NIRMAL JIT SINGH HOON (De- APPELLANT; * *Feb.2,3 Mar. 11 AND
THE BANK OF NOVA SCOTIA
RESPONDENT. (P laintiff) .....................
ON APPEAL FROM THE OF APPEAL BRITISH COLUMBIA
Guarantee-Guarantees signed by defendant for indebtedness of two companies to plaintiff bank in consideration of bank's agreeing to deal with the companies "in the way of its business as a bank"-Payment demanded shortly after guarantees signed-Bank subsequently agreeing to extension of time for payment on furnishing of additional securities-Whether failure of consideration.
On April the defendant signed two guarantees for the indebtedness of D Ltd. and M Ltd. to the plaintiff bank "in consideration of the bank's agreeing to deal with [the said companies] in the way of its business as a bank". D Ltd. owed the bank $20,000 on a demand loan and about $28,400 by way of overdraft. M Ltd. owed the bank $20,000 on a demand loan but had a credit balance of something over $4,000 in its current account.
Following the signing of the guarantees the bank refused to honour outstanding cheques of D Ltd. unless cash were deposited to cover them, although up to that time the account had been allowed to become overdrawn. Four days after the signing of the guarantees the bank transferred $5,000 from the account of M Ltd. in part payment of the demand loan, thereby reducing that loan to $15,000 and creating an overdraft in the account of close to $900. On April 23 the bank's manager told the defendant that the bank would not advance further moneys to either D Ltd. or M Ltd. on the basis of the security that had been offered by the defendant. On April 24 the bank demanded payment in full of the indebtedness of the two companies and on April 27 demanded payment thereof from the defendant under the guarantees.
After some days of discussion an arrangement was completed by May 1959, whereby the bank was provided with certain additional security and in return agreed to a postponement of payment until April 29, 1960. However, payment was not made and an action on the two guarantees was commenced on January 1961. The trial judgment in favour of the bank was affirmed by the Court of Appeal with one member of the Court dissenting. On the appeal to this Court one ground of defence required consideration, i.e., that it was a condition precedent to the defendant's liability on the guarantees that the plaintiff should carry out its agreement to deal with D Ltd. and M Ltd. as its customers in the way of its business as a bank, that the plaintiff did not carry out those agreements, and indeed never intended to do so, and that consequently the defendant who received no part of the consideration for his promises was under no liability.
Held (Judson J. dissenting): The appeal should be allowed.
Cartwright, Martland, Judson, Ritchie and. Hall JJ. S.C.R.
[19661