The Queen (Plaintiff)
v.
F. H. Jones Tobacco Sales Co. Ltd. (Defendant)
Trial Division, Noël A.C.J.—Montreal, May 1;
Ottawa, May 29, 1973.
Income tax—Individual guaranteeing loan to customer in
return for exclusive sales rights—Default on loan—Guaran-
tor called on to make good—Payment made by company
controlled by guarantor—Whether deductible in computing
company's income.
Jones guaranteed a $200,000 loan to a cigarette sales
company to enable it to acquire a cigarette manufacturing
company. In return for the guarantee, Jones was given the
exclusive right to supply tobacco to the tobacco manufactur
ing company. Subsequently, the cigarette sales company
defaulted on the loan and Jones was called on to pay
$115,369 in consequence. The sum was, however, paid not
by Jones but by defendant company which Jones controlled.
Defendant company sought to deduct the amount of the
payment as a business expense in computing its income.
Held, the company was entitled to the deduction. From a
commercial point of view the obligation incurred in respect
to the loan was that of defendant company and not that of
Jones personally. Moreover, the purpose of the payment
was to increase defendant company's sales and thus its
profits, and not to create an enduring benefit.
L. Berman & Co. Ltd. v. M.N.R. [1961] C.T.C. 237;
M.N.R. v. Freud [1969] S.C.R. 75 referred to.
APPEAL from Tax Review Board.
COUNSEL:
Jean Potvin and Gaétan Drolet for plaintiff.
Michel Gilbert and Maurice Paquin for
defendant.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Lemay, Paquin and Gilbert, Montreal, for
defendant.
NOEL A.C.J.—An appeal is brought from the
decision of the Tax Review Board of April 28,
1972, allowing appellant's appeal from an
assessment by the Minister for 1966, by which
the latter rejected an amount of $115,369.33
which the company claimed to be entitled to
deduct, and added the said amount to its
declared income, thereby levying a tax of
$65,666.02.
Since 1961 defendant, F. H. Jones Tobacco
Sales Co. Ltd., has operated a business growing
and selling tobacco. F. H. Jones is its president
and principal shareholder, owning 99 per cent of
the shares.
In 1963 La Société des Tabacs Québec Inc., a
distributor of cigarettes, sought to acquire con
trol of Tabacs Trans-Canada Ltée, a company in
the business of manufacturing cigarettes. A loan
of $200,000 was necessary for this purpose, as
well as the endorsement of a solvent person.
On September 27, 1963 an agreement was
made between La Société des Tabacs Québec
Inc. (hereinafter called the company) on the one
hand, and F. H. Jones on the other hand, by
which
(1) F. H. Jones agreed to sign a guarantee to
repay a loan of $200,000 made by the com
pany for the purpose of acquiring control of
Tabacs Trans-Canada Ltée, payable to a Mr.
Pilonnière, acting on behalf of the Richelieu
Corporation, the lending company, at the rate
of approximately $5,000 a month;
(2) the company appointed Mr. F. H. Jones,
and undertook to have him appointed by
Tabacs Trans-Canada Ltée, as exclusive
agent for the purchase and supply of leaf
tobacco, at the best possible price having
regard to market conditions;
(3) both personally and in his capacity as
president and majority shareholder of F. H.
Jones Tobacco Sales Co. Ltd., F. H. Jones
undertook to supply the company and Tabacs
Trans-Canada Ltée with leaf tobacco, at the
best possible price having regard to market
conditions;
(4) the aforementioned guarantee would be
provided by the endorsement of one or more
promissory notes making a total of $200,000.
Prior to this agreement Tabacs Trans-Canada
Ltée had purchased 80 per cent of its tobacco
from suppliers other than F. H. Jones Tobacco
Sales Co. Ltd.
Jacques Hurtibise, president of La Société
des Tabacs Québec Inc., indicated to F. H.
Jones that if he signed as surety for the sum of
$200,000 all tobacco purchases would be chan
nelled to F. H. Jones Tobacco Sales Co. Ltd.
Because of the vigorous competition in the
market for the sale of tobacco, F. H. Jones felt
that it would be advantageous to his company to
make certain of, and increase, its sales to a
customer like Tabacs Trans-Canada Ltée. He
therefore affixed his signature to a document or
note relating to the loan of $200,000 needed to
enable La Société des Tabacs Quebec Inc. to
acquire control of Tabacs Trans-Canada Ltée.
