Bank Cuts Credit Line Without Notice: RBC Held Liable

A bank may end a business relationship without giving a reason, but not without reasonable notice. The Quebec Superior Court holds RBC liable for cutting off a small business’s credit line two days after notifying it.

Picture this. You run an import-export business you built from the ground up. Two months ago, your bank, pleased with your numbers, increased your line of credit to $750,000. Then, one Monday morning in June, you open a letter: the bank is ending the relationship. Two days later, without further warning, your credit line is capped at… $1.00. You cannot pay your suppliers. Contracts collapse. And no one at the bank can tell you why.

That is precisely what Mr. Anatoli Gutin and his company went through, and it is the story at the heart of Gutin c. Royal Bank of Canada, 2026 QCCS 1700, rendered on May 11, 2026 by the Honourable Audrey Boctor of the Quebec Superior Court, district of Montreal. The Court ordered the Royal Bank of Canada (RBC) to pay $171,231 to the company and $10,000 to its president. The case is a reminder that a bank is entitled to end a banking relationship — but not just any way it pleases.

The Facts: A Banking Relationship That Went Off the Rails in a Matter of Days

Mr. Gutin and his wife immigrated to Canada from Belarus in 2006. After studying international trade in Montreal, they built an import-export business specializing in frozen meats, with clients and suppliers in Africa, Europe and the Americas. That kind of trade rests on two pillars: reputation and access to credit, since the company must often pay its suppliers before its own clients pay it.

The company had banked with RBC since 2013, and the bank knew its client well: quarterly visits from the account manager, annual review of the financial statements, monthly margin calculations. Never a missed payment, never a default. The credit line grew from $200,000 in 2016 to $500,000 in 2017, then to $750,000 on April 3, 2019 — each time after a full due diligence review lasting several months.

Then came the bombshell. On June 3, 2019, the company received a letter dated May 29: RBC was terminating the banking relationship, stating that recent account activity exceeded the bank’s risk tolerance threshold. The letter announced a 60-day period to find another financial institution, but its schedule provided that access to the credit facility would end five days after the date of the letter. In concrete terms: as of June 5 — two days after the letter was received — the credit line was capped at $1.00.

The account manager himself, a banker with 23 years of experience, testified that he had never seen anything like it in his entire career. He had been instructed to redirect all questions to a 1-800 number in Toronto. After repeated demands and formal notices, the bank restored access to the credit line on June 11, through to the end of the notice period. But the damage was done: deprived of credit at the worst possible moment, the company could not pay a Russian supplier by the June 8 deadline, which triggered the cascading cancellation of two contracts with clients in Ghana.

Can a Bank Close Your Account Without a Reason? Yes… But With Reasonable Notice

The judgment’s first lesson may surprise many: a bank does not need a reason to end a banking relationship. Banking agreements are generally contracts of indeterminate term — contracts with no set end date. Under Quebec civil law, either party may terminate such a contract, provided it follows one of two paths: either it invokes a serious ground (a serious breach by the other party), which it must then prove, or it terminates without cause — in which case it must give reasonable notice.

Reasonable notice is the breathing room that allows the client to regroup and find alternative banking arrangements. Its length depends on the circumstances of each case. Here, no one seriously disputed that 60 days was reasonable for the banking relationship as a whole, and the Court found the roughly 56 days actually given to be adequate for most of the services.

One striking feature of the case: throughout the proceedings, RBC maintained that it had cause to terminate, invoking a loss of confidence in the company’s management — only to abandon that position during closing argument at trial, without offering any supporting evidence. The Court therefore analyzed the case under the rules governing termination without cause. As the Quebec Court of Appeal has made clear, a party cannot have it both ways: whoever terminates without cause must live with the notice requirements.

Two Days’ Notice on the Credit Line: The Bank’s Fault

The problem lay with the credit facility. On paper, the credit agreement allowed the bank to cancel any unused portion of the credit without notice and to demand repayment at any time. But since the Supreme Court of Canada’s landmark decision in Houle v. Canadian National Bank, 1990 CanLII 58 (SCC), the case law has been constant: even armed with such clauses, a lender must act reasonably and in good faith. Good faith — codified in particular at article 1375 of the Civil Code of Québec — must govern the parties’ conduct at every stage of the contract, including its termination.

Here, RBC knew, or ought to have known, that the credit line was vital to its client’s operations: financing precisely this type of transaction was the very reason it had increased the facility to $750,000 two months earlier. Cutting off that access with two days’ effective notice — without any established ground, without any individualized assessment of the file, and without ever presenting the measure as temporary — is not how a prudent and diligent bank behaves. The Court also noted that less drastic options existed, such as simply reducing the available credit.

The Damages: No Blank Cheque From the Court

A word of caution, however: establishing the bank’s fault is not enough. The plaintiff must also prove, on a balance of probabilities, the damage and the causal link — that is, that the damage flows immediately, directly and foreseeably from the fault. These are the basic rules of civil liability, and this is where the judgment becomes a genuine lesson in evidence.

