Truro (Town) v. Toronto General Insurance Co.

Truro (Town) v. Toronto General Insurance Co.

There was no valid assignment of the prime contract because the contract required the contractor's written consent which was not given; the bond guaranteed payment under subcontracts and the town's sole obligation under the prime contract was to pay the contract price, an obligation that was not affected by the statutory amalgamation or administrative steps; therefore no material change discharged the surety and the surety remained liable for the subcontractor's claim. Additionally the surety failed to discharge its duty to keep itself reasonably informed of the contractor's financial condition.

Citation
[1974] SCR 1129
Parties
Plaintiff/appellant: Town of Truro; Defendant/respondent: Toronto General Insurance Company
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
27 August 1973
Procedural Posture
Civil Appeal (suretyship/contract) / Appeal to the Supreme Court of Canada From the Supreme Court of Nova Scotia, Appeal Division
Outcome
Appeal allowed; judgment of the trial court restored.
Legal Topics
Labour and Material Payment Bond, Assignment of Contract, Material Change/variation of Contract, Obligee/owner Vesting Under Statute, Surety Monitoring Obligations
Source Language
English
Guarantee and Suretyship Contract Law Construction Law Property/public Law Labour and Material Payment Bond Assignment of Contract Material Change/variation of Contract Obligee/owner Vesting Under Statute +1 more

Case Brief

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Parties

Town of Truro

Plaintiff/appellant

Toronto General Insurance Company

Defendant/respondent

Procedural Posture

Civil Appeal (suretyship/contract) / Appeal to the Supreme Court of Canada From the Supreme Court of Nova Scotia, Appeal Division

Legal Issues

  1. 1 Whether the Town of Truro assigned the prime contract to the amalgamated school board without contractor consent
  2. 2 Whether events between March and October 1970 constituted a material change or variation of the prime contract that discharged the surety
  3. 3 Whether the bond incorporated the prime contract such that changes to the prime contract could discharge the surety

Ratio Decidendi

There was no valid assignment of the prime contract because the contract required the contractor's written consent which was not given; the bond guaranteed payment under subcontracts and the town's sole obligation under the prime contract was to pay the contract price, an obligation that was not affected by the statutory amalgamation or administrative steps; therefore no material change discharged the surety and the surety remained liable for the subcontractor's claim. Additionally the surety failed to discharge its duty to keep itself reasonably informed of the contractor's financial condition.

Court Disposition

Appeal allowed; judgment of the trial court restored.

Orders

  • Appeal allowed
  • Set aside judgment of the Supreme Court of Nova Scotia, Appeal Division