Supreme Court of Canada

Hawrish v. Peters et al., [1982] 1 S.C.R. 1083

Date: 1982-06-23

Andrew Hawrish Appellant;

and

Ray Peters, Raymond N. Resky, Fred L. Dunbar and Harold J. Russell Respondents.

File No.: 16294.

1982: April 28; 1982: June 23.

Present: Dickson, Estey, McIntyre, Chouinard and Wilson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN

Limitation of actions—Action to recover from co-sureties—Date that right to call for contributions from co-sureties arose—The Limitation of Actions Act, R.S.S. 1965, c. 84, s. 3.

Appellant commenced this action to recover contributions from two sureties for a bank debt of a third party. The debt had been retired by appellant, through payments made between April 1, 1970 and May 4, 1972, following a decision of the Saskatchewan Court of Appeal, made July 18, 1967 and affirmed here on January 28, 1969, finding appellant liable. Appellant paid more than his pro rata share of the debt on June 2, 1970. The writ in this action was issued January 17, 1975.

The issue before this Court was when did the right of a surety to call for contributions arise. The trial judge ruled and the Court of Appeal affirmed that The Limitation of Actions Act began to run from the date judgment was rendered against appellant.

Held: The appeal should be allowed.

The action was not statute-barred by The Limitation of Actions Act. The right of a surety to bring an action against his co-sureties arose when the surety paid any sum beyond his share of the debt. Where the plaintiff seeks a declaratory order in futuro relating to the obligation of a co-surety, the limitation period runs from the date of the ascertainment of liability, which occurs when the last right of appeal has expired. In this case, that date was January 28, 1969, less than six years prior to the issuance of the writ.

The proceedings must be referred back to the trial court for a determination on the merits.

[Page 1084]

Davies v. Humphreys (1840), 6 M. & W. 152; Ex parte Snowdon. In re Snowdon (1881), 17 Ch. D. 44; Gardner v. Brooke and Others, [1897] 2 I.R. 6; Stirling and Burden, [1911] 2 Ch. 418; In re Richardson. Ex parte The Governors of St. Thomas’s Hospital, [1911] 2 K.B. 705; In re Beavan. Davies, Banks and Co. v. Beavan, [1913] 2 Ch. 595; Dominion of Canada Investment and Debenture Co. Ltd. v. Gelhorn, 1917 CanLII 216 (SC EnBanc), [1917] 3 W.W.R. 231; Patterson v. Campbell (1910), 44 N.S.R. 214; Tucker v. Bennett (1927), 1927 CanLII 409 (ON SC), 60 O.L.R. 118; Walker v. Bowry and Another (1924), 35 C.L.R. 48 dismissing an appeal from [1924] Q.S.R. 142, referred to; Wolmershausen v. Gullick, [1893] 2 Ch. 514; Roddy v. Atkinson, 1949 CanLII 227 (MB CA), [1949] 1 W.W.R. 927, distinguished.

APPEAL from a judgment of the Saskatchewan Court of Appeal affirming without reasons a judgment of Maher J. Appeal allowed.

B.A. Crane, Q.C., for the appellant.

Reynold Robertson and Brent Gough, for the respondents.

The judgment of the Court was delivered by

ESTEY J.—This action was commenced by the appellant as plaintiff to recover contribution from two sureties for a bank debt of a third party, which debt was retired by the plaintiff‑appellant Hawrish by payments made to the Bank of Montreal, the creditor of the third party. The essential dates are as follows:

1. October 6, 1964:

Judgment in the action by the Bank of Montreal as creditor of the third party on the guaranty given to the Bank by the appellant finding the appellant was not liable to the Bank on his guaranty.

2. July 18, 1967:

The Court of Appeal for Saskatchewan reversed the judgment at trial and found the appellant liable to the Bank on its guaranty.

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3. January 28, 1969:

Judgment of the Supreme Court of Canada dismissing the appeal from the judgment of the Court of Appeal.

