COURT OF APPEAL FOR BRITISH COLUMBIA
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Citation: |
Dahl v. Royal Bank of Canada, |
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2006 BCCA 369 |
Date: 20060808
Docket: CA033371
Between:
Cheryl Dahl
Appellant
(Plaintiff)
And
Royal
Bank of Canada, Canadian Imperial
Bank of Commerce and Bank of Montreal
Respondents
(Defendants)
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Before: |
The Honourable Mr. Justice Low |
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The Honourable Mr. Justice Lowry |
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The Honourable Madam Justice Kirkpatrick |
| D.M. Rosenberg |
Counsel for the Appellant, |
| D.G. Cowper, Q.C. |
Counsel for the Respondent, |
| J. Wood, Q.C. |
Counsel for the Respondent, |
| G.W. Ghikas, Q.C. |
Counsel for the Respondent, |
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Place and Date of Hearing: |
Vancouver, British Columbia |
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19 and 20 June 2006 |
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Place and Date of Judgment: |
Vancouver, British Columbia |
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8 August 2006 |
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Written Reasons by: |
| The Honourable Madam Justice Kirkpatrick |
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Concurred in by: |
| The
Honourable Mr. Justice Low |
Reasons for Judgment of the Honourable Madam Justice Kirkpatrick:
[1] The substantive issue to be decided in this appeal is whether the amounts that the respondent banks charge credit cardholders who fail to pay the full balance owing on their accounts on the due date, which are calculated before funds are advanced to the merchant, are interest.
[2] The procedural issue to be decided is whether the substantive issue should have been determined under Rule 18A of the Supreme Court Rules of Court prior to certification of the proposed class action and full discovery.
[3] This appeal is the second appeal taken in this proposed class action brought pursuant to the Class Proceedings Act, R.S.B.C. 1996, c. 50. The first appeal was from the order of the class action case management judge which dismissed the plaintiffs’ claims under the Interest Act, R.S.C. 1985, c. I‑15, the Consumer Protection Act, R.S.B.C. 1996, c. 69, and the Bank Act, S.C. 1991, c. 46. The chambers judge concluded, pursuant to an application brought under Rule 34 of the Supreme Court Rules of Court, that the manner in which the banks charge interest does not violate the provisions of the above-cited statutes: 2005 BCSC 1263.
[4] Levine J.A. gave comprehensive reasons in allowing the first appeal: 2004 BCCA 419, 31 B.C.L.R. (4th) 132. Those reasons should be read with these.
[5] Levine J.A. described the substantive issue as follows:
[6] The substantive issue in the appeal is whether the charges the Banks call interest (applied when credit card holders fail to pay the balance owing in full by the due date) calculated between the transaction date (when the credit card is used by the holder to obtain goods or services from a merchant) and the posting date (two to five days later, when the merchant is paid directly or indirectly by the Banks) is, in law, interest.
[7] If the amount charged from the transaction date is interest, it is common ground that the Banks are in compliance with the statutes.
[8] If the amount is not interest, it is common ground that the Banks have not made proper disclosure under the statutes.
[9] The appellants’ first ground of appeal, however, is that the chambers judge erred in deciding the question of law, whether the amount charged between the transaction date and posting date is interest, based only on the facts set out in the pleadings. They say that evidence in the form of the contracts between the Banks and the merchants and the Banks and the card holders is necessary in order to determine the legal relationship among the three parties to a credit card transaction: the credit card issuer, the credit card holder and the merchant. Thus, they say, the entire matter should be referred to the trial list.
[10] The Banks say that the legal question of whether the amount charged by them between the two dates is interest is properly determined without reference to the contracts. They rely to a large extent on legal principles articulated by the English Court of Appeal in Re Charge Card Services Ltd., [1988] 3 All E.R. 702.
[6] Levine J.A. concluded:
[11] I have come to the conclusion that the substantive issue on this appeal cannot be decided in the absence of evidence comprising at least the contracts governing the legal relationship among the relevant parties, including the merchants. While the pleadings describe credit card transactions generally understood by millions of consumers and the principles articulated in Re Charge Card Services apply to such transactions, it would be premature and unjust to dismiss the appellants’ action without reviewing the contracts applicable to this case.