After the agreement was signed on September
27, 1963 between La Société des Tabacs
Québec Inc. and F. H. Jones, all the tobacco
needed by Tabacs Trans-Canada Ltée was
bought from F. H. Jones Tobacco Sales Co.
Ltd.
In 1966 La Société des Tabacs Québec Inc.
became insolvent, and the surety was asked for
the sum of $115,369.33 on the loan of $200,-
000. F. H. Jones Tobacco Sales Co. Ltd. paid
the said amount of $115,369.33, and as we have
seen claimed it as an expense or a loss in
computing its income for 1966.
The plaintiff, Her Majesty the Queen, relies
on two propositions in disputing defendant's
right to deduct the sum of $115,369.33.
Firstly, she contends that there is no legal
connection between the creditor of the debt for
$115,369.33 and defendant, and so the latter
was under no obligation to pay the said amount.
She adds that this debt was a personal one of F.
H. Jones, and therefore cannot be considered as
an outlay or expense made or incurred by
defendant for the purpose of gaining or produc
ing income from defendant's business.
Alternatively, if the agreement made on Sep-
tember 27, 1963 between La Société des Tabacs
Québec Inc. and F. H. Jones was legally binding
on defendant, the amount of $115,369.33 would
still not be deductible in computing defendant's
income, for the following reasons:
(1) the amount of $115,369.33 was not a bad
debt deductible in computing defendant's
income within the meaning of s. 11(1) of the
Income Tax Act. This was a ground of appeal
accepted by the learned Member of the Tax
Review Board, but abandoned by counsel for
the defendant, for reasons which are obvious.
The sum of $115,369.33 was not the result of
loans made in the ordinary course of defend
ant's business, which did not even partly
involve the lending of money; moreover, the
amount in question was not included by
defendant in computing its income for 1966,
or for any prior year;
(2) the amount of $115,369.33 represented an
outlay, loss or replacement of capital, or a
payment on account of capital, and pursuant
to the provisions of s. 12(1)(b) of the Income
Tax Act, could not be deducted in computing
defendant's income.
Let us now return to plaintiff's first proposi
tion, namely that there is no legal connection
between the creditor of the debt for $115,-
369.33 and defendant, so that the latter was
under no obligation to pay the amount, since the
sum of $115,369.33 was a personal debt of F.
H. Jones, not of his company, and so it cannot
be considered as an outlay or expense made or
incurred by defendant for the purpose of gain
ing or producing income from its business.
In order to fully understand the questions
before the Court, I feel we must ascertain the
facts which gave rise to Jones' endorsement and
the circumstances in which this undertaking was
made. It should first be noted that he is practi
cally outright owner of F. H. Jones Tobacco
Sales Co. Ltd., since he holds 99 per cent of its
shares. We are therefore concerned with a com
pany whose ownership is in the hands of a
single man, F. H. Jones, and he is its president.
Before being incorporated, however, this busi
ness functioned under a trade name owned
entirely by F. H. Jones. Indeed, the company's
incorporation seems to have had no effect on
the activities of F. H. Jones, who continued to
run the business as in the past, and to act as if
no company existed.
According to Jones the company purchased
tobacco and finished it before it was rolled into
cigarettes.
Jones stated that his company began supply
ing tobacco to Tabacs Trans-Canada Ltée
around 1960. At that time ten per cent of the
Jones company's sales were to Tabacs Trans-
Canada Ltée. The Tabacs Trans-Canada factory
was subsequently sold to Mr. Jacques Hurtibise,
and he set up a company known as La Societe
des Tabacs Quebec Inc.,, which became the
successor to Tabacs Trans-Canada Ltée, since
the aforesaid company bought the shares of
Tabacs Trans-Canada Ltée. Jones testified that
in 1963 he was approached by Hurtibise or
other representatives of his company, who told
him that they intended to buy Mr. Brisebois'
shares in the company, and continue to manu
facture the "Québécoise" cigarette. They said
they needed a lot of tobacco, and Jones stated
"I found this was a very good thing for our
company".
He was also asked for his endorsement up to
the sum of $200,000 to enable them to buy the
shares of the Tabacs Trans-Canada company.
At the time it was indicated that if he did not
want to give the endorsement, they would go to
certain of his competitors, companies in Ontario
which were subsidiaries of American firms.
