A creditor who loans money has a duty not to breach its contract
or act "unconscionably" towards the guarantor or surety
of the loan. Accordingly, only in the most egregious circumstances
will a Court discharge a guarantee on the basis of the
creditor's improper conduct.
A recent decision of the Ontario Court of Appeal, Bank of
Montreal v. Javed, 2016 ONCA 49, per Lauwers J.A.
("Javed") illustrates that a guarantor or surety
will not lightly be discharged from obligations under a guarantee
based on the creditor's behavior.
The Facts
In Javed, the defendant Shah and his co-defendant Javed
gave the Bank a joint and several guarantee to secure a small
business loan to their company. The parties operated a donut
restaurant. The Bank loaned the company $213,486. Shah's
guarantee was limited to $53,371, in addition to interest.