[7] The matter was remitted to the Supreme Court for re-hearing on evidence of the contracts among the parties. In making that order, Levine J.A. observed:
[71] It strikes me that this case is an ideal candidate for the summary trial procedure provided in Rule 18A of the Rules of Court, where the contracts and any other relevant evidence may be put before the Court in affidavit form.
[8] On 8 September 2005, the same chambers judge (who had heard the Rule 34 application) handed down reasons following a summary trial under Rule 18A (2005 BCSC 1263) in which she examined the contracts in question. She applied principles derived from the decision in Re Charge Card Services Ltd., [1988] 3 All E.R. 702 (C.A.) (a decision approved by Levine J.A. in the first appeal) and the decision in Garland v. Consumers’ Gas Co., [1998] 3 S.C.R. 112, 165 D.L.R. (4th) 385. In reaching her conclusion, the chambers judge said:
[86] As the Supreme Court of Canada held in Garland v. Consumers’ Gas Co. (1998), 165 D.L.R. (4th) 385 (S.C.C.) at ¶ 35, “A debt is deferred – and credit extended – when an agreement or arrangement permits a debtor to pay later than the time at which payment would otherwise have been due.”
[87] The plaintiffs assert that an unconditional obligation to pay the merchant, and hence an absolute discharge of the cardholder at the time of the credit card transaction, is necessary to conclude that credit has been advanced.
[88] The Banks do not take issue with the fact that at some point in the course of a credit card transaction there must be an absolute discharge. However, they argue that although the absolute discharge takes place at the time of the transaction, it need not coincide with the transaction date for credit to have been advanced.
[89] In fact, it is commonly understood that the point of a credit card system is to discharge the cardholder’s obligation to pay the merchant the price of the goods or services and, in its place, the cardholder assumes an obligation to pay the Card Issuer.
[90] In Re Charge Card Services (C.A.), the court set out a number of the normal features of credit card transactions at p. 705:
The general features of credit card transactions
(a) There is an underlying contractual scheme which predates the individual contracts of sale. Under such scheme, the suppliers have agreed to accept the card in payment of the price of goods purchased; the purchasers are entitled to use the credit card to commit the credit card company to pay the suppliers.
(b) That underlying scheme is established by two separate contracts. The first is made between the credit company and the seller: the seller agrees to accept payment by use of the card from anyone holding the card and the credit company agrees to pay to the supplier the price of goods supplied less a discount. The second contract is between the credit company and the cardholder: the cardholder is provided with a card which enables him to pay the price by its use and in return agrees to pay the credit company the full amount of the price charged by the supplier.
(c) The underlying scheme is designed primarily for use in over-the-counter sales, i.e. sales where the only connection between a particular seller and a particular buyer is one sale.
(d) The actual sale and purchase of the commodity is the subject of a third bilateral contract made between buyer and seller. In the majority of cases, this sale contract will be an oral, over-the-counter sale. Tendering and acceptance of the credit card in payment is made on the tacit assumption that the legal consequences will be regulated by the separate underlying contractual obligations between the seller and the credit company and the buyer and the credit company.
(e) Because the transactions intended to be covered by the scheme would primarily be over-the-counter sales, the card does not carry the address of the cardholder and the supplier will have no record of his address. Therefore the seller has no obvious means of tracing the purchaser save through the credit company.
(f) In the circumstances, credit cards have come to be regarded as substitutes for cash; they are frequently referred to as ‘plastic money’.
(g) The credit card scheme provides advantages to both seller and purchaser. The seller is able to attract custom by agreeing to accept credit card payment. The purchaser, by using the card, minimises the need to carry cash and obtains at least a period of free credit during the period until payment to the card company is due.
[91] The court then went on to consider whether, as alleged by the merchants in that case, payment by means other than cash is presumed to be a conditional discharge of the price at the time of the transaction until the merchant is paid by the card issuer or an absolute discharge at the time of the transaction whether the merchant is paid or not. It was necessary to determine when the absolute discharge arose on the facts because this determined who among the competing claimants was entitled to the unpaid amounts due from cardholders where the card issuer was insolvent.