Jones said he did not want to lose the opportu
nity of selling the tobacco he had on hand then,
and future sales as well, "in the interests of our
company first of all", as he said. He told them
that "$200,000 is a lot of money", and asked if
they intended to repay the money promptly.
They replied that they would be doing so "with-
in three months", that they intended to sell
shares on the open market, and that he had
nothing to worry about. Jones stated that he
discussed the matter with his board of directors,
who he said gave him authority to sign on behalf
of the company, and he did so. An extract was
produced from the minutes of a meeting of the
directors of F. H. Jones Tobacco Sales Co. Ltd.,
dated August 26, 1963, that is a few days before
Jones signed the agreement between La Société
des Tabacs Québec Inc. and himself on Septem-
ber 27, 1963, by which he undertook to guaran
tee repayment of $200,000. This document was
his authority, he said, to sign for the company.
It reads as follows:
On motion duly made and seconded, it was resolved that
Mr. F. H. Jones, the President, be and he hereby is duly
authorized for or on behalf of the company to sign or
endorse agreements with prospective customers who manu
facture tobacco in the province of Quebec.
Whereby the company, namely F. H. Jones Tobacco Sales
Co. Ltd, will have exclusive rights to purchase and process
tobacco with a mutual understanding as to the price and will
take all measures at his disposition to see that the tobacco
purchased for any company is well protected and is the
property of F. H. Jones Tobacco Sales Co. Ltd until fully
paid.
As far as the endorsement itself is concerned,
he said he was not too sure what kind of docu
ment he signed, and added, "it was a contract".
He was unable to produce it because, he said,
he gave it to his lawyers at the time, and they
cannot find it. Further, this document might
have disappeared when the tax inspectors took
certain documents in connection with an excise
matter involving La Société des Tabacs Québec
Inc. I understand from a statement by counsel
for the plaintiff at the hearing that inspectors
from the Excise Branch, Department of Nation
al Revenue, saw this document on that occa
sion, and its existence is admitted. All the com-
pany's assets were seized on that occasion,
including the tobacco, and sold for whatever
they would bring. Jones said he was left with
the endorsement for $200,000, of which he was
asked to pay the sum of $136,000. A cheque for
this amount was then issued by his company in
settlement of this obligation.
Jones maintained that he acted on behalf of
his company at all times in endorsing payment
of the sum of $200,000, and that he did so in
reliance on the resolution of his board of direc
tors, mentioned above.
It is not for me to decide here whether an
action on the note against the Jones company
would succeed. I must simply determine wheth
er this was a purely personal debt of Jones, or a
debt which may and should be regarded as a
debt of the company.
As we have seen, Jones claims that this was
at all times simply a debt of his business or his
company, and I feel the evidence shows this
was indeed the case, not only in the view of
Jones but in that of Jacques Hurtibise, president
of La Société des Tabacs Québec Inc., as well.
At the hearing before the Tax Review Board
(evidence which was included in the record of
this case by consent), Hurtibise said the follow
ing in response to questions from Jones' coun
sel, concerning the latter's endorsement for
$200,000, at pages 35 et seq.:
Q. Were you aware of this transaction?
A. Certainly.
Q. Did you see the document?
A. Yes, as I remember, yes, I saw all the documents.
Q. Was the endorsement by Mr. Jones or by the
company?
A. As I remember, F. H. Jones appeared throughout.
Q. F. H. Jones; what does F. H. Jones refer to?
A. The company.
Hurtibise then said, at p. 37:
Definitely, once the transaction was complete, that is, the
one involving the purchase of Trans-Canada by La Société
des Tabacs Québec—definitely, in the space of a few
months tobacco purchases were directed to the F. H. Jones
company. Certainly after that our former suppliers came to
us on several occasions. I saw them myself, because it must
be remembered that before La Société des Tabacs Québec
took over Tabacs Trans-Canada, 70, 75, 80 per cent of the
tobacco supplied to us came from other sources besides Mr.
Jones.
A little further on he added that the Jones
company in fact supplied most of the tobacco
required by La Société des Tabacs Québec Inc.
Cross-examined by counsel for the plaintiff,
Me Potvin, he repeated what he said earlier,
namely that so far as he was concerned Jones
always stood for the Jones company:
Mc Potvin:
Q. On the last question, Mr. Hurtibise, you mentioned a
moment ago that you were not too sure who you were
dealing with when Mr. Jones signed the documents,
whether it was with him personally or his company?
