Executive Summary: Key Legal and Evidentiary Issues

• Appropriateness of summary judgment to resolve disputes over unpaid commercial lines of credit

• Whether the appellant was a “consumer” under the Consumer Protection Act and entitled to its protections

• Impact of ongoing payments and acknowledgements on the running of the limitation period

• Whether procedural fairness was compromised due to alleged lack of full document disclosure

• Effect of the Farm Debt Mediation Act stay on the appeal and enforcement of the lower court judgment

• Whether the motion judge erred in granting ancillary enforcement orders at the summary judgment stage

Background of the dispute

Kenneth Reed, a farmer, operated his business with financing from FS Partners and the Bank of Nova Scotia. In 2015, he entered into two credit agreements with the bank: a Crop Input Line of Credit, which effectively replaced prior FS credit, and a Business Line of Credit directly with the bank. Over time, he defaulted on both accounts. The bank sued to recover the outstanding amounts.

Mr. Reed acknowledged that he owed the balance on the Business LOC, but disputed the amount owed under the Crop Input LOC and argued that the bank had failed to comply with the Consumer Protection Act. He also raised issues under the Limitations Act, arguing that parts of the claim were statute-barred.

Lower court decision

The motion judge granted summary judgment to the bank for $68,450.56 on the Crop Input LOC and $27,956.52 on the Business LOC. The court also enforced the bank’s rights under a general security agreement, allowing it to take possession of secured assets and requiring the defendant to provide a list of assets.

Issues on appeal

Mr. Reed appealed, arguing that summary judgment was inappropriate and that he was unable to properly defend himself without an affidavit of documents and further discoveries. He also challenged the finding that the CPA did not apply, and he objected to the scope of the enforcement orders.

During the appeal, the appellant sought a stay of proceedings under the Farm Debt Mediation Act, which was granted prior to the hearing. The parties made submissions about whether the stay applied to the appeal.

Court of Appeal findings

The Court of Appeal dismissed the appeal. It found that summary judgment was appropriate: Mr. Reed had received relevant documents, examined a representative of the bank, and obtained answers to undertakings. The key dispute was a legal one about interpretation of the credit agreements, not a complex factual dispute requiring a trial.

The court agreed that the CPA did not apply because the credit was extended for commercial farming purposes, not personal or household use. On limitations, the court found no error in the motion judge’s conclusion that Mr. Reed had acknowledged the debt through ongoing payments, restarting the limitation period.

As to the FDMA stay, the court ruled that it applied to the bank’s ability to enforce the lower court judgment, but not to Mr. Reed’s appeal, since the appeal was commenced by the appellant, not by the bank. As a result, the appeal was heard and dismissed, but enforcement of the judgment was stayed pending completion of the mediation process or termination of the FDMA stay.

Conclusion

The Court of Appeal dismissed Mr. Reed’s appeal in full. It stayed the enforcement portions of the judgment under the FDMA. The appellant was ordered to pay the bank $7,500 in costs.