Facts
The case concerns a construction loan granted by a bank to a company for the construction of buildings. The loaned funds were to be used specifically for the construction project, but the loan recipient used part of the funds for other purposes, including paying personal debts and non-project related expenses.
The loan was secured by mortgages on the land to be built on. The loan agreements explicitly stated that the funds could only be used for the purpose of paying construction and material costs, and that any use contrary to this purpose was prohibited.
The loan recipient was convicted of abuse of trust and other offenses, and appealed to the SCC.
Considerations
The SCC examined the question of whether the loan recipient had committed an abuse of trust by using the funds for purposes other than those provided for in the contract. The court considered that, in the case of a construction loan, there is an obligation for the borrower to constantly conserve the counter-value of what they received, if the loan is granted for a specific purpose.
The court recalled its previous case law (ATF 120 IV 117) according to which an obligation to conserve value can be inferred from a loan contract if the loan is granted for a specific purpose, and if the lender can…