[92] The court [in Re Charge Card Services] concluded there was no general presumption that a payment by credit card is only a conditional discharge of the price until the merchant is paid. The court concluded that whether the form of payment is a conditional discharge of the price or not (until the merchant is paid) has to be answered "in light of the consequences and other circumstances attending to that type of payment". In the context of credit cards, that answer depends on the agreement between the merchant and cardholder [page 707].
[93] As stated earlier, in the case at bar, both the cardholders and the merchants understand that each has an underlying agreement with the Bank. The cardholder knows that by accepting the credit card the merchant is entitled to receive a payment for the transaction which will fully discharge the cardholder’s liability for the price. The merchant knows that by using the credit card the cardholder renders himself liable to the Card Issuer.
[94] Before entering into their agreement, both the cardholder and merchant had entered their respective contracts. The underlying assumption must be that on completion of the transaction their future rights and obligations will be regulated by those underlying contracts.
[95] In light of the agreements it could not reasonably be contemplated that, notwithstanding a payment by the Card Issuer to the merchant, the merchant could nonetheless sue the cardholder for the purchase price. The exact time of the absolute discharge is not relevant for these purposes. The fact that there is at least a conditional discharge of the obligation to pay the price by cash or other means on the transaction date and an absolute discharge in due course is sufficient to conclude that credit is advanced. That, in turn, is sufficient to characterize the charges from the transaction date as interest charges: Bills Investments Ltd.
[96] The fact that the Merchant Agreements contain chargeback provisions does not take away from the nature of the credit card transaction. If a subsequent event might allow the merchant to claim against the cardholder that does not, in my view, detract from the acceptance of the card as payment in full for the goods or services on the Transaction Date.
[97] Similar provisions were contained in the company’s agreement with garages in Re Charge Card [1986], 3 All E.R. 289 at 296 (Ch.D): "The company reserved the right to reject any invalid sales voucher, and the circumstances in which a sales voucher should be invalid were specified. The company also reserved the right to charge the garage with any overpayment made in respect of sales vouchers and with the full amount of all payments made in respect of invalid sales vouchers."
[98] Despite those provisions the court found that the nature of the credit card sale was such that there was an unconditional discharge at the time of the sale, i.e. the Transaction Date.
[99] In my view there is nothing in the Cardholder Agreements, the Merchant Agreements, or the circumstances of the agreement between the cardholder and the merchant that is inconsistent with the conclusion that the Banks advance credit on the Transaction Date. Accordingly, I have concluded that the charge to the cardholder from the Transaction Date, which is applied when the cardholder fails to pay the balance owing in full by the due date, is, in law, interest.
[9] Ms. Dahl contends that the chambers judge erred in:
· finding, on the limited record before her, that the monies charged to credit cardholders by the Respondent Banks between the date a credit card is used to purchase goods or services and the date that the merchants were paid by the Respondent Banks are properly characterized as interest; and
· concluding in this case that the issues were suitable for summary determination prior to document discovery, prior to examinations for discovery, and prior to a certification hearing.
DISCUSSION
Substantive Issue
[10] It is first necessary to set out the conclusions reached by this Court on the first appeal because they directly bear on the outcome of this appeal. The issue was particularized by Levine J.A. at paras. 27‑30:
[27] The substantive legal issue in this case is whether the Banks may, at common law, charge interest from the transaction date although they have not, at that date, advanced any funds to the merchant from whom the card holder has purchased goods or services.
[28] The appellants’ position is that since no funds have been advanced either to the card holder or the merchant on the transaction date, there is no principal amount on which interest can be charged: see, with reference to mortgages, Edmonds v. Hamilton Provident and Loan Society, [1891] 18 O.A.R. 347 at 361 (Ont. C.A.), and letters of credit, Kebet Holdings Ltd. v. 351173 B.C. Ltd. (1992), 74 B.C.L.R. (2d) 198 at para. 22 (C.A.).