A. What I mean is, in our opinion, F. H. Jones was
present throughout, quite simply.
THE PRESIDENT:
Q. To you Mr. Jones was the same as the F. H. Jones
Company?
A. That's correct.
Further, Hurtibise's testimony indicates clear
ly that the lender's representative, one Pilon-
nière, did not know Jones personally, and was
introduced to him by the witness, who added in
answer to a question by plaintiff's counsel that
Pilonnière was not aware of the fact Jones was
a person of substance, and that this enabled him
to act as surety for the sum of $200,000.
How can it be said, in these circumstances,
that the amount of $115,369.33 (that is $136,-
000 less certain sums paid by the co-endorsers)
paid by the defendant company was only a
personal debt of Jones, and not of the com
pany? The Court must consider the situation
from a businessman's point of view, and not
dwell on technicalities which may be relevant in
other types of proceeding in which, for instance,
the company challenged the existence of the
obligation, but which have no relevance here.
The payment of the amount of $115,369.33 by
the Jones company was undoubtedly made for
commercial reasons, in accordance with ordi
nary business principles. On this see L. Berman
& Co. Ltd. v. M.N.R. [1961] C.T.C. 237 per
Thorson P., at p. 247:
There is no doubt in my mind that the appellant made the
payments in question as a business person intending to
continue in business would reasonably do and that, conse
quently, they were made in accordance with the ordinary
principles of commercial trading or well accepted principles
of business practice and I am unable to find any ground in
Section 12(1)(a) for their exclusion.
Even if the appellant had not been legally bound to make
the payments that did not prevent them from having been
made in accordance with the ordinary principles of commer
cial trading. There is strong authority for this statement in
Usher's Wiltshire Brewery, Limited v. Bruce, [1915] A.C.
433. In that case the tenants of the appellants' tied houses
were by agreement bound to repair their houses and pay
certain rates and taxes. They failed to do so. The appellants,
though in no way legally or morally bound to do so, paid for
these repairs and paid these rates and taxes. They did so,
not as a matter of charity, but of commercial expediency, in
order to avoid the loss of their tenants, and, consequently,
the loss of the market for their beer, which they had
acquired these houses for the purpose of affording. It was
held that, although they were not legally or morally bound to
make these payments, yet they were, in estimating the
balance of the profits and gains of their business for the
purposes of assessment of income tax, entitled to deduct all
the sums so paid by them as expenses necessarily incurred
for the purposes of their business.
I therefore feel that defendant legitimately
paid the claim resulting from the endorsement
for $200,000.
Let us now turn to plaintiff's last proposition,
namely that the sum of $115,369.33 was an
outlay, loss or replacement of capital, or a pay
ment on account of capital, and that by virtue of
the provisions of s. 12(1)(b) of the Income Tax
Act, it cannot be deducted in computing defend
ant's income.
Section 12(1)(a) and (b) reads as follows:
12. (1) In computing income, no deduction shall be made
in respect of
(a) an outlay or expense except to the extent that it was
made or incurred by the taxpayer for the purpose of
gaining or producing income from property or a business
of the taxpayer,
(b) an outlay, loss or replacement of capital, a payment
on account of capital or an allowance in respect of
depreciation, obsolescence or depletion except as express
ly permitted by this Part, ... .
Clearly, as I have already indicated, the pay
ment made by the Jones company was one
which fell within the exception provided in
paragraph (a) of section 12(1). It was in fact
made for the purpose of gaining or producing
income from defendant's business, and the evi
dence establishes that until the bankruptcy of La
Société des Tabacs de Québec Inc. it actually
yielded considerable income by the sales of
tobacco made by the company to the latter
concern.
The only question the Court must now deter
mine is whether the payment of this amount
falls within paragraph (b) of section 12(1), as an
outlay, a payment on account of capital, or a
loss of capital. Plaintiff's counsel argued that it
does, and it is possible that in certain circum
stances it might be so regarded.
For some years, however, our courts have
been inclined to accept certain expenses or
losses as deductible, considering not so much
the legal aspect of the transaction, but rather the
practical and commercial aspects.
To see this we need only refer to the remarks
of the Chief Justice of the Supreme Court, when
he dismissed the appeal from the decision of
Jackett P. in Algoma Central Rly. v. M.N.R.
