Alberta (Treasury Branches) v. Hammond, (1996) 192 A.R. 353 (QBM)

• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 15, 1996
• Citations: (1996), 192 A.R. 353 (QBM)

Alta. v. Hammond (1996), 192 A.R. 353 (QBM)

MLB headnote and full text

Province of Alberta Treasury Branches (plaintiff) v. William Hammond (defendant)

(Action No. 9503-10904)

Indexed As: Alberta (Treasury Branches) v. Hammond

Alberta Court of Queen's Bench

Judicial District of Edmonton

Funduk, Master in Chambers

November 15, 1996.

Summary:

Alberta Treasury Branches (Alberta) loaned money to a company, after Hammond invested $100,000 in the company (share­holders loan) and Hammond and three others guaranteed the Alberta loan. Each guarantee had a ceiling and no guarantor was liable for another's guarantees. The company was not successful and ceased operating. Two of the guarantors, Sims and Anderson, were bank­rupt. Alberta sued Hammond on his guaran­tees. Hammond counterclaimed for damages relating to the shareholders loan. Hammond applied for an order requiring Alberta to produce its procedure manual pertaining to the taking of guarantees; requiring a trial of the issues of whether Alberta withheld material facts from Hammond relating to the financial affairs of Sims and Anderson and whether the alleged withholding caused Hammond financial loss and was a defence to Alberta's action; and requiring Alberta to stay its action until the trial of the above issues.

A Master of the Alberta Court of Queen's Bench dismissed the application.

Guarantee and Indemnity - Topic 603

Duties of creditor - General - Fiduciary duty - [See Guarantee and Indemnity - Topic 2668 ].

Guarantee and Indemnity - Topic 604

Duties of creditor - General - Financial disclosure re other guarantors - [See Guarantee and Indemnity - Topic 2667 ].

Guarantee and Indemnity - Topic 2667

Discharge and other defences of surety - Acts of creditor - Duties of creditor - Alberta Treasury Branches (Alberta) loaned money to a company, after Hammond invested $100,000 in the com­pany and Hammond and three others executed guarantees - Alberta sued Hammond on his guarantees - Two of the other guarantors were now bankrupt - Hammond alleged that Alberta breached its fiduciary duty to him by not disclosing that the two guarantors had no net worth - Hammond alleged that he would never have invested in the company if he had known and counterclaimed for damages - He applied for an order requiring Alberta to produce its procedure manual pertaining to the taking of guarantees, to determine whether it conformed to "industry practice" - A Master of the Alberta Court of Queen's Bench dismissed the application - Whether a lender took a guarantee from a guarantor with no net worth was a risk factor for the lender to consider - Any internal rules were not law and could not create rights in third parties - The bank could not breach its duty of confidentiality.

Guarantee and Indemnity - Topic 2668

Discharge and other defences of surety - Acts of creditor - Breach of fiduciary duty - Alberta Treasury Branches (Alberta) loaned money to a company, after Hammond invested $100,000 in the com­pany (shareholders loan) and Hammond and three others executed guarantees - Each guarantee had a ceiling and no guar­antor was liable for another's guarantees - Alberta sued Hammond on his guarantees - Two of the other guarantors were now bankrupt - Hammond alleged that Alberta breached its fiduciary duty to him by not disclosing that the two guarantors had no net worth - Hammond alleged that he would never have invested in the company if he had known and counterclaimed for damages - A Master of the Alberta Court of Queen's Bench held that Alberta did not owe Hammond a fiduciary duty.

Cases Noticed:

TWT Enterprises Ltd. et al. v. Westgreen Developments (North) Ltd. et al. (1992), 127 A.R. 353; 20 W.A.C. 353 (C.A.), refd to. [para. 1].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1, appld. [para. 26].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, appld. [para. 27].

Litwin Construction (1973) Ltd. v. Kiss (1988), 29 B.C.L.R.(2d) 88 (C.A.), refd to. [para. 31].

Bertolo v. Bank of Montreal (1986), 18 O.A.C. 262; 57 O.R.(2d) 577 (C.A.), refd to. [para. 32].

Hayward v. Bank of Nova Scotia (1985), 51 O.R.(2d) 193 (C.A.), refd to. [para. 33].

Continental Bank of Canada v. Hunter (1986), 75 A.R. 381; 49 Alta. L.R.(2d) 358 (Q.B.), refd to. [para. 33].

Royal Bank of Canada v. Brattberg (1993), 143 A.R. 131; 11 Alta. L.R.(3d) 190 (Q.B.), refd to. [para. 33].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, folld. [para. 34].

Tournier v. National Provincial and Union Bank of England, [1924] 1 K.B. 461 (C.A.), refd to. [para. 61].

Authors and Works Noticed:

Crawford and Falconbridge, Banking and Bills of Exchange (8th Ed. 1986), vol. 1, c. 36 [para. 63].

McGuinness, Kevin Patrick, The Law of Guarantee (2nd Ed. 1995), pp. 201 to 203 [para. 41]; 432 to 448 [para. 36].

Counsel:

B.W. Sarabin (Bishop & McKenzie), for the plaintiff;

J.R. Nickerson (Nickerson Roberts), for the defendant.

This application was heard at Edmonton, Alberta, by Funduk, Master in Chambers, of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following decision on November 15, 1996.