Bank guarantee and cost security limits control recovery: expired guarantee and earmarked deposit could not satisfy tax demand.

A bank guarantee given for stay of a sales tax demand was enforceable only within its express contractual period, and a court could not extend the surety's liability beyond the clear terms of the instrument. Because the stipulated time limit had expired before enforcement, the guarantee could not be used to recover the tax demand. A separate deposit made as security for costs was earmarked only for that purpose and, absent an order for costs, could not be appropriated towards the unpaid tax liability. The claimed recovery therefore failed both on expiry of the guarantee and on the limited purpose of the security deposit.

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Issues: (i) Whether the bank guarantee executed for the stay of the sales tax demand remained enforceable after the stipulated time limits had expired. (ii) Whether the amount deposited as security for costs could be applied towards the balance of the tax demand.

Issue (i): Whether the bank guarantee executed for the stay of the sales tax demand remained enforceable after the stipulated time limits had expired.

Analysis: The guarantee had to be construed according to its own terms. A surety cannot be made liable beyond the engagement actually undertaken, and where the language is clear the court cannot enlarge the obligation by referring to recitals or by reading the instrument as a whole against an express time restriction. On the terms of the guarantee, enforcement was confined to the period specified in the instrument, and that period had expired before any effective attempt at enforcement was made.

Conclusion: The guarantee was not enforceable after expiry of the contractual time limit.

Issue (ii): Whether the amount deposited as security for costs could be applied towards the balance of the tax demand.

Analysis: The security deposit was provided only for costs. In the absence of an order for costs, that deposit could not be diverted to satisfy the unpaid tax amount or the deficit claimed by the State.

Conclusion: The security for costs could not be applied towards the tax demand.

Final Conclusion: The claimed recovery failed in both respects, as the guarantee had lapsed and the security deposit was not available for tax recovery.

Ratio Decidendi: A guarantor is liable only within the exact terms and period of the guarantee, and a security deposit earmarked for costs cannot be appropriated for an unrelated tax liability absent an order for costs.

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