cruelty to be such as to render cohabitation intoler-
able; such cruelty should be proved by more than the testimony of
interested parties.
A. T. M.
MUNICIPAL LAW – NECESSITY OF NOTICE UNDER 622 CITIES AND
TOWNS ACT, PRELIMINARY EXCEPTION, FAILURE TO INVOKE, Ville
de Mont-Royal (d~fenderesse) appelante v. Dame Leiboviteh et
Vir (demanderesse)
intimfe [1970] C.A. 522 and Corporation
Municipale de la Cit6 de Magog (d~fenderesse) appelante v.
Dame Gigu~re (demanderesse)
Two recently reported decisions of the Quebec Court of Appeal
considered three different aspects of the notice requirement of
Article 622 of the Cities and Towns Act,’ namely the necessity for
same, the exceptions to giving same and the effect of Article 167
C.C.P.
intim6e [1970] C.A. 983.
In resolving these three issues the two Plaintiffs must be won-
dering exactly what happened, for on the one hand a Plaintiff who
gave no notice at all was able to have her case heard on the merits
while on the other hand a Plaintiff who gave a notice, although it
was late, was not.
In the City of Magog case 2 a decision rendered March 31, 1967
but not reported until 1970, the facts were as follows:
5 (1969), 6 D.L.R. (3d) 201 at p. 205.
1 S.R.Q. 1964, c. 193.
2 [1970] C.A. 983.
No. 2]
RECENT CASES
The Respondent, Dame Gigu~re, initiated an action in dam-
ages against the municipal corporation of Magog claiming $35,000
in damages, alleged to be the result of flooding from the city’s sewer.
As undisputed fact, Dame Gigu~re gave no notice to the city but
simply instituted an action on September 27, 1966 and the city only
moved by way of preliminary exception on October 31, 1966, i.e. at
a time beyond the five day delay of Article 162 C.C.P.
As Mr. Justice Hyde pointed out:
The whole question for us is whether the waiver provisions of the Cities and
Towns Act above quoted are nullified by the terms of article 167 of the
new C.P. reading as follows:
The dismissal of a suit for one of the grounds set forth in article 165
may be urged notwithstanding the failure to do so within the delays; but
if an exception made beyond the delays results in the dismis
l of the suit,
the costs shall be the same as if the exception had been made within the
delays, unless the court otherwise orders.
This is new law because under the old code the failure to take the
exception within the required delay was fatal. 3
Mr. Justice Hyde with whom Casey, J. concurred, after com-
menting that the notice is an exceptional protection to the Defendant
municipalities and constituted a real hazard prospective claimants,
concluded:
It is therefore right and proper that the municipality for its part be required
to invoke such failure within a specific delay and that failure to do so should,
as provided by sub-section 4 above quoted, constitute “a waiver of such
irregularity”.
It was unnecessary for the Legislature to spell this out under the old
rules applicable to exceptions to the form.
Article 167 C.P. to all intents and purposes removes the effectiveness
of the stipulated delays for making of these exceptions except insofar as
costs are concerned.
The delay for making them, however, is still specified in the new code,
namely five days, and in the face of the specific provision that the failure
to invoke the exception within the delay constitutes a waiver of such irregu-
larity, I would in the interest of preserving a right of action, continue to
‘apply that provision.4
Mr. Justice Rinfret in his dissent adopted a rather mechaical
approach to the whole question. He stated, that since the concluding
words of Article 622 of the Cities cnd Towns Act read:
Le d~faut d’invoquer ce moyen par exception A la forme dans les ddlais et
suivant los r~gles 6tablies par le Code de procdure civile couvre cette
irregularit6.
3 Ibid., at p. 984.
4Ibid.
McGILL LAW JOURNAL
[Vol. 16
and that as the rules of the Code of Procedure had been changed
from the old Article 164 C.C.P. to a combination of Articles 162
and 167 of the new C.C.P., therefore:
Le jugement de premiere instance sur ce point doit done 6tre infirm6.
