Demand Guarantees: Guarantor Attempts to Use Bank's Courtesy Against It

In Bank of Nova Scotia v. Williamson, The Bank of Nova Scotia (the "Bank") advanced loans to Ancon Industries Inc. ("Ancon"). The loans were guaranteed (the "Guarantee") by an individual guarantor (the "Guarantor") who was an officer, director and shareholder of Ancon.

In October 2004, Ancon's loans went into default and the Bank demanded payment from Ancon. On the same day, the Bank sent a letter to the Guarantor (the "2004 Letter") stating, among other things, that "If payment of our demand is not made as required, we will take steps to recover from you."

In December 2004, Ancon was deemed bankrupt. Final administration of Ancon's estate was not completed until February 2007, at which point, the Bank was still owed over $1 million. As a result, the Bank sent a demand letter to the Guarantor (the "2007 Letter") and took subsequent judicial action when the Guarantor failed to pay under the Guarantee.