[5]
This is an appeal from a judgment of the
Superior Court dismissing appellant's class action
against the Attorney General of Quebec for the
recovery of excess interest paid on student loans.
[6]
From 1992 to 1996, Appellant was a full time
university student, resident in Quebec, who received
student loans totalling $26,765 under the financial
assistance programs provided for in the Act
Respecting Financial Assistance for Education Expenses
(R.S.Q. c. A-13.3).
[7]
Appellant contends, in substance, that he was
compelled to pay an amount of interest of $308.53 on
his student loans covering a period for which he was
exempt from the payment of interest both under the
terms of his loan contract and under the provisions of
the Financial Assistance for Education Act in
force at the time the loans were made. He
alleges that other student borrowers under the Act
were similarly obliged to pay interest covering
periods that were to be exempt from interest under the
Act in force at the time their loans were incurred,
and that their recourses for the reimbursement of
excess interest paid raised similar issues.
[8]
Appellant was authorized by the Superior Court
to bring class action proceedings on his own behalf as
well as on behalf of a group of student borrowers
whose recourses raised similar issues:
"All
students who on June 30, 1997 had obtained one or more
student loans after signing a Loan Certificate issued
by the Direction générale de l'aide financière aux
étudiants, and who did not obtain other student loans
after June 30, 1997, and completed or abandoned their
studies after June 30, 1997, " and
"All
students who on June 30, 1997 had obtained one or more
student loans after signing a Loan Certificate issued
by the Direction générale de l'aide financière aux
étudiants and who did not obtain other student loans
after April 30, 1998, and completed or abandoned their
studies after April 30, 1998."
**
* **
THE
FACTS
[9]
From 1992 to 1996, appellant applied for and
received student loans totalling $26,765. On the
approval of his loan application, appellant would
receive a loan certificate from the Department of
Education which he would present to a financial
institution which would disburse the loan, the
repayment of which was guaranteed by the Government of
Quebec.
[10]
The loan certificate issued by the Department
was signed by the student and an authorized
representative of the financial institution and it
effectively became the loan contract between the
parties:
The
contract is signed in accordance with the
prescriptions of the Act respecting financial
assistance for students (R.S.Q., c. A-13.3), the
Regulation thereunder (A-13.3, r.1) and the
prescriptions of the Loan Guaranty Program for the
Purchase of a Microcomputer, if applicable.
[11]
As to the payment of interest by the student,
the certificate provided:
5.
The student is exempt from payment of interest
on the principal loaned by the financial institution,
under the Act respecting financial assistance for
students, for the exemption period defined in section
23 of the Act, which is cited in clause 10 of this
contract.
[12]
Clause 10 of the certificate defined the
interest exemption period as follows:
10.
Exemption period "means the period beginning on
the date on which the borrower obtains a first loan or
on which he becomes a full-time student again after
having ceased to be so, and ending
1)
on 1 April, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding summer trimester;
2)
on 1 August, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding autumn trimester;
3)
on 1 January, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding winter trimester" (R.S.Q., c.
A-13.3, s. 23).
[13]
Appellant concluded his studies on January 30,
1998, so that his obligation to reimburse the capital
of the loans and to pay interest on the loans would
normally have begun at the end of the exemption period
– on January 1, 1999. Until the end of the
exemption period, under Sec. 24 of the Act, the
Government was to pay the interest on the loan to the
financial institution.
[14]
In 1997, the Act was amended reducing the
exemption period for the payment of interest by one
month.
[15]
In 1998, the Act was again amended, reducing
once again, the period of exemption during which
students were exempt from paying interest while the
Government assumed the interest payable to the
financial institutions. The 1998 amendment was
stipulated under Sec. 13 to be applicable
"… aux situations juridiques en cours lors de
leur entrée en vigueur." ("… to juridical
situations in progress at the time of their coming
into force …".).
[16]
Insofar as appellant was concerned, he was
required to pay interest on his loans from June 1,
1998, instead of from January 1, 1999, the end of the
period of exemption stipulated in his loan
certificate. The excess amount paid by appellant
in interest was $308.53.
