Staples v iitner

The plaintiff guaranteed the liability of a firm to a bank by the execution of a letter of lien over Commonwealth bonds which were deposited with the bank. Authority was given to the bank to sell the bonds and to apply the proceeds in discharge of the firm's indebtedness. The principal debtor having made default, the bank, with the consent of the plaintiff, sold the bonds, and, on 19th August 1932, without the knowledge of the plaintiff, credited the proceeds to a suspense account. Thereafter interest on the amount of such proceeds was not credited to the suspense account nor debited to the principal debtors' account. On 23rd February 1937 a co-surety paid to the bank a sum of money which together with the sum in the suspense account amounted to the full amount of the firm's indebtedness to the bank, and certain documents given by the co-surety to the bank in respect of the guarantee were cancelled. After the commencement of a suit brought by the plaintiff against the co-surety for contribution the bank credited the principal debtor's account with the amount at the credit of the suspense account and thus closed the latter account. 'The defence was raised in the suit that the amount at the credit of the suspense account could not be treated as paid before the commencement of the suit.

• that payment had been made and the proceeds of the bonds applied in discharge 'of the principal debt before the commencement of the suit. Per Rich and 'McTiernan JJ.: Payment was made when the proceeds of the bonds were "carried to a suspense account on 9th August 1932. Per Starke and Evatt JJ. : _ 'There was a final and definite appropriation of the proceeds of the sale of the bonds towards the payment of the guaranteed debt on 23rd February 1937,

Held, also, by Starke, Evatt and McTiernan JJ., (Latham C.J. dissenting, and Rich J. not deciding), that a surety whose liability is secured and therefore

• postponed by the New-South- Wales moratorium legislation is not precluded from recovering from a co-surety contribution in respect of a payment made to the "principal creditor by reason of the fact that such payment was made before the date to which the liability was postponed.

Decision of the Supreme Court of New South Wales (Nicholas J.) reversed.

from the Supreme Court of New South Wales. A suit by way of statement of claim was brought in the equitable tion of the Supreme Court of New South Wales by William McLean to enforce contribution from one of the defendants, and Finance Ltd., as his co-surety, in respect of a debt to the National Bank of Australasia Ltd. by the other three its, Walter George Melbourne Wall, Eric Vernon Wall and William Rothwell, who traded as a firm under the name Wall, which firm, however, was insolvent. was not any appearance to the statement of claim entered or on behalf of any of these last-mentioned three defendants. n in his statement of claim in its original form claimed tual payment of contribution from Discount and Finance Ltd.

n the basis that he, McLean, was liable as-surety to the amount 3,000 and Discount and Finance Ltd. to the amount of £5,000. 'debt of the firm for which the sureties were actually made liable 772 17s. 3d., which included interest and bank charges. 3rd December 1930 Discount and Finance Ltd. became to the bank for the indebtedness of the firm of George Wall n 3rd December 1930 McLean guaranteed the liability of the of the firm of George Wall to the bank by the execution of lien under seal over Commonwealth bonds, which were by McLean with the bank. By this document McLean the bonds with the amount of the firm's liability and gave authority to sell the bonds and to apply the proceeds in c of the firm's indebtedness.

| 15th December 1930 the principal debtors made default.

Held, by Rich, Starke, Evatt and McTiernan JJ., (Latham C.J. not deciding), H. C. orJA.

The bank, on 9th August 1932, sold the bonds deposited by McLean for the sum of £2,936 16s. 3d. and paid the sum into a suspense account in the name of "George Wall, W. K. McLean Treasury Bonds, Manager's Suspense Account." The bank treated the overdraft liability of the firm as reduced by the amount placed in the suspense account and charged interest only on the balance of the overdraft.

On 23rd February 1937 Discount and Finance Ltd. paid to the bank a sum of money which together with the sum placed in the suspense account amounted to the full overdraft liability of the firm to the bank. On or about this date Discount and Finance Ltd.'s guarantee was cancelled by the bank.

After the institution of this suit McLean forwarded to the bank a letter, witnessed by a solicitor, wherein he stated that he ratified and confirmed the action of the bank in appropriating the proceeds of sale of his bonds towards payment of the indebtedness of the firm.

The Moratorium Act 1930 (N.S.W.) came into operation on 19th December 1930, and was repealed by the Moratorium Act 1932, which came into operation on 21st December 1932.

When the matter came on for hearing McLean discoveréd that Discount and Finance Ltd. had on 28th November 1929 guaranteed the firm to the extent of £10,000 and the claim was amended accordingly, contribution being claimed on the basis that Discount and Finance Ltd. should bear ten thirteenth parts of the liability and not only five eighth parts thereof as originally claimed.