[1967] 2 Ex.C.R. 88, in which the latter had
allowed deduction of certain amounts spent on a
study designed to assist industries to locate in
the area served by the Algoma Central Railway,
and so generate income for its railway
operation.
At p. 449 of the M.N.R. y. Algoma Central
Rly. decision ([1968] S.C.R. 447) Fauteux C.J.
referred to and adopted the following statement
of Lord Pearce in B.P. Australia Ltd. v. Com
missioner of Taxation of Australia [1966] A.C.
224, at p. 264:
The solution to the problem is not to be found by any rigid
test or description. It has to be derived from many aspects
of the whole set of circumstances, some of which may point
in one direction, some in the other. One consideration may
point so clearly that it dominates other and vaguer indica
tions in the contrary direction. It is a cpmmonsense
appreciation of all guiding features which must provide the
ultimate answer.
It was in Hallstroms Pty. Ltd. v. F.T.C. 8
A.T.D. 190, however, that the Court held, at p.
196, that a realistic attitude must be adopted
toward deduction of expenses or losses. Indeed,
it stated that in such cases the solution
"depends on what the expense is calculated to
effect from a practical and business point of
view, rather than upon a juristic classification of
the legal rights, if any, secured, employed or
exhausted in the process".
Certain decisions of this Court, and of the
Supreme Court, were cited at the hearing. To
decide as to the deductibility of the sum of
$115,369.33 paid by defendant I feel I need
only quote at some length from a Supreme
Court decision by Pigeon J., in M.N.R. v. Freud
[1969] S.C.R. 75 at pp. 81-84, in which he
accepted as deductible monies advanced to a
company for the construction of an automobile
prototype, but unfortunately used up to no pur
pose since the venture did not succeed:
Appellant further contends that the disbursements made
by respondent should be considered as a loan to the com
pany. This is somewhat doubtful because while reimburse
ment of the sums advanced to the company could probably
have been claimed as money had and received, the sums
paid direct to third parties might well have been considered
as voluntary payments and not recoverable (Halsbury's
Laws of England, 3rd ed., vol. 8, p. 231).
Assuming that the whole amount should properly be con
sidered as a debt due by the company, this does not neces
sarily imply that the outlay was an investment. Obligations
to pay money can be trading assets just like other things
(Scott v. M.N.R. [1963] S.C.R. 223, [1963] C.T.C. 176;
M.N.R. v. Maclnnes [1963] S.C.R. 299, [1963] C.T.C. 311;
M.N.R. v. Curlett [1967] S.C.R. 280, [1967] C.T.C. 62). It is
true that in those cases the conclusion that the acquisition of
mortgages at a discount was a speculation, not an invest
ment, rests upon a consideration of the large number of
operations of a similar nature that were effected. But, on
account of the definition of "business", this is not the only
basis on which this conclusion can be reached. As previous
ly pointed out, a single venture in the nature of trade is a
business for the purposes of the Income Tax Act "as well in
the case of an individual as of a company".
It is, of course, obvious that a loan made by a person who
is not, in the business of lending money is ordinarily to be
considered as an investment. It is only under quite excep
tional or unusual circumstances that such an operation
should be considered as a speculation. However, the circum
stances of the present case are quite unusual and exception
al. It is an undeniable fact that, at the outset, the operation
embarked upon was an adventure in the nature of trade. It is
equally clear that the character of the venture itself
remained the same until it ended up in a total loss. Under
those circumstances, the outlay made by respondent in the
last year, when the speculative nature of the undertaking
was even more marked than at the outset due to financial
difficulties, cannot be considered as an investment. Whether
it is considered as a payment in anticipation of shares to be
issued or as an advance to be refunded if the venture was
successful, it is clear that the monies were not invested to
derive an income therefrom but in the hope of making a
profit on the whole transaction.
At this point, the decision of this Court in M.N.R. v. Steer
[1967] S.C.R. 34, [1966] C.T.C. 731, must be considered. In
that case, it was held that a guarantee given to a bank for a
company's indebtedness was a deferred loan to the company
and that a large sum paid to the bank to discharge this
indebtedness was a capital loss. The decision cannot imply
that loans are always investments but only that such was the
character of the loan in the circumstances of that case
because, as we have seen, there are at least three recent
cases in this Court where loans were held to be trading
operations with the consequence that profits and losses
were on income not capital account. It must also be added
that the decision cannot imply that an outlay for the acquisi
tion of an interest in an oil well drilling venture such as the
company involved in the Steer case, can never be a trading
venture because in Dobieco Ltd. v. M.N.R. [1966] S.C.R.