[29] The Banks say that they can charge interest on credit advanced, where the parties to the transaction agree: Edmonds at pp. 362-64; Bills Investments Ltd. v. First Investors Corp. (1990), 72 D.L.R. (4th) 32 at 38-39 (Sask. C.A.), leave to appeal refused, 74 D.L.R. (4th) viii (S.C.C.). They say they advance credit to the cardholder on the transaction date (Garland v. Consumers’ Gas Co., [1998] 3 S.C.R. 112 at paras. 35-37) by undertaking the obligation to pay the merchant for the goods or services purchased by the card holder. They are obliged to pay the merchant from the transaction date because in law (relying on Re Charge Card Services) the card holder is absolutely discharged from that obligation on presentation and acceptance of the card.
[30] Thus, there are two questions underlying the issue of whether the charge calculated from the transaction date is interest. Those are, first, whether the Banks may legally charge interest on credit, as opposed to funds, advanced; and second, whether credit is advanced to the card holder by the Banks on the transaction date.
[Emphasis in original.]
[11] The arguments made before Levine J.A. were essentially repeated before us. Levine J.A. addressed those arguments and the applicable law. She found as follows at para. 40:
[40] Thus, neither of the cases relied on by the appellants would preclude the Banks from charging interest although they have advanced no funds on the transaction date. In accordance with the second principle in Edmonds, interest may be charged though no funds are advanced if it is clear from their agreement that the parties so intend.
[Emphasis in original.]
[12] Levine J.A. then articulated, at para. 31 of her reasons, the questions that she anticipated the chambers judge would have to resolve on the further re‑hearing:
[31] The first question, whether the Banks may legally charge interest on credit, turns on the legal definition of interest, about which there is no dispute, and the agreement of the parties, about which there is no evidence. The second question, whether credit is advanced to the card holder on the transaction date, turns on an analysis of the contractual relationship among the parties, again in the absence of evidence.
[13] In order to properly understand the issues in this appeal it is essential to recognize that the three, and frequently four, bi-lateral contracts that are at play in a credit card transaction are separate and distinct. They are the contracts between:
(a) the bank (the "card issuer") and the credit cardholder (the "cardholder agreement");
(b) the bank and the merchant (the "merchant agreement");
(c) the bank and the merchant acquirer (which markets the credit card plan, enters into the merchant agreement and provides hardware and software that permits the merchant to accept credit cards in the course of its business); and
(d) the merchant and the credit cardholder (which contract is usually oral).
[14] A fundamental flaw in the appellant’s arguments on this appeal and in the Supreme Court is founded in her failure to appreciate the separate and distinct nature of these contracts.
[15] In my opinion, and upon a review of the contracts in evidence, the principle of privity of contract renders all contracts except the cardholder agreement irrelevant to the determination of whether the charge by the banks to cardholders is interest.
[16] It is manifestly clear that, in each cardholder agreement in evidence, the cardholder agrees as a term of using the credit card that, in certain defined circumstances, she will pay interest. The language is plain and clear.
[17] The Royal Bank of Canada cardholder agreement provides:
9. Interest Charges:
(a) Interest-Free Purchases: I will not pay interest on the amount of any Purchase appearing on an Account Statement for the first time that is paid in full by the Due Date shown there, provided all other Debt shown on the Account Statement is also paid in full by that Due Date.
(b) Interest-Bearing Balance: I will pay interest on Interest‑Bearing Balance at the Interest Rates in effect in the manner described below and in sub‑Section 9.(c). You will charge me interest:
(i) on the amount of each Interest‑Bearing Purchase and Cheque from (and including) the transaction date recorded for them on the Account Statement where they appeared for the first time to the day you receive payment in full of the Interest‑Bearing Balance; and
(ii) on the amount of each Cash Advance from (and including) the day I obtain them to the day you receive payment in full of the Interest‑Bearing Balance.
[Emphasis added.]
It is clear from this agreement that interest, where it is required to be paid, accrues from the transaction date. The other agreements are similarly clear.