[17]
The loan authorities in the Department of
Education refused to reimburse appellant for the
interest paid in excess of the amount contemplated in
the exemption period. In essence, the Department
was of the view that the amendments to the Act were
applicable to existing loans concluded prior to the
dates of these amendments as well as to future loans.
[18]
The trial judge dismissed appellant's action.
He was of the view that:
[79]
Le programme d'aide financière aux étudiants n'est
pas un contrat. C'est un programme social,
impersonnel et offert à tous les citoyens qui répondent
aux critères sans exceptions. Le programme vise
à donner une chance égale à tous de poursuivre des
études. C'est la poursuite d'un idéal : l'éducation
à tous les niveaux accessibles à tous. Il
provient donc d'un processus unilatéral normatif.
[19]
The trial judge concluded:
[88] L'article
13 de la loi de 1997 prévoit que les nouvelles
dispositions de la loi seront applicables aux
situations juridiques en cours lors de leur entrée en
vigueur. Il s'agit d'une disposition législative
démontrant que le législateur veut que la loi
nouvelle s'applique de façon immédiate à tous les
prêts existants ou futurs.
[89] Le
tribunal ne voit pas comment il pourrait conclure que
les deux nouvelles lois ont créé des situations
juridiques distinctes, que l'on se situe avant ou après
leur adoption. En l'absence de stipulation
contraire, toute loi doit recevoir une application immédiate
tant pour les contrats conclus avant qu'après leur
entrée en vigueur.
[90] Le
tribunal souligne qu'il ne peut y avoir plusieurs
modalités de remboursement pour les étudiants
terminant leurs études à un même trimestre sans
dispositions législatives spécifiques.
[91] L'interprétation
que doit favoriser le tribunal en est une conduisant
à l'application uniforme d'un régime législatif
plutôt qu'à une pluralité de régime.
THE
ISSUES
[20]
The questions raised in this appeal by
appellant are the following:
1.
Did the trial judge err in concluding that
appellant's obligations under the certificate of loan
were not contractual in nature?
2.
Did the trial judge err in concluding that the
amendments to the Act in 1997 and 1998 were applicable
to student loans contracted by appellant and other
students prior to the amendments so that they were
obliged to pay interest on their loans for periods
stipulated in their loan agreements and in the Act to
be exempt periods when the loans were contracted?
3.
Did the trial judge err in concluding that
appellant and other similarly situated student
borrowers did not have acquired rights by reason of
their contracts signed with the financial institutions
prior to the amendments?
**
* **
Contractual
Nature of Appellant's Obligations
[21]
With respect for the opinion of the trial
judge, in my view, appellant's obligations under the
loan certificate issued by the Department were clearly
contractual in nature. While it is true, as the
trial judge indicates, that the financial assistance
programs created under the Act are worthy social
programs designed to encourage equal accessibility to
education for all Quebec students, the program of
student loans contemplated in the Act did nevertheless
impose contractual obligations upon students who
obtained these loans, contractual obligations which
included conditions as to the repayment of the capital
of the loans as well as conditions concerning the
payment of interest. One of the conditions in
this contract stipulated the period of the loans
during which the student was to be exempt from the
payment of interest.
[22]
The certificate of loan, issued by the
Department and signed by the student as well as the
financial institution, is in the form of a contract
and the clauses setting out the conditions of the loan
contain numerous references to "this
contract". Any reasonable borrower or
lender reading the document would consider himself
bound by a contract.
[23]
And while it is true that the Department did
not itself sign the document, it was the Department
that issued it to the student and it was the
Department that had stipulated the conditions of
repayment of capital and the exempt period for the
payment of interest by the student. The
Department was, moreover, itself contractually
involved in the loan made to the student in that it
guaranteed the repayment of the capital of the loan as
well as the payment of interest to the financial
institution, including the payment of interest for the
period during which the student was exempt from
interest payment.
[24]
In sum, while the programs created under the
Act can fairly be characterized as social and
educational, the obligations and the rights of
students under their loan agreements with the lenders
were substantially contractual.
[25]
I do not wish to suggest, of course, that the Financial
Assistance for Education Expenses Act did not
govern the relationship between the lending banks and
the students and the relationship between the Banks
and the Government.. Clearly, regard must be bad
to this statute and the regulations to support any
claims whether by the bank or by the government or to
determine the liability of a borrowing student (Rhine
v. R. and Prytula v. R. [1980] 2 S.C.R.
