One Missed Instalment but Recurring Delays Before Termination: Did the Bank Abuse Its Right?

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The Brussels attachment judge, rarely enough to be worth noting, considered a bank’s termination of an investment credit granted to a business in 2010 and repayable monthly over 20 years. The business was only one instalment in arrears at the time of termination.

The business had opposed the order preceding executory attachment on the mortgaged property and considered the termination abusive. It sought to be discharged of the indemnities, interest and costs linked to the termination, and to have payment terms restored. To argue abuse of rights, it admitted having paid its instalments with recurring delays, no doubt because the underlying rent on the property was itself regularly paid late, but relied on the bank’s tolerance over nine years. It also considered the termination abusive since, on the day of termination, only the current month’s instalment remained to be paid.

But the bank had warned it

The bank, relying on the banker’s freedom to terminate a credit as a general principle, considered it had not abused its right: instalments must be paid at the time stipulated in the contract, and any delay is a contractual fault capable of leading to termination. Moreover, the bank showed that it had regularly sent reminders and formal notices to the debtor, warning that, failing payment of arrears, interest and costs, it reserved the right to terminate the credit.

A bank’s tolerance does not oblige it to persist, nor prevent termination

The court restated the principles of abuse of rights, which concerns good faith in the performance of contracts. Applied to banking law, they imply that the bank is not required to put its client’s interests before its own. The mere fact that termination may harm the borrower does not establish abuse, since any termination inevitably causes inconvenience. What matters is whether the harm caused is disproportionate to the borrower’s breaches. The court also recalled the appellate case law under which a banker cannot be criticised for choosing termination over normal performance where the borrower never normally performed its obligations; only a brutal termination engages the banker’s liability.

The court found no abuse of rights, given the bank’s interests and the many reminders sent, despite the absence of a swifter termination. It granted the bank’s counterclaim to appoint a notary for the public sale of the mortgaged property, the executory attachment having meanwhile been served.

This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.