The appellant, a statutory corporation created to encourage economic development in remote and isolated communities, made a loan to a company located near Winnipeg.
The loan was guaranteed by the respondent, a director and shareholder of the company.
The company defaulted, and the appellant sued the guarantors.
The Supreme Court of Canada held that the loan was ultra vires the appellant because it contravened its statutory objects.
Furthermore, the Court held that the respondent was not liable on the guarantee because the principal debt was a nullity and the respondent had not personally received any of the funds.
