The appellant Bank financed the purchase of a company by the respondents, who guaranteed the loans.
The Bank, concerned about the company's finances, deceitfully obtained the respondents' consent to appoint a receiver by misrepresenting its intentions.
The company was placed in receivership and the Bank sued the respondents on their guarantees.
The trial judge found the Bank deceitful but held the guarantors liable as the company was insolvent and the receivership actually reduced their liability.
The Court of Appeal discharged the guarantors due to the Bank's deceit.
The Supreme Court of Canada allowed the Bank's appeal, holding that a guarantor is not discharged by a creditor's misrepresentations or irregular conduct unless it materially alters the risk assumed or causes prejudice to the guarantor.