4. *April 1, 1970 to May 4, 1972:

Payments made by the appellant to the Bank in the amount of $14,700 discharging the guaranty with interest.

*On June 2, 1970 the appellant paid more than his pro rata share on the joint guaranty given by the appellant and the respondents to the Bank.

5. January 17, 1975:

Writ issued against the respondents.

The appellant commenced these proceedings against the co-sureties but the trial judge found that his claim was statute barred. The court of first instance interpreted The Limitation of Actions Act, R.S.S. 1965, c. 84, as requiring the computation of the six-year prescriptive period from the date of the judgment of the Court of Appeal when the appellant was first held to be liable on the guaranty.

Section 3 of The Limitation of Actions Act, supra, provides as follows:

3.—(1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned:

(f) actions for:

(i) the recovery of money, except in respect of a debt charged upon land, whether recoverable as a debt or damages or otherwise, and whether on a recognizance, bond, covenant or other specialty or on a simple contract, express or implied; or

(ii) an account or for not accounting;

within six years after the cause of action arose;

[Emphasis added.]

The rule ordinarily applicable in actions for the recovery of money from fellow guarantors is set out in Halsbury, 4th ed., vol. 28, p. 302 (para. 671) and Halsbury, 4th ed., vol. 20, p. 122 (paras. 224-5). The former reads as follows:

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671. Co-sureties etc. As between co-sureties, co-contractors, or co-debtors, the statute of limitation runs against the right of contribution of one who has paid more than his share from the time of such payment. It is immaterial that at the time of action for contribution the statute may have run between the principal creditor and the co-surety who is sued for contribution.

The text, Rowlatt on Principal and Surety (4th ed. 1982), states the rule this way, at p. 197:

No claim for contribution accrues till a surety has paid more than his share of what is unpaid by the debtor… As soon as the surety has paid his share he can sue his co‑sureties toties quoties for every further payment made by him.

To the same effect is the comment in Holmstead and Gale, Rules of Practice, (Annotated), 1273:

Until one surety has paid more than his due proportion of the entire debt, he cannot call on a co-surety to contribute merely because he has paid more than he presently ought to pay…

and later on the same page:

Strictly speaking, a right to indemnity, as such, arises only when the surety has paid the debt…

These and other texts writing to the same effect draw their authority for the statements as quoted above from a line of cases commencing with Davies v. Humphreys (1840), 6 M. & W. 152, as followed and applied in Ex parte Snowdon. In re Snowdon (1881), 17 Ch. D. 44 (C.A.), per Brett M.R. at p. 48; Gardner v. Brooke and Others, [1897] 2 I.R. 6, per O’Brien J. at p. 12; Stirling and Burdett, [1911] 2 Ch. 418 at p. 423; In re Richardson. Ex parte The Governors of St. Thomas’s Hospital, [1911] 2 K.B. 705; and In re Beavan. Davies, Banks and Co. v. Beavan, [1913] 2 Ch. 595, at p. 600. In Davies v. Humphreys, supra, Baron Parke, giving judgment for the Court of Exchequer Chamber, stated at p. 169:

In truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand any thing from the other; and before that, he has no equity to

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receive a contribution, and consequently no right of action, which is founded on the equity to receive it… But, whenever it appears that one has paid more than his proportion of what the sureties can ever be called upon to pay, then, and not till then, it is also clear that such part ought to be repaid by the others, and the action will lie for it.

