Summary 16.8. CASE SUMMARY 16.8 Excessive Interest Costly for All Concerned: Garland v. Consumers' Gas Co.50 In a stunning class action suit, Garland brought an action on behalf of over 500 000 customers of Consumers' Gas (now Enbridge Gas Distribution Inc.). He demonstrated that the 5 percent late payment penalties charged on unpaid accounts constituted a criminal rate of interest. Garland established that when a late payment penalty was charged and the actual bill and late payment were paid within 38 days, the actual annual interest rate was over 60 percent, contrary to section 347 of the Criminal Code. The case went to the Supreme Court of Canada-twice! In the first instance, the Court found that the late Payment penalties were collected in contravention of the Criminal Code and, as a matter of public policy, criminals should not be permitted to keep the proceeds of their crime. The Court thus ordered Consumers' Gas to repay the late payment penalties collected from the representative class in excess of the interest limit stipulated by the Criminal Code. The issue of restitution brought the matter back to the Supreme Court. It decided that, although late payment penalties had been collected since 1981, only those penal- ties imposed after the class action was commenced (in 1994) had to be repaid. Prior to 1994, reliance on the Ontario Energy Board's orders gave Consumers' Gas justification for the enrichment; but once Garland's action was commenced, Consumers' Gas was put on notice that it was violating the Criminal Code. Collecting excessive interest from that point on constituted unjust enrichment. DISCUSSION QUESTIONS Consider other situations where consumers must pay late payment penalties. Should it be left to consumers to challenge these in court? This is fair warning to the perceptive businessperson to avoid charging such penalties