In the Town of Mount Royal case6, a decision rendered March 25,
1970, the fatts may be briefly stated as follows:
1. The Respondent Dame Leibovitch was injured from a fall
on Bates Road in the Town of Mount Royal on November 12, 1968.
2. November 22, 1968, Dame Leibovitch’s attorney addressed
a letter to the City of Montreal outlining the damages which she
was holding the city entirely responsible for. On December 12 the
City advised Dame Leibovitch’s atorney that Bates Road was
within the jurisdiction of the Town of Mount Royal and was
therefore not within the jurisdiction of the City of Montreal. This
same -day, namely December 12, a new letter was addressed to the
Town of Mount Royal holding them responsible. As undisputed fact
this letter addressed to the Town of Mount Royal was outside the
15 day delay of Article 622 C.T.A. and the Town of Mount Royal
urged the preliminary exception of 162 within the 5 days imme-
diately following receipt, namely within the delay of Article 162
C.C.P.
The sole question which had to be decided by the court was
whether or not a late notice was fatal. Taschereau, J., relying on
the decision of the City of Quebec v. Baribeau7 as an authority
that notice was not only necessary, but in fact gave right to the
action and the decision of Dame Rheaume v. The City of Quebec 8
which stated that the exceptions of 622(4) C.T.A. could only be
invoked in circumstances tantamount to force Matjeure, allowed the
exception to the form and dismissed Dame Leibovitch’s action. The
decision of Mr. Justice Rinfret was centered upon the circumstances
under which the exception of Article 622(4) could be invoked and
it was his conclusion that ignorance of the fact that Bates Road
was in the Town of Mount Royal was “un fait facilement contrb-
lable” as opposed to uncontrolable circumstances
,and therefore
allowed the exception to the form and dismissed the action. Mr. Justice
Owen in his dissent simply agreed with the trial judge that the
conclusion asked for in the Motion for Exception to the Form simply
did not flow from allegations contained therein: namely it was
5 Ibid., at p. 987.
6 [1970] C.A. 522.
7 [1934] S.C.R. 622.
8 [1959] S.C.R. 609.
No. 2]
RECENT CASES
alleged in the Motion that the town did not receive any notice;
this fact was false, a notice was sent, it was late. It was further
alleged that the Defendant, namely the Town had suffered prejudice
from this irregularity and as Mr. Justice Owen pointed out, absolutely
no proof of prejudice was presented and prejudice in law, namely
having to defend an action, is a thing of the past.
The rule of Article 622 of the Cities and Towns Act, as Mr.
Justice Hyde quite correctly pointed out, is an exception and consti-
tutes a real hazard for prospective plaintiffs. The results which
flow from these two seemingly contradictory cases are important to
note. The failure to give notice will be fatal to the -action, unless the
plaintiff can show that he comes within one of the allowable excep-
tions of Article 622(4) of the Cities and Towns Act or if the city
does not invoke the error within a delay of five days (Article 162
c.c.P.).
The principal concern to prospective plaintiffs would be the
allowable exceptions to giving notice and it is to be noted in this
respect that the courts have been much harsher than in the opinion
of the author they need have been.
One wonders whether or not the courts ought not to be relying
more on the words “for any reason deemed sufficient by the court
or judge” and make their decision based on the policy consideration
of the notice requirement as enunciated in Jobin v. City of Thetford
Mines 9, namely whether or not the city, in the analysis of the relative
merits of the claim, was prejudiced.
S.
J. LOVECCHIO.
9 [19251 S.C.R. 686 which states at p. 687: “The purpose of the notice was
to give the municipal corporation such knowledge of the claim in respect of
which it was given as would enable it to make the necessary inquiries to ascertain,
within a reasonable time after the claim arose, the basis of it and the material
facts and circumstances affecting the corporation’s liability.”