Nicholas J., by whom the suit was heard, found as a fact that the amount for which Discount and Finance Ltd. was liable had not been reduced from £10,000 to £5,000 as claimed by that company, and he held that McLean had not, before action brought, actually paid any moneys to the bank. An amendment was allowed to introduce a quia timet claim for a declaration of liability of Discount and Finance Ltd. and an order for payment within a time to be fixed by the court.

The judge held that, having regard to the provisions of the Moratorium Act 1932-1936, payment was not made before the institution of the suit and that McLean did not become entitled to contribution on the sale of the bonds. 'The suit was dismissed, but, having regard to the provisions of sec. 14a (d) of the Moratorium Ac 1932-1936, without prejudice to McLean's right to bring further proceedings for the same relief.

From that decision McLean appealed to the High Court, and Discount and Finance Ltd., on the ground that the suit should have

iven to institute further proceedings. er facts appear in the judgments hereunder.

\itable doctrine of contribution as between co-sureties is not

ment must have been made necessary but that one surety have contributed more than his proper proportion of the debt -y. Earl of Winchelsea (1) ). The appropriation of the proceeds sale of the appellant's bonds, namely, £2,936 16s. 3d., which paid into a suspense account, to the overdraft account on 9th 1932, in that the latter account was reduced on that date by that in calculating interest on the overdraft account, was sufficient sive the appellant a vested right to payment of the contribution nst the respondent company in the same way as if that sum in fact been paid into the overdraft account, because on the : mentioned (i) the bank got the benefit of the sum; (ii) the ft account benefited qua interest as if the sum had been paid it; and (iii) the appellant could not recover any part of the from the bank because the whole of it was charged with the llant's liability under his guarantee. As to payment, see y. Lowndes (2) and Hall vy. Hutchons (3). At all times the treated the amount in the suspense account as being set off the overdraft account. As to set-off under sec. 40 of the ium Act 1932-1937, see Parkes Property and Stock Co. Ltd. Trustee Co. Ltd. (4). If that appropriation was not to give the appellant a vested right to the payment of ion on 9th August 1932, the events of 23rd February 1937

ny on the basis that that sum was the balance still owing on v account after deducting the above-mentioned sum of 16s, 3d. from that account as from 9th August 1932. If what uk did on that date was a release of the respondent company, e appellant is entitled to rely on the authority of Ex parte

• Inre Snowden (5). The rule that a surety cannot recover from another surety until the former has paid more than on of the debt is based upon the principle that the second not to be twice vexed (Davies v. Humphreys (6) ; Dering

me 318 [29 E.R. 1184). (4) (1936) 36 S.R. (N.S.W.) 457; 53.

Beay. 361, at pp. 367, W.N. (N.S.W.) 185. (BER 142 at pp. 144,145], (5) (1881) 17 Ch. D. 44, at pp. 48, 49. My. & K. (40 E.R. (6) (1840) 6 M. & W. 153, at pp. 168-

nn dismissed outright, cross-appealed with respect to the liberty 4- © oF 4.

K.C. (with him Beale), for the appellant. The basis of Ducovsr

v. Earl of Winchelsea (1); White and Tudor's Leading Cases in Equity, 9th ed. (1928), vol. 2, pp. 488, 490, 492, 493). If the events referred to above did not give the appellant such a vested right to payment of contribution, the appropriate inferences to be drawn from the events of 23rd February 1937 are : (a) that the bank accepted the sum of £4,638 16s. 10d. from the respondent company on the basis that it held the appellant responsible for the payment of the balance, namely, £2,936 16s. 3d., and (b) that the bank discharged the securities given by the respondent company and by the respon- dent partnership but did not give a formal release. The liability of the respondent company under its guarantee to the extent of £10,000 was not reduced or varied. The only inference that can be drawn from these events is that the bank discharged the respondent company but intended to retain its rights against the appellant for the balance. The bank must therefore be deemed to have discharged the respondent company on the basis that it reserved its rights to recover that sum from the appellant (Ex parte Gifford (2); Watters v. Smith (3); Ex parte Good; In re Armitage (4); In re E.W.A. | (5); White and Tudor's Leading Cases in Equity, 9th ed. (1928), vol. 2, p. 547). The position, therefore, is that after 23rd February 1937 the bank was still entitled to recover from the appellant the whole of the sum of £2,936 16s. 3d., and the appellant was still | entitled to contribution against the respondent company. He could have enforced this contribution by paying the sum mentioned and suing the respondent company for its share thereof; or by suing guia timet, and asking for an order quia timet that the respective liabilities of the appellant and the respondent company to pay the balance of the debt be ascertained, and that the respondent company should be ordered to pay the bank its share thereof, or that, upon the appellant paying the bank the whole of the balance, the respon dent company should be ordered to recoup to the appellant its share thereof (Ex parte Snowdon (6) ; Wolmershausen v. Gullick (7); Inre Anderson-Berry ; Harris v. Griffith (8) ; McIntosh v. Dalwood [No.3 (9); Tate v. Orewdson (10); Rowlatt on Principal and Surety, 2nd ed. (1926), pp. 239, 240). A surety is entitled to sue guia timet in equity as soon as the contingent debt has become an actual debt. The right of a person to bring a quia-timet action is discussed in Ascherson v. Tredegar Dry Dock and Wharf Co. Lid. (11). A surety's