[18] The Canadian Imperial Bank of Commerce ("CIBC") cardholder agreement provides:
4. Payment
I will pay the indebtedness and interest on it by the Payment Due Date on the monthly statement as follows:
(a) in full, or
(b) by a part payment equal to the greater of $50 or 3% of the unpaid balance shown on the statement, or
(c) by any payment greater than (b).
In addition, I will immediately pay any Indebtedness exceeding the credit limit, and if the balance shown on a statement is less than $50, I will pay it in full by the statement’s Payment Due Date. Payments received at your VISA mailing address, Automated Banking Machines or by 3:00 p.m. on a banking day at any of your Canadian branches will be value dated to the VISA Account as of the day of receipt. I will not use the VISA Account to pay the Indebtedness.
5. Interest
(a) Payment in Full. There is a benefit to me if I pay my entire VISA Account in full by the Payment Due Date shown on the statement. If I do so, interest is charged only:
(i) on cash advances from and including the date they are obtained,
(ii) on Aerogold Cheques from the date they are charged to the VISA Account, and
(iii) on Indebtedness shown on the statement which also appeared on the previous statement.
(b) Partial Payment. If I do not pay the entire VISA Account balance in full by the Payment Due Date, then interest is charged:
(i) on cash advances from and including the date they are obtained,
(ii) on Aerogold Cheques from the date they are charged to the VISA Account, and
(iii) on purchases from their transaction date, and
(iv) on all other Indebtedness from the date it is charged to the VISA Account.
(c) Interest Rate. Interest is charged at the rate specified in the Disclosure Statement which accompanies this Agreement. The interest rate is subject to change in accordance with Paragraph 14 of this Agreement, and the current rate, on an annual and daily basis, appears on the monthly statement.
(d) Interest is calculated as follows:
(i) Interest is calculated by totalling the interest bearing Indebtedness owing at the end of each day in the period in question and multiplying the result by the daily interest rate.
(ii) New Purchases: No interest is charged on a new purchase (meaning a purchase which was not previously billed) if I pay my entire VISA Account balance in full by the Payment Due Date. If I make a partial payment only, then interest is charged retroactively on all purchases from the transaction date until I have paid my entire VISA Account balance (plus the interest which has accrued on the new purchases).
(iii) Cash Advances and Aerogold Cheques: Interest is charged on a cash advance from the day I receive the advance until the day I repay it (plus interest which has accrued on the advance). Interest is charged on an Aerogold Cheque from the date it is processed to my VISA Account until the day I make a payment which covers the amount of the Aerogold Cheque plus the interest which has accrued on the Aerogold Cheque (see "Application of Payments" below).
[19] The Bank of Montreal cardholder agreement provides:
2. Card and Cheque use
You may make a Purchase or obtain a Cash Advance by using your Card, by writing Cheques and in any other way we may allow from time to time. You authorize us to charge your Account with the amount of any Purchase or Cash Advance.
…
6. Interest Charges
We charge interest on Purchases, Cash Advances and fees from the date of the transaction or the fee until the date we receive payment. You authorize us to charge this interest to your Account. We do not charge interest on interest charges.
7. Waiver of interest charges
We waive the interest charges on Purchases and fees which appear on your Account statement for the first time if your New Balance is paid in full by the payment due date shown on that statement and if, in the case of Purchaser, you made the Purchase by using your Card. Purchases made by writing Cheques are treated as Cash Advances and we don’t waive the interest charges.
8. Interest rate and calculation
We charge interest at the annual Cash Advance and Purchase Interest rates shown on the Card Carrier or as amended over time. The annual rates at any time and their equivalent daily interest rates appear on your Account statement. We calculate interest on Cash Advances by multiplying the daily closing balance of your Cash Advances by the equivalent daily Cash Advance Interest rate. We calculate interest on Purchases and fees by multiplying the daily closing balance of those items by the equivalent daily Purchase Interest rate.
[Emphasis added.]
[20] Thus, as was found by the chambers judge, it is apparent from the provisions of the relevant agreements that the parties (i.e., the banks and the cardholder) agree that interest will be charged from the transaction date. By virtue of this Court’s holding at para. 40 in the first appeal, this conclusion is dispositive of this appeal.
