Lord Maugham:-

In the months of January and February 1926 one T.R. Nickson, who resided in the City of Vancouver, found himself in a position of considerable difficulty. He controlled and managed two companies, the Prudential Holdings, Limited and the Nickson Construction Company, Limited, in which he was practically the sole share-holder, and he was being pressed by the Royal Bank of Canada to discharge the sum of $15,500 which was owed by the Construction Company to the bank. There had been a loan made to the Construction Company the security for which proved to be worthless, and early in February Mr. B.L. Mitchell, the manager of the Royal Bank in Vancouver, sent for Nickson and told him that the loan must be repaid immediately. Nickson applied to a friend of his, the late C.V. Cummings of Vancouver, for assistance, and Cummings thereupon called upon Mitchell at the bank, and after verifying certain statements made by Nickson, informed Mitchell that he was ready to make an advance upon having security. Nickson was not called at the trial of the action for some unexplained reason. Mitchell, however, was called and in addition to him a Mr. Coulter, a barrister and solicitor practising in Vancouver who had known Nickson for a long time and was the secretary of and held one share in Prudential Holdings, Limited; and he was a friend of Cummings. The evidence of Coulter and Mitchell shows quite clearly that the basis of the whole transaction was an advance by Cummings to Nickson to be secured in some shape or form by the latter.

The transaction was, however, carried out in a somewhat peculiar form owing to the circumstances in which the two principals found themselves. Nickson on his side had no assets except shares standing in his own name, but as stated he controlled the Prudential Holdings, Limited, and that company was the registered owner of certain lands in Vancouver which may be described as the Powell Street property and also of some lands which may be called the Burrard Street property. By a mortgage dated 15th January 1925 the Powell Street property had been mortgaged by the Prudential Holdings, Limited, to the respondents to secure a loan of $13,000.00 with interest thereon at 6 per cent. per annum, and this mortgage contained a covenant by the Prudential Holdings, Limited, as mortgagors for the payment of the mortgage money and interest. The Burrard Street property was also in mortgage to secure a sum of $6,000 and interest. In these circumstances Nickson proposed to procure the Prudential Holdings, Limited, to supply the necessary security (whatever its form might be) for an advance which in effect was to be made for the purpose of enabling the Construction Company to discharge its liability to the bank. On the other hand, Cummings, for private reasons of his own the nature of which did not appear in evidence, informed Mitchell that he did not want to have his name appear in the transaction in any way. Mitchell said he knew how to handle the matter with the assistance of a trust company and he telephoned to the manager of the Montreal Trust Company, the appellants in the present case, and got that company to agree to act as nominees for Cummings in the transaction.

It should be added, though nothing turns on this fact, that the name of Cummings was not at this time disclosed to the appellants, and the indemnity agreement which Cummings had to execute in the usual course in favour of the appellants was retained by the bank and was not to be called for by the appellants until they were entitled to enforce its terms. In the various steps that were taken to carry the matter to completion Mitchell acted as agent for both parties; and it is clear that the bank was itself directly interested since the $15,500 to the knowledge of all parties was to be paid to the bank so as to discharge a debt due to the bank. Their Lordships think that in these circumstances the evidence of Mitchell was clearly admissible. Mitchell asked the b