(1) (1787) 1 Cox, at pp. 321, 322 [29 (6) (1881) 17 Ch. D., at p. 48. E.R., at pp. 1185, 1186]. (7) (1893) 2 Ch. 514. (2) (1802) 6 Ves. 805 [31 E.R. 1318]. (8) (1928) Ch. 290. (3) (1831) 2 B. & Ad. 889 [109 E.R. (9) (1930) 30 S.R. (N.S.W.) 332, 4165

1373). 47 W.N. (N.S.W.) 85, 128. (4) (1877) 5 Ch, D. 46. (10) (1938) Ch. 869. (5) (1901) 2 K.B, 642, at p. 650. (11) (1909) 2 Ch. 401, at p. 408.

Swinburne (1) ). In an action between co-sureties, if the principal debtor is before the court it is not necessary to prove his insolvency : here, however, there is ample evidence of insolvency (Hay v. Carter _ (2)). Ifa debt is released as to part and as against one surety is enforced as to part, that surety is entitled, in respect of the part so enforced, to contribution from a co-surety to the extent of the 's proper proportion of that part (Walker v. Bowry (3) ). There nothing inconsistent between Commercial Bank of Australia Ltd. r. Official Assignee of the Estate of Wilson & Co. (4) and Fahey v. a (5), because when the mortgage was handed over in the

• latter case it was for the purpose of paying and for the purpose of _ satisfying the obligations of the surety under his guarantee. If the ; on 23rd February 1937 did absolutely release the respondent j company then the rights had crystallized between the parties and the appellant became immediately entitled to contribution. Ward . National Bank of New Zealand Ltd. (6) only applies where the f liability of the several sureties is still contingent, and has no applica- after a surety has been called upon to pay more than his fair hare of the debt. The ratification or consent given by the appellant the bank in November 1938 had, under sec. 14 (d) of the Mora- Act 1932-1937, a retrospective operation. The only case in it is stated that a cause of action has to be complete at the e of the institution of the suit is Attorney-General v. Avon Corpora- (7). In a proper case the court should allow supplementary ts to be pleaded (shelby v. Federated European Bank Ltd. (8) ).

0 pay and has in fact paid more than his share of the guaranteed (Rowlatt on Principal and Surety, 2nd ed. (1926), pp. 237 et seq., ez; 3rd ed. (1936), pp. 242 et seq., note 0; Walker v. Bowry ). In cases in which he has not in fact paid more than his share is entitled to bring a quia-timet action for a declaration of his it to contribution and consequential orders only when there has

a judicial adjudication declaring and ascertaining his liability

i 2 ae 14 Ves. 160, at p. 164 [83 (5) (1890) 26 LR. Ir. 78.

482, at pp. 483, 484). (6) (1883) 8 App. Cas. 755. 1038) Ch: 397. (7) (1863) 3 DeG.J. & Sm. 637, at p. 35 CLR, 48. 650 [46 E.R. 783, at p. 789).

debt may become an actual debt in several ways (Craythorne v. H.C. or A.

H.C. or A. to the principal creditor in an amount in excess of his share of the ons guaranteed debt (Story on Equity, 3rd ed. (1920), par. 494a; Han- bury's Modern Equity, 2nd ed. (1937), p. 81; Shepheard v. Bray (I) ),

McLean a A co-surety has no such right when he is only under a liability to Disconee pay such excess, whether or not the principal creditor has made