[21] The appellant nevertheless contends that the cardholder agreements stipulate that interest will only be charged on funds that have been advanced or posted to the cardholder’s account, not on credit being advanced.
[22] In my opinion, the appellant’s argument cannot be sustained. There is nothing ambiguous about these provisions. They all contemplate the use of the credit card as payment for goods and services in place of the cardholder using her own funds.
[23] The appellant's argument in respect of this issue is based on a misconception of the definition of interest as stated by the chambers judge at para. 33 of her reasons:
[33] Interest is “the return or consideration or compensation for the use or retention by one person of a sum of money, belonging to, in a colloquial sense, or owed to, another” which accrues from day to day: Ontario (Attorney General) v. Barfried Enterprises Ltd., [1963] S.C.R. 570 at 575; Garland v. Consumers’ Gas Company (1998), 165 D.L.R. (4th) 385; Dahl v. Royal Bank (C.A.) at ¶ 32.
The appellant contends that this statement stands for the proposition that the card issuer's money must be used or retained. However, it is clear from para. 34 of the chambers judge's reasons that "retention" refers to the retention of the cardholder's money that would otherwise have been expended at the time of the transaction.
[24] In my opinion, the chambers judge correctly identified the nature of the credit card transaction and the mechanism by which interest is charged. The interest provisions in each of the agreements clearly provide that an immediate debt between the bank and the cardholder arises upon the use of the card on the transaction date. The posting date on the cardholder’s monthly statement is notice of the transaction and charges associated therewith. Credit, that is, the retention by the cardholder of her own funds rather than experiencing the immediate outlay of those funds, is extended upon the cardholder's presentation and the merchant's acceptance of the credit card as the means of payment for the goods or services provided. Credit is accordingly provided at the time of the transaction.
[25] The appellant’s contention that the banks do not provide credit to the cardholder on the transaction date is premised on a misunderstanding of the decision in American Express International Inc v. Commissioner of State Revenue, [2004] VSCA 193 [Amex]. The appellant relied on para. 35 of that decision:
35. The respondent relies on the underlying contractual scheme in order to satisfy the requirements of sub-paragraphs (b)(i) and (ii) of the definition of "continuing credit contract" in the FID Act. It has already been noted that this contractual scheme involves three separate contracts, establishing separate contractual relations between the three parties to the underlying scheme. Amex in this Court submitted, and I think correctly, that under the terms of the cardholder agreement the cardholder has direct liability to Amex to the exclusion of liability to the merchant who accepts the charge card in complete satisfaction of the cardholder’s obligation to make payment for the goods or services. Similarly, under the terms of the merchant agreement, Amex has direct liability to the merchant, who accepts the obligation to pay as the consideration for the sale. It follows, in my view, that there is no agreement within the terms of s. 5(b)(i) or (ii) of the FID Act, since Amex does not satisfy any debt of the cardholder to the merchant, nor does it provide credit to the cardholder in respect of the satisfaction by Amex of such debt owed by the cardholder to the merchant.
[Emphasis added.]
[26] The central issue in Amex was whether, under the provisions of the State of Victoria Financial Institutions Duty Act 1982 (Vic.), a receipt by Amex referable to a charge card was a repayment in the nature of a loan or a continuing credit contract as defined by the Act. Under the Amex cardholder agreement, the cardholder was required to pay the full balance on receipt of the account statement. Because the payment obligation was not deferred, the contract was found not to fall within the definition of "loan" (or credit contract) under the legislation in issue. It was in the context of determining whether the contract between Amex and its customers was a continuing credit contract that the court made its comments at para. 35, supra. It does not, with respect, stand for the proposition advanced by the appellant.