These cases have been brought into this country in cases such as Dominion of Canada Investment and Debenture Co. Ltd. v Gelhorn, 1917 CanLII 216 (SC EnBanc), [1917] 3 W.W.R. 231 (Sask. C.A.), Patterson v. Campbell (1910), 44 N.S.R. 214 (N.S. C.A.), and Tucker v. Bennett (1927), 1927 CanLII 409 (ON SC), 60 O.L.R. 118 (H.C.) In Australia the same principle of law has been applied in Walker v. Bowry and Another (1924), 35 C.L.R. 48 (High Court of Australia), dismissing an appeal from [1924] Q.S.R. 142 (S.C.) These principles were applied to a set of facts almost identical to that before the Court on this appeal. The Australian High Court expressed the rule in the following manner:

Lastly, it was suggested that Walker’s right to this contribution was barred by the Statute of Limitations. The argument was based upon some observations in Wolmershausen v. Gullick and Robinson v. Harkin. But Gardner v. Brooke shows that, in the present case, Walker had no right to sue Bowry for the £400 until he had paid the money. And he paid, in point of fact, between 25th August 1919 and 14th June 1922—less than six years before action brought. [Per Starke J. at p. 59.]

All these cases concern actions on guaranties. We are not here concerned with contributions by joint tort feasors and the computation of limitation periods in respect to such causes of action.

The respondents largely based their resistance to the claims of the appellant on the judgment in Wolmershausen v. Gullick, [1893] 2 Ch. 514. In this case the surety had not yet paid any part of the judgment entered against him in favour of the principal creditor. The liability of the surety was determined in an action for the administration of a deceased’s estate. The surety’s liability was determined in those proceedings and the surety was denied the right to bring the co-sureties in under third party procedure. Before the surety paid any

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part of the moneys owing under the guaranty he brought action against the co-sureties. In this action the surety:

claimed a declaration that the Defendants were jointly and severally liable to contribute with the Plaintiff to the discharge of the principal debt and an order upon the Defendants respectively to contribute with the Plaintiff to pay… the amount of their debt, or, in the alternative, an order upon them to indemnify the Plaintiff against any sums which she might pay… in excess of her proper share.

In disposing of the action Wright J. said, at p. 529:

The principal creditor not being a party, I think I cannot order payment to him or directly prevent him from enforcing his judgment against the Plaintiff alone. Nor can I at present order the co-surety to pay his half to the Plaintiff, or the Plaintiff cannot give him a discharge as against the principal creditor… But I think that I can declare the Plaintiffs right, and make a prospective order under which, whenever she has paid any sum beyond her share, she can get it back, and I therefore declare the Plaintiffs right to contribution, and direct that, upon the Plaintiff paying her own share, the Defendant Gullick is to indemnify her against further payment or liability, and is, by payment to her or to the principal creditor or otherwise, to exonerate the Plaintiff from liability beyond the extent of her own share.

It thus is apparent that in that action the plaintiff sought a declaratory action in futuro. What we are concerned with is an action “for the recovery of money” from a co-surety under an existing right. The Limitation of Actions Act directs itself to “actions for the recovery of money”. It may well be that the Wolmershausen type of action is not touched by The Limitation of Actions Act of Saskatchewan, at least not s. 3(1), but we of course do not have to make any such decision here for the disposition of this appeal. Furthermore, if the declaratory action which includes a direction to pay is by its very terms operative only “upon the plaintiff paying her own share”, it follows that the right to recovery under that judgment was not

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complete at the time of the commencement of that action or at the time of the entry of the declaratory judgment. The respondent Dunbar found comfort in the course of argument from the statement of Wright J. at p. 529:

A point was made as to the Statutes of Limitation. The principal creditor’s claim was put in in 1879. But I think that I must hold that, even if the statute can begin to run before the surety has paid more than his proportion, at any rate it does not run until his liability is ascertained, and that did not occur until 1890.

That is, of course, professedly obiter dictum in the disposition of the Wolmershausen claim and, in any case, it is not directed to the situation arising in the face of the terminology adopted by the Legislature of Saskatchewan in s. 3(1)(f), supra. If anything need be added to a discussion on the relevancy of the Wolmershausen judgment it would arise from the use of the word “ascertain” by Wright J. in the above quotation. The ascertainment of liability by the appellant here must surely be upon the expiry of rights of appeal from the Court of Appeal judgment in 1967. This did not occur until the dismissal of the appeal in this Court in January 1969, supra. Whether the date is January 1969 or the earliest date of payment, June 2, 1970, the action was here commenced (January 17, 1975) within the six-year prescription period. The learned trial judge placed some reliance on the Manitoba decision in Roddy v. Atkinson, 1949 CanLII 227 (MB CA), [1949] 1 W.W.R. 927. This was an action on a judgment and not directly on the point of the principal issue here, namely when does the right of a surety to call for contribution arise. In any event, at p. 930 Dysart J. stated that the obligation to pay was never final until the last right of appeal had expired or been disposed of. In that case, time would begin to run on January 28, 1969 so that the writ would be within the six-year period by eleven days.