For two cancelled contracts (sales to clients in Ghana, sourced from a Russian supplier who required advance payment no later than June 8), the chain was airtight: with no access to credit from June 5 to 11, the company could not pay, the supplier terminated, and the sales fell through. The Court awarded the lost profit: $171,231.

For a third contract, however, the plaintiff’s account of the facts shifted over the course of the trial, and the evidence established neither the date nor the amount of the payment the company was supposedly prevented from making. That claim was dismissed.

As for the 58% drop in revenue from June through August 2019 — more than $3 million — the Court dismissed that claim too. The plaintiffs’ expert report, prepared by the company’s own accountant, wrongly assumed that access to credit had been cut off for the entire summer, when it had in fact been restored on June 11. More fundamentally, time spent searching for a new bank during an otherwise sufficient notice period is not compensable: the bank was entitled to end the relationship. A plaintiff can only recover for what flows from the fault actually committed, not from the termination itself.

The Owner’s Stress: A Distinct Injury, Compensated at $10,000

The final chapter is worth a close look. Mr. Gutin personally claimed $200,000 for injury to his reputation and $100,000 for stress and inconvenience. Reputation? No evidence of any lasting harm: claim dismissed. Stress? The Court compensated it — at $10,000.

The reasoning deserves attention. The banking contract bound the bank to the company, not to Mr. Gutin personally. Yet under Quebec civil law, the same fault can engage both contractual liability toward the contracting party and extracontractual liability — what common law jurisdictions would call liability in tort — toward a third party who suffers a distinct injury. Mr. Gutin, who had personally guaranteed the credit line up to $250,000 and had built the company as his life’s work, suffered very real stress, to the point of consulting his physician. The Court also found that the bank had aggravated this injury by maintaining, right up until trial, allegations of grounds for termination that it never even attempted to prove — conduct found to fall short of the requirements of loyalty.

Why This Case Stands Out

Quebec decisions on the “de-banking” of businesses — the abrupt end of a banking relationship — remain relatively rare. This judgment follows in the footsteps of the Court of Appeal’s decision in Toronto-Dominion Bank c. Pourshafiey, 2020 QCCA 1582, and sends a clear message: “no notice” clauses in credit agreements are not blank cheques. Good faith and reasonable notice prevail over the letter of the contract.

The case also illustrates, in the opposite direction, how demanding the courts are when it comes to proving damages. Of roughly $740,000 claimed, the plaintiffs recovered $181,231. The Court set aside the bulk of the expert report prepared by the in-house accountant, and even deprived both parties of their expert fees. An expert too close to the client, unverified assumptions, a factual narrative that shifts mid-trial: so many ways to watch a claim melt away, even where the fault itself is proven.

Key Takeaways if Your Bank Ends the Relationship

If your bank announces the end of the relationship, do not bury your head in the sand: the notice period exists precisely to give you time to reorganize, and it keeps running even if you dispute the decision. Document everything from day one: letters, emails, phone calls, jeopardized contracts, payment deadlines. That contemporaneous paper trail is what allowed the company to be compensated for two contracts — and its absence is what sank the rest.

If you are an entrepreneur and credit is the lifeblood of your operations, know that a bank cannot cut you off overnight, even where the contract seems to allow it. Conversely, remember that a bank does not have to justify its decision to part ways with you: in most cases, what matters is the notice, not the reason. Finally, before launching proceedings, have someone coldly assess the link between the alleged fault and every dollar claimed: that is where these cases are won — and lost.

Frequently Asked Questions

Can a bank close my account or credit line without a reason in Quebec?

Yes. A banking contract of indeterminate term can be terminated by the bank without cause, provided it gives reasonable notice. If the bank instead relies on a serious ground, it must prove it. What is wrongful is cutting off a vital service without sufficient notice, even where the contract contains a “no notice” clause.

What is reasonable notice for ending a banking relationship?

There is no fixed period: the notice must give the client a realistic window to find another financial institution, depending on the nature of the services and how dependent the business is on them. In Gutin, roughly 56 to 60 days was found adequate for the banking services, but two days’ effective notice on the credit line was found to be a fault.

Can I claim damages if my bank abruptly cut off my credit?

Yes, but you must prove the fault, the damage and the direct link between the two. Losses tied to specific, documented contracts were compensated; a general drop in revenue based on a poorly supported expert report was dismissed.

Can a business owner be personally compensated for stress caused by the bank?

In some circumstances, yes. Even though the contract binds the bank to the company, an owner who suffers a distinct injury (stress, inconvenience) may recover on the basis of extracontractual liability. In this case, $10,000 was awarded.

When the Bank Pulls Your Credit Line Overnight: RBC Ordered to Compensate a Business Owner