A "wild goose chase" ends with Ontario's top court siding with the commercial lender.
Ontario's top court has confirmed lenders can accelerate unaccrued future interest on a defaulted commercial loan and that Mortgages Act protections do not apply mid-term.
On July 30, 2026, a three-judge Court of Appeal panel dismissed the borrower's appeal and awarded the lender $25,000 in appeal costs.
The dispute began on January 22, 2024, when Canadian Equipment Finance & Leasing (CEFL) loaned an Ontario bus charter company $559,250 to buy a bus. The five-year loan carried 15.25 percent annual interest. The company's two directors personally guaranteed the debt, which was secured by a $25,000 deposit, a security interest in the bus, and a collateral mortgage on the directors' home.
The borrower defaulted. On August 22, 2024, CEFL sent default notices and demanded $672,417.20 under the loan's acceleration clause - the balance of principal plus all unaccrued future interest.
Then things got messy. CEFL tried to seize the bus and could not find it. When asked at his home, one of the directors told the lender the search would be a "wild goose chase." A Canada-wide vehicle database search eventually turned up the bus in Alberta, where the borrower had secretly sold it to a third party for $500,000, in breach of the loan agreement. Under pressure from the buyer, the borrower remitted the sale proceeds on September 17, 2024. That covered the outstanding principal and accrued interest up to that date - but not the future interest CEFL had already accelerated.
The borrower argued the contract did not allow acceleration of future interest and that section 17 of Ontario's Mortgages Act barred the claim. A Superior Court judge disagreed in September 2025, ordering the borrower to pay the future interest, $32,701.96 in enforcement costs, and a $12,571.25 WiseCap Broker Fee paid to the broker who arranged the loan.
Justice D.A. Wilson, writing for the appeal panel, upheld that ruling on all three grounds.
On the contract, she found the acceleration clause plainly allowed the lender to accelerate future interest. "Indebtedness" was defined in the agreement to include "any and all obligations, indebtedness and liability of the Borrower to the Lender (including interest thereon) present or future."
The Mortgages Act argument drew the most attention. The court accepted that the Act applies to both collateral and conventional mortgages given the broad statutory definition. But it held that section 17 - which lets a borrower pay out a mortgage on three months' notice or three months' interest in lieu - applies only to post-maturity default in the payment of principal. It does not apply to defaults during the life of the loan.
Reading section 17 to apply mid-term, Wilson J.A. wrote, would let a borrower abridge the statutory five-year timeline in section 18 "simply by going into default."
The court left the enforcement costs order undisturbed, citing deference to the application judge and the wild goose chase the lender was sent on. It upheld the broker fee under section 12(g) of the loan agreement, which entitles the lender to recover costs "reasonably incurred" in enforcing the deal.
For commercial lenders and the advisors who guide business-owner clients through secured borrowing, the ruling is a useful marker. A well-drafted acceleration clause referring to broadly defined "indebtedness" reaches future interest, and section 17's statutory redemption right will not rescue a borrower who defaults mid-loan.