95, [1965] C.T.C. 506, such an interest was treated as a
trading asset of an underwriting and trading firm. As we
have seen while there is a presumption against an isolated
operation having such a character in the hands of an
individual, this presumption can be rebutted and it may be
shown that even a single operation is in fact a venture in the
nature of trade and therefore a "business" for income tax
purposes.
In the present case as we have seen, the basic venture was
not the development of a sports car with a view to the
making of a profit by going into the business of selling cars
but with a view to a profit on selling the prototype. There
fore, the venture, from its inception, was not for the purpose
of deriving income from an investment but for the purpose
of making a profit on the resale which is characteristic of a
venture in the nature of trade. Nothing indicates that the
character of the operation had changed when the outlays
under consideration were made. On the contrary, the ven
ture had become even more speculative, it was abundantly
clear that respondent could have no hope of recovering
anything unless a sale of the prototype could be accom
plished. The outlays cannot be considered as a separate
operation isolated from the initial venture, they have none
of the characteristics of a regular loan.
In my view, the payments made by respondent could not
properly be considered as an investment in the circum
stances in which they were made. It was purely speculation.
If a profit had been obtained it would have been taxable
irrespective of the method adopted for realizing it. Such
being the situation, these sums must be considered as out
lays for gaining income from an adventure in the nature of
trade, that is a business within the meaning of the Income
Tax Act, and not as outlays or losses on account of capital.
I also conclude that the loss sustained by
defendant when it was called on to act as surety
must be treated as an outlay made for the pur
pose of gaining or producing income in the
operation of its business undertaking, and not
an outlay or loss on account of capital.
Indeed, the evidence establishes that for a
number of years before 1966 defendant had
been selling hundreds of thousands of dollars
worth of tobacco to Tabacs Trans-Canada Ltée.
Realizing the poor financial condition of Tabacs
Trans-Canada Ltée, and that the latter would be
unable to pay for and take delivery of large
quantities of tobacco on order, defendant
through its president agreed to act as surety in
favour of La Société des Tabacs Québec Inc.,
for the amount of $200,000, so that the latter
could purchase the shares of Tabacs Trans-
Canada Ltée, otherwise La Société des Tabacs
would have obtained a guarantee from defend
ant's Ontario competitors and defendant would
thus lose a good customer.
In effect, defendant sought through this guar
antee to ensure continued growth of its sales to
Tabacs Trans-Canada Ltée, and at the same
time make certain that the latter would be able
to proceed with large orders for tobacco made.
It is thus clear that the actions taken by Jones
for his company were of a nature that would
benefit the latter, at least for a time. Their sole
purpose was to increase its sales, and hence its
profits, and this moreover is what did happen, at
least for some time, that is to say until La
Société des Tabacs Québec Inc. ceased
operations.
It is true that by signing the agreement of
September 27 defendant company secured a
certain priority in supplying tobacco to La
Société des Tabacs Québec Inc., but this was
nevertheless "at the best possible price having
regard to market conditions", as stated in clause
one of the agreement.
Counsel for the plaintiff sees this as an exclu
sive right, giving defendant a permanent asset,
and argues that for this reason the payment of
$115,369.33 should be regarded as a capital
payment.
In the first place, this exclusive right to
supply tobacco at the market price is rather
relative, since it was only enjoyed by defendant
if it sold its tobacco at the lowest price on the
market. It was thus at the mercy of its competi
tors. With regard to the period for which this
exclusive right was to exist, I feel that taking
into consideration the circumstances described
in the evidence it was quite short. Jones stated
that it would only last a few months, or as he
was informed, the time necessary to repay the
amount of $200,000 from the proceeds of the
sale of shares in La Société des Tabacs Québec
Inc. Furthermore, this period only lasted in fact
until this company was wound up a few months
after the agreement.
In these circumstances I am unable to see the
existence of an exclusive or permanent right
sufficient to warrant a finding that defendant
obtained a continuing benefit from his surety.
The appeal is accordingly dismissed with
costs.
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