[27] Furthermore, nothing in the merchant agreements in evidence modifies the conclusion that credit is advanced to the cardholder on the transaction date. As I have noted, the merchant agreement is a separate bi-lateral contract between the banks (as card issuer) and the merchant. In most instances the cardholder does not know the precise terms of the merchant agreement (although she may have some understanding that the merchant is charged a fee by the bank for a transaction made by a credit card). But the merchant agreements do not qualify or alter the cardholder agreements. This is so notwithstanding the evidence tendered by the appellant of an agreement between appellant's counsel and a computer consultant who provided services to counsel. In that contract (i.e., between the merchant and the cardholder), the cardholder agreed to remain liable for payment in the event that the card issuer bank refused to pay the merchant. However, that separate contract does not alter the card issuer's right to charge interest under the cardholder agreement. This conclusion is fortified by the holding in Amex at paras. 28‑29:
28. … I accept that, as between Amex and the merchant, the term suggests that the cardholder might remain liable to the merchant in the event of Amex failing to pay the merchant. But, as between Amex and the cardholder, such a proposition would be directly opposed to the second principal conclusion arrived at in Charge Card Services and Diners Club referred to in paragraph [14] above. No such term is contained in the cardholders' agreement with Amex, nor is there any reason to believe that the cardholder would have any knowledge of it.
29. It seems to me that the existence of the underlying contractual scheme, no doubt part of the factual matrix, takes the respondent's argument no further. The judgments of Millet, J. and Sir Nicolas Browne‑Wilkinson, V‑C. in the Charge Card Services litigation repeatedly, as has already been seen, stated that the rights and obligations of the parties must depend upon the terms of the individual contracts into which they have entered. …
[28] The fundamental error in the appellant’s position throughout her submissions is the treatment of a credit card transaction as a multi-party contract, rather than three (or four) independent bi‑lateral agreements. This mischaracterization created a fount of confusion. When understood in their proper context, it is clear that the obligations owed by the parties under the three (or four) bi‑lateral contracts are completely independent. Thus, the cardholder agreement is the only relevant document for determining whether the charge calculated from the transaction date is, at law, interest. As I have noted, the cardholder agreements clearly show that the parties agree that interest may be charged from the transaction date.
[29] Accordingly, it is, strictly speaking, not necessary to consider the second question posed by Levine J.A. in the first appeal, at paras. 44‑46:
[44] The second question, whether the banks advance credit to the card holders on the transaction date or the posting date, similarly cannot justly be determined without examining the underlying contracts.
[45] The Banks maintain that credit is advanced to the card holder when a purchase is made (that is, on the transaction date), because the acceptance of the credit card by the merchant absolutely discharges the holder from any liability to the merchant. They say that under the tripartite contractual arrangements involving the card holder, the merchant and the card issuer, the card holder’s liability to the merchant is discharged and the card holder is liable to the card issuer on that date.
[46] The Banks rely on Re Charge Card Services for these principles. The appellants do not dispute the validity of the principles articulated in Re Charge Card Services based on the evidence in that case. Their position, with which I agree, is that the principles cannot be applied in this case without reviewing the contracts between the Banks and the merchants, and those between the Banks and the appellants.
[30] The second question was posed by Levine J.A. in the absence of the merchant agreements. However, as I have indicated, an examination of those agreements discloses that they, like the cardholder agreements, are independent. Thus, the appellant’s argument that the banks have not advanced credit because they do not assume an absolute obligation to pay the merchant on the transaction date must fail. The fact that the bank may make a "charge back" to the merchant’s account under the terms of the merchant agreement does not affect the cardholder’s obligation to pay the bank. This proposition is supported by the decision in Re Charge Card Services at p. 710 where the court held that "payment by credit card is normally to be taken as an absolute, not conditional, discharge of the buyer’s liability …". Additionally, as a matter of law, the chargeback right amounts to a condition subsequent, which does not affect the immediate nature of the obligations of the parties to the contract. In CIBC’s case, for example, if it charges a transaction back to the merchant, the cardholder is not required to pay CIBC either the principal amount of the transaction or interest on that amount.
[31] The appellant’s first ground of appeal is related to her second ground in the sense that she complains that the chambers judge should not have decided the substantive issue on "the limited record before her". The appellant suggested six allegedly disputed facts upon which the chambers judge should have had evidence. All, save one, relate to the merchant agreements. None, in my opinion, is relevant to the issues on this appeal.
