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Posted on October 1, 2013 | Posted in Collections

A financial institution extends a loan to a debtor and, sometime later, decides, in its wisdom, to demand payment and close the loan. Can it do so? The debtor in Gyimah v. Bank of Nova Scotia, a 2013 decision of the Ontario Court of Appeal, said, No!

Go Elsewhere

The bank had given the debtor a line of credit (the “Line”) and a Visa card. The bank then received credible information from a credit report that the debtor posed a high credit risk and that other financial institutions held the same view. The bank also reviewed the payment history on the Line and Visa and noted that the debtor had made uneven payments. Accordingly, even though the Line and the Visa were then in good standing, the bank cancelled the loan facilities.

The debtor sued the bank, alleging wrongful termination of the loan facilities. It seems that, to the debtor, the best defence is a good offence. The bank counterclaimed for the amount then due, the grand sum of $18,500.


As part of the loan documentation, the debtor signed a loan agreement that entitled the bank to renew, amend, or cancel the loan facilities. In particular, it entitled the bank to require the total balance of the loan to be paid, without prior notice or demand, if, among other things, “anything else happens that [the Bank defendants] believe endangers [the client’s] ability to pay or that [the Bank defendants] believe endangers the property in any way.” The bank also had the power to cancel the agreement if the client “[is] not handling [his or her] account in accordance with this agreement or our requirements”.

This type of agreement is not the creation of only the Bank of Nova Scotia. No doubt, other financial institutions have similar agreements.

We assume that the bank gave the debtor some time to pay the loans. Even with a demand loan, the debtor must be given some time to attempt to obtain alternate financing.


The bank brought a motion for summary judgment and was successful. The motions judge dismissed the action and granted judgment on the counterclaim, plus Courts of Justice Act interest.

The debtor, who represented himself (always a dangerous move), appealed the decision. This allowed the bank to cross appeal, claiming interest at the substantially higher contractual rate. We say “allowed” because we doubt that the bank would have bothered to cross appeal for a higher interest rate had the debtor not brought the bank to the dance.

The Court of Appeal dismissed the debtor’s appeal – no surprise. It also allowed the bank’s cross appeal – also no surprise. The law is settled that, if the contact sets out a specific rate of interest, judgment should be calculated using that rate.

To add insult to injury, the Court awarded costs of the appeal and cross-appeal on a substantial indemnity basis, because the loan agreement called for them, and fixed those costs at $10,300. The debtor’s decision to appeal was not wise. Indeed, the debtor’s entire response to the bank’s loan cancellation was not wise.


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