[Page 1090]

Whatever may be the significance of “ascertainment” as it was used by Wright J. it is of relevance only if the co-surety seeks a prospective order which is not the case here where he seeks contribution for moneys paid. The learned author of Rowlatt, supra, in dealing with the Wolmershausen type of action stated, at p. 198:

It is submitted that the existence of a right in the surety before payment to take equitable proceedings to compel the principal or a co-surety to pay, as the case may be, the whole or the proper proportion of the debt, can have no effect on the time when the statute begins to run against him. The statute would seem to have no direct application to a claim in that form; and if the surety pays and immediately afterwards sues principal or co-surety for money paid, it is hard to see how a defence founded on the statute could be supported by evidence that more than six years before proceedings might have been taken quia timet in equity.

The learned author of Lightwood on Time Limit on Actions makes the following comment on Wolmershausen, at p. 235:

But this prospective right to indemnity is substantially different from the right which accrues upon actual payment by the surety. It is probably correct to say that upon such payment a fresh cause of action accrues to the surety against which the statute then begins to run…

Gibson J. in Gardner v. Brooke, supra, stated at p. 20:

In my opinion, though the plaintiff might possibly have maintained a suit, such as in Wolmershausen s Case [supra], before he paid off the note, for prospective indemnity, he became entitled, on making the actual payment, to a distinct and substantive cause of action for contribution…

The respondents raised in this Court, for the first time in these proceedings, an issue concerning the amendment of the statement of claim at trial which was held in March 1978. It was said that the appellant had paid an excess of his share on June 2, 1970 and accordingly it is argued that an amendment to the claim in 1978 would be beyond the period permitted under The Limitation of Actions Act. No doubt because this matter is

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raised so late in the day, the record is inadequate for a full discussion and proper disposition of the argument. Apparently, the amendment occurred on February 22, 1978. The Fiat of the learned trial judge was March 9, 1978. No mention is made in the disposition of the action of the amendment and certainly no reference is made to any opposition by the respondents to the amendment being permitted by the Court. The Court of Appeal gave no reasons for their dismissal of the appeal from the trial judgment. The respondents make no reference in this submission to the Rules of Court in the Court of Queen’s Bench. This Court has nothing before it indicating the state of the statement of claim prior to the 1978 amendment and therefore it must be assumed that the prayer for relief remains as initially pleaded and that the date on which this action was commenced was indeed the date of the writ of summons which was within the six-year period when measured from the date of payment by the appellant of an excess of his obligation as a co-surety.

The learned trial judge dealt with the quantum actually in issue as between the appellant‑surety and the co-surety-respondents, and as this matter must, in my view, be referred back to the trial court for a determination on the merits, no discussion as to these matters would be appropriate here.

I therefore, for these reasons, would allow the appeal with costs and would refer the proceedings to the trial court for a determination on the merits. The appellant should have his cost here and in the courts below for the proceedings taken to date, but thereafter, of course, costs arising shall be determined in the ordinary way on the outcome of the appellant’s action.

Appeal allowed with costs.

Solicitors for the appellant: Hawrish and Hawrish, Saskatoon.

Solicitors for the respondent Fred L. Dunbar: Hnatyshyn, Sandstrom & Co., Saskatoon

Solicitors for the respondents Raymond N. Resky and Harold J. Russell: Robertson, Muzyka, Bell, Robertson & Nieman, Saskatoon.