442, 449).
[26]
But that being said, once it has been concluded
that the contractual rights and obligations of a
student borrower and a lender bank satisfy the
requirements of the statute and the regulations, we
must logically look to the contract concluded and the
law that then existed to determine the rights and
obligations of the borrowing student.
[27]
Unless the subsequent amendments to the law are
expressly stipulated to be retroactive or are
retroactive by necessary implication, I can see no
basis for applying provisions in the amendments in
conflict with the rights of the parties under their
contract and the law which was applicable when it was
concluded (Gustavson Drilling (1964) Ltd v.
M.N.R. [1997] S.C.R. 271, 279). On signing
the contract of loan, the student had no reason to
believe that the Government might, by simple
legislative amendment, rewrite his contract with the
bank and modify his interest obligation. Nor, in
the absence of an intention, expressed or tacit, to
impair the rights of the student under his loan
contract, do I see any basis for interpreting the
amendments in a manner that would have that effect.
Retroactivity
of 1997 and 1998 Amendments
[28]
Appellant's student loans were contracted prior
to the amendments to the Act of 1997 and 1998.
When appellant obtained his loans, the loan
certificate issued by the Department and signed by
appellant as well as the financial institution,
provided the following conditions regarding exemption
from the payment of interest:
5.
The student is exempt from payment of interest
on the principal loaned by the financial institution,
under the Act respecting financial assistance for
students, for the exemption period defined in section
23 of the Act, which is cited in clause 10 of this
contract.
[…]
10.
Exemption period "means the period beginning on
the date on which the borrower obtains a first loan or
on which he becomes a full-time student again after
having ceased to be so, and ending
1)
on 1 April, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding summer trimester;
2)
on 1 August, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding autumn trimester;
3)
on 1 January, for a borrower who completes or
abandons his full-time studies during or at the end of
the preceding winter trimester" (R.S.Q., c.
A-13.3, s. 23).
[29]
The contract therefore provided appellant with
a very specific period for which he was to be exempt
from the payment of any interest on his student loan.
Under the ordinary principles of contract, he was
entitled to assume, when he signed the loan agreement,
that he would have no interest to pay for the
exemption period provided in clause 10 of the
agreement and he obviously did make that assumption.
In appellant's case, the exemption period in clause 10
would have ended on January 1, 1999.
[30]
The subsequent amendments of 1997 and 1998, if
applicable, would have had the effect of reducing
retroactively the interest exemption period provided
in appellant's loan agreement.
[31]
Respondent contends that although the 1997 and
1998 amendments to the Act came into force
subsequently to appellant's loans, these amendments
were nevertheless applicable to previously obtained
and existing loans.
[32]
I certainly have no problem with the
proposition that the statute and regulations in this
case govern the rights and obligations of the
borrowing student and the lending financial
institution (Rhine v. R. (supra)). But
the law that governed the parties when the loans were
concluded provided a very specific exemption period
for the payment of interest by the student. That
provision was incorporated into the contract signed by
the student and the Bank.
[33]
To require, on the basis of subsequent
amendments, that the exemption period be reduced, in
my view, offends the basic principle against
retroactivity. There is no express provision in
the subsequent amendments requiring that the
amendments be retroactively applicable to previously
concluded loans and I can see no necessary implication
that would require this interpretation (Pierre-André
Côté, Interprétation des lois, 3ième édition,
1999, Les Éditions Thémis, page 138).
[34]
Nor can I easily accept that the phrase
"… situations juridiques en cours …" was
intended to make the 1997 and 1998 amendments
applicable so as to reduce the interest exemption
period provided in the previously existing statute and
in the contract signed by the borrowing student and
the lending bank. In my respectful opinion, once
the loan was approved by the Department and the
contract of loan was signed by the student and the
bank, appellant's obligation to pay interest and his
exemption from the payment of interest were not
"situations juridiques en cours". They
were rights and obligations which were no longer
"in progress". They were crystallized,
finalized and definitively concluded under the terms
and conditions of the contract.