[32] There were, so far as I am aware, no restrictions placed on the parties as to the evidence they might adduce on the summary trial. The appellant did not apply to cross-examine on the affidavits or to call viva voce testimony. The chambers judge had before her a considerable body of evidence. Most particularly, she had the contracts that govern the relationship between the appellant and the banks, as well as the merchant agreements. In the end, this dispute is a straightforward matter of contract interpretation. The intentions of the parties are readily discernable from the contracts. The contracts clearly contemplate that the cardholder will pay interest from the transaction date but that interest will be waived if her account is paid in full on the due date.
Procedural Issue
[33] As I have noted, Ms. Dahl submits that the chambers judge should not have decided the substantive legal issue prior to the certification hearing and attendant availability of document disclosure and examinations for discovery. The chambers judge expressed her reasons for deciding the issue pursuant to Rule 18A at paras. 28‑31:
[28] The plaintiffs also argue that it is inappropriate to determine the summary trial motion prior to certification. Section 40 of the Class Proceedings Act, R.S.B.C. 1996, c. 50 provides that the Rules of Court apply to class proceedings to the extent the Act and the Rules are not in conflict. As was identified by Brown J. in Dahl v. Royal Bank (22 November 2002), Vancouver L020712 (B.C.S.C.) at ¶ 8, whether a motion will be heard prior to certification depends in large part upon the nature of the motion and circumstances of the particular case.
[29] Although the plaintiffs argue that the Banks’ applications will not bring finality to the litigation, the Class Proceedings Act contemplates that issues will be isolated and determined without bringing finality to the litigation. In my view, what must be considered is whether the resolution of the issue will bring finality to some of the issues in the action.
[30] One of the objects of the Rules of Court as set out in Rule 1(5) is to "secure the just, speedy and inexpensive determination of every proceeding on its merits." Rule 1(5) applies even though this is an intended class action: Edmonds v. Actton Super-Save Gas Stations Ltd. (1996), 5 C.P.C. (4th) 101 at ¶ 14 (B.C.S.C.). Rule 18A exists to achieve the objective set out in Rule 1(5) in appropriate cases.
[31] I have concluded that the resolution of the issue of whether the charge between the Transaction Date and when the merchant is paid is properly characterized as "interest" will either resolve the plaintiffs’ principal claims completely or decide the principal issues arising in respect of those claims. This will save considerable time and expense and enhance the administration of justice. In my view, determination of the issues on this application is an effective use of court time and will assist the efficient resolution of this proceeding and is not inconsistent with the Class Proceedings Act.
[34] In support of her argument, Ms. Dahl relies on the decision in Garland v. Consumers’ Gas Co., [2004] 1 S.C.R. 629, 237 D.L.R. (4th) 385, in which the Supreme Court expressed disapproval of litigation by instalments in class actions (at para. 90).
[35] I agree, with respect, that litigation by instalments should be discouraged. I note, however, that in the case at bar the substantive issue that has been considered has been the same throughout. Further, as the chambers judge concluded, the determination of this issue decides a substantial portion of this litigation. The effect of this decision means that the banks have complied with the Bank Act and the Consumer Protection Act. Ms. Dahl has abandoned her claim under the Interest Act.
[36] I am not persuaded that the chambers judge improperly exercised her discretion in determining that the legal issues in this case should be decided prior to the certification hearing. The judge charged with the case management of a class action is in the best position to make this decision. Absent some fundamental error, the chambers judge's decision should not be disturbed by this Court. No such error has been shown.
[37] As I have already noted, the issue in this case is a relatively simple matter of contract interpretation. It makes no sense to require the banks to oppose a certification hearing in circumstances where the discrete legal issue is capable of summary determination. In such cases it is appropriate to decide a central legal issue in circumstances where, as here, it is ripe for determination. Such determination saves enormous time and expense for all the parties. It makes no sense to expose the parties to the expense of a certification hearing and the discovery process when the litigation can be pared to its proper dimensions by the appropriate determination of central legal issues.
[38] For the foregoing reasons, I would dismiss the appeal.
“The Honourable Madam Justice Kirkpatrick”
I Agree:
“The Honourable Mr. Justice Low”
I Agree:
“The Honourable Mr. Justice Lowry”