Re Stratford Fuel, Ice, Cartage and Construction Co.

Re Stratford Fuel, Ice, Cartage and Construction Co.

Where a creditor settles with a liquidator and agrees not to rank on the debtor's estate while expressly reserving rights against guarantors, that settlement does not discharge or bar non‑consenting sureties from claiming to rank (or be subrogated) for amounts they have paid; accordingly the sureties who paid are entitled to rank on the insolvent estate.

Citation
(1914) 50 SCR 100
Parties
Liquidator; Appellant/plaintiff: John Brown; Respondent/defendant; Surety: J.J. Coughlin; Respondent/defendant; Surety: W.J. Irwin
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
1 June 1914
Procedural Posture
Appeal Under Winding Up Act (insolvency) Concerning Ranking of Sureties in Liquidation / Final Appeal Decided by the Supreme Court of Canada (judgment)
Outcome
Appeal dismissed with costs; Appellate Division order restored; respondents entitled to rank on the insolvent estate for sums paid to the Traders Bank
Legal Topics
Subrogation, Ranking in Liquidation, Effect of Settlement/compromise on Suretyship, Reservation of Rights, Continuing Guarantee, Agency/authority to Compound
Source Language
English
Guarantee and Suretyship Insolvency and Liquidation Banking Law Contract Law Subrogation Ranking in Liquidation Effect of Settlement/compromise on Suretyship Reservation of Rights +2 more

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Parties

John Brown

Liquidator; Appellant/plaintiff

J.J. Coughlin

Respondent/defendant; Surety

W.J. Irwin

Respondent/defendant; Surety

Procedural Posture

Appeal Under Winding Up Act (insolvency) Concerning Ranking of Sureties in Liquidation / Final Appeal Decided by the Supreme Court of Canada (judgment)

Legal Issues

  1. 1 Whether a compromise between creditor and liquidator by which the creditor agrees not to rank on the estate operates to bar sureties from ranking after they have paid the creditor
  2. 2 Whether an express reservation of rights against guarantors in a settlement preserves guarantors' rights to seek contribution or indemnity from the principal debtor or its estate
  3. 3 Whether the continuing guarantee clause authorizing the bank to compound with parties and excluding doctrines in favour of sureties operates to deprive sureties of statutory or common law rights absent their consent

Ratio Decidendi

Where a creditor settles with a liquidator and agrees not to rank on the debtor's estate while expressly reserving rights against guarantors, that settlement does not discharge or bar non‑consenting sureties from claiming to rank (or be subrogated) for amounts they have paid; accordingly the sureties who paid are entitled to rank on the insolvent estate.

Court Disposition

Appeal dismissed with costs; Appellate Division order restored; respondents entitled to rank on the insolvent estate for sums paid to the Traders Bank

Orders

  • Appeal dismissed with costs
  • Respondents Coughlin and Irwin entitled to rank as creditors in the liquidation for amounts they paid to Traders Bank; matter to be reported to master for assessment as necessary