[35]
There is no suggestion in the law or the
contract that the obligations of the student or the
bank as regards the payment of interest by the student
or the duration of the exemption period were subject
to discussion or change. These were matters
definitively concluded in the contract insofar as
appellant and the Bank were concerned. Appellant
had no right to demand that the exemption period be
extended and the Bank had no right to demand that the
exemption be reduced. The Government had no
right to demand that its guarantee in favour of the
bank be reduced. What "situations
juridiques" remained "en cours"?
Absolutely none.
Acquired
Rights
[36]
Appellant contends that the trial judge erred
in interpreting the subsequent amendments of 1997 and
1998 as applicable to his loans in a manner that would
violate his acquired rights under the contract of loan
and under the law, as it existed when the loan was
made.
[37]
It is a well established principle of Canadian
law that a new law should, as a general rule, be
interpreted as respecting existing rights (Spooner
Oils Ltd v. Turner Valley Gas Conservation Board
[1933] S.C.R. 629; Board of Trustees of the
Acme Village School District v. Steele-Smith
[1933] S.C.R. 47; Pierre-André Côté,
Interprétation des lois, 3ième édition,
1999, Les Éditions Thémis, page 211). In the
absence of an express or tacit intention of the
legislature, a new law will not be read as impairing
existing rights.
[38]
Insofar as the 1997 amendment was concerned, I
can see no provision expressed or tacit from which one
might infer that reduction in the exemption period was
intended to apply to previously existing loans under
existing contracts.
[39]
In the 1998 amendment, Sec. 13 provided
that the amending provisions would apply to "…
situations juridiques en cours lors de leur entrée en
vigueur."
[40]
While it is true that when the 1998 amendment
came into force, appellant had not yet ended the
period of exemption provided in his contract, I find
it hard to imagine that the Legislature intended, in
adopting the 1998 amendment, to change the interest
exemption period of a contract of loan that had
previously been concluded merely on the basis that the
period of exemption had not yet expired.
[41]
When appellant undertook the loan, he did so
under specific conditions for repayment of capital and
payment of interest. There was no suggestion in
the certificate of loan issued by the Department or in
the contract that these conditions might be changed at
any time. Nor is an interest exemption period,
by its nature, of a kind that would be subject to
periodic change. Appellant had every right to
expect that his obligations for the repayment of
capital and the payment of interest were those set out
in the contract and that these conditions would be
respected. Appellant fulfilled his obligations
in repaying the loan and paying the interest on the
loan under the terms required under his contract.
[42]
In the absence of very clear terms in the
amending statutes establishing that the Legislature
intended to impair appellant's rights under his
existing contract, I can see no reason why the
Government should not respect the rights and
obligations existing under that contract. If
that means the payment of interest by the Government
for the period of exemption in the contract, so be it.
That was the basis on which the certificate was issued
and the contract was signed.
[43]
I would find it very difficult to interpret the
words "… situations juridiques en
cours…" as evidence of an intention on the part
of the Legislature to vary the terms of a loan
contract that was concluded prior to the coming into
force of the new law.
[44]
In short, I am of the view that appellant did
have vested rights under his contract of loan and that
the amendments of 1997 and 1998 should not be
interpreted in a manner that would impair those
rights.
[45]
Finally, respondent submits that it would have
been inequitable to treat students bound to pay
interest on student loans differently merely because
their loans had been contracted at different times.
Respondent contends it would be more equitable to
treat all students with student loans uniformly and
subject to the same conditions of repayment of capital
and interest. The trial judge was of with same
view.
[46]
With great respect, I do not think this is a
question of treating students uniformly nor even
treating all students equitably. It is rather a
question of respecting the difference in contractual
rights and obligations concluded prior to the
amendments. I can see nothing equitable in
impairing the contractual rights and obligations that
were concluded prior to the amendments on the basis
that all students should be treated uniformly in their
conditions of loan repayment. There is nothing
equitable in treating students less favourably than
they were entitled to be treated under their contracts
and under the law that was applicable when the
contracts were concluded.
[47]
I would therefore:
Allow
the appeal with costs;
Set
aside the judgment rendered in first instance;
Maintain
the class action with costs;
Return
the dossier to the Superior Court for final judgment
and the making of such orders as may be required under
Art. 1044 C.C.P. and Arts 1027 C.C.P.
et seq.
