Lexfund v. Ferro et al., 2016 ONSC 4113 (CanLII)

Interest rate on litigation loans reduced due to failure by loan company to comply with Consumer Protection legislation.

Released June 22, 2016 | Full Decision [CanLII]

Lexfund is a litigation loan company. It loaned money to five people who had been injured in motor vehicle accidents and commenced lawsuits for damages. The money was needed to cover living and medical expenses while their lawsuits went forward. All five individual borrowers were represented by the same lawyer, Lou Ferro.

In all of the cases, the borrowers provided Mr. Ferro with an irrevocable direction directing and authorizing him to pay the loans upon settlement of their court actions. Unfortunately this step in the procedure did not take place and Mr. Ferro made an assignment in bankruptcy on March 12, 2015 and passed away on June 12, 2015.

Mr. Ferro helped the plaintiff arrange the loans. He then paid himself an administration fee out of the funds which the borrowers had not agreed to. None of the borrowers got a loan statement from Mr. Ferro. The borrowers were under the impression that Mr. Ferro had taken care of paying off the loans. Justice Sloan wrote that “unfortunately it appears that Mr. Ferro, in relation to the subject loans, breached every obligation he could breach, both with respect to the plaintiff and with respect to his clients as the borrowers”.

All of the borrower’s MVA court actions were settled and there was at the time of settlement in four actions sufficient money to pay off the outstanding balance of the plaintiff’s loans, but, they were either not paid at all or not paid in full. In the fifth action there was a settlement of part of the action (which is still ongoing) which would have been sufficient to pay off almost all of the loan. The interest rates on the loans were between 19% and 24% per annum compounded monthly. Lexfund sued both the individual borrowers and Mr. Ferro’s estate and law firm to try to recover the full amount owing on the loans.

The Court held that Lexfund, with full knowledge of the Consumer Protection Act, made an informed decision not to comply with the Act’s disclosure provisions by sending that disclosure directly to Mr. Ferro and not the borrower as mandated by the Act. He held that Lexfund “flagrantly and with a sense of entitlement” crafted documents in an effort to allow it to process its loans without full compliance with the Consumer Protection Act. These breaches of the Act by Lexfund “were not technical; they went to the very heart of the reason for the Act coming into force”. Justice Sloan held that there was actual prejudice to the borrowers in this case.

For those reasons Lexfund’s claim for compound interest in accordance with the contracts was dismissed. However, Justice Sloan found that it would be inequitable for the five injured parties not to pay any interest for loans that they deemed necessary to prosecute their motor vehicle accident cases, all of which resulted in recoveries for the borrowers.

In addition all of the individual borrowers, if they did not know what the interest rate was, would have known that they weren’t getting the use of the money interest free. Justice Sloan therefore set the interest rate at 5% per annum simple interest commencing from the date that each individual borrower obtained their loan.


Counsel for Lexfund:  Louis-Pierre Gregoire

Counsel for Mr. Ferro’s Estate and law firm: William G. Scott and Jillian Van Allen

Counsel for the individual borrowers: Mary Grosso


Read the full decision on CanLII
Written by

A partner at Oatley Vigmond, Ryan joined the firm in 2006 shortly after he was called to the bar in 2005. Ryan holds an Honours B.A. from York University, as well as a Bachelor of Laws (LL.B.) and a Master of Laws (LL.M.) (Civil Litigation and Dispute Resolution) from Osgoode Hall Law School.

When Ryan is not practicing law, he enjoys golfing and spending quality time with his wife and two young children.