Finance demand on him. Even then, to have such a right he must be under ea a presently enforceable liability to pay ; his debt must not only be debitum in praesenti but also solvendum in praesenti (Hughes-Hallett v. Indian Mammoth Gold Mines Co. (2) ; Leake on Contracts, 7th ed. (1921), p. 50). Whether the appellant did or did not in law pay the bank prior to the institution of the suit, he was not prior to the institution of the suit, nor afterwards, on the date of actual payment, namely, 9th November 1938, presently liable to pay the bank out of his bonds the amount secured by the deposit thereof (Moratorium Act 1930 (N.S.W.), sees. 4, 16 (3); Moratorium Act 1932-1937 (N.S.W.), secs. 2,7, 9,18). The word " chattel " as used in the Moratorium Act 1930 includes a bond (Bullock v. Dodds (3) ). Even if the putting of the money into a suspense account is ambiguous and capable of two interpretations, the court should accept an innocent interpreta- tion of such action. A co-surety who pays a debt which is not presently enforceable has no right of contribution: he cannot by his own voluntary act accelerate the liability of another co-surety to contribution. A bank has security over moneys in a suspense account (Commercial Bank of Australia Ltd. v. Official Assignee of the Estate of Wilson & Co. (4) ). The bank never exercised its power of sale in respect of the bonds, therefore the appellant could not ratify what had notin fact taken place. If the bank in fact purported to exercise its power of sale what it did was a nullity (Coroneo v. Australian Provincial Assurance Association Ltd. (5)): Cf. Cox v. National Bank of Australasia Ltd. (6) and Creelman v. Hudson Bay Insurance Co. (7).

A surety is not entitled to bring an action for indemnity, a quia- timet action, against a principal debtor, or a co-surety, if the day of payment has not elapsed (Ascherson v. Tredegar Dry Dock and Wharf Co. Ltd (9); Nisbet v. Smith (10); Dale and Perry v. Lolley (11) )-

(1) (1906) 2 Ch. 235, at p. 253, (6) (1931) 31 S.R. (N.S.W.) 410; 48 (2) (1882) 22 Ch. D. 561. W.N. (N.S.W.) 123. (3) (1819) 2 B. & Ald, 258 [106 E.R. (7) (1920) A.C. 194. 361). (8) (1891) A.C. 248. (4) (1893) A.C. 181. (9) (1909) 2 Ch., at p. 409.

(5) (1935) 3% . (N.S.W.) 391, at p. (10) (1789) 2 Bro. C.C, 579 [29 ER. 395; 52 W.N. (N.S.W.) 131, at 317. p. 132. (11) (1808) 2 Bro. C.C. 582, note 2 [29 E.R. 319).

pay. What was done with the appellant's bonds did not until 9th ember 1938 amount to payment; therefore he had not paid than his share and consequently had no claim for contribution. eing so, he did not have an equity to bring a quia-timet action, his liability to pay was not imminent. Allegations in a suit be supported or proved by facts which occurred since the neement of the suit (Attorney-General vy. Avon Corporation (1); Buans v. Bagshaw (2); Hshelby v. Federated European Bank lid. (3); Daniell's Chancery Practice, 8th ed. (1914), p. 378). If there were no suretyship of a plaintiff at the time the writ was issued t not to be allowed, on subsequently becoming a surety, to if he had not overpaid when the writ was issued he cannot ed to amend so as to prove an overpayment. The question want on a quia-timet action, because that depends upon : such an action is solely on the supposition that what before the writ did not in fact amount to payment. the appellant paid more than his share, or even before he was ta presently enforceable liability to pay the bank, the bank

ed and released the respondent company from its liability

the respondent company. After such release the appellant's redress was against the bank. He was by the release of his , the respondent company, discharged from his liability to nk pro tanto, that is, to the extent that his right to contribution

n injuriously affected (Rowlatt on Principal and Surety, 3rd

Bank of New Zealand Ltd. (5) ). The cases cited on this it on behalf of the appellant are irrelevant, because they are all which involved joint and joint and several liabilities where, if had been a release and discharge, the other parties would have absolutely discharged. Ex parte Snowdon (6) does not deal th release by a creditor : See also Stirling v. Burdett (7). If, how- i the foregoing arguments are not accepted, the decision of the ourt below should be sustained on the ground that prior to the it becoming surety the respondent company's liability under ee of 28th November 1929 had been discharged or varied he agreement of indemnity dated 9th September 1930. Under

3 DeG.J. & S., at p. 650 ER,, at p. 789]. 5 Ch. App. 340. . 1K.B., at pp. 258-263. (7) (1911) 2 Ch, 418, at p. 425. 2 Swans, 185, at p. 192 [36 585, at pp. 587, O88}.

(5) (1883) 8 App. Cas., at p. 766. (6) (1881) 17 Ch. D. 44; 50 LJ. Ch. 340.

isions of the Moratorium Acts postpone the obligation to H- ©: oF A.

such varied or substituted agreement the respondent company was not a co-surety with the appellant and, therefore, could never be under any liability for contribution; or, alternatively, its liability to contribution, if any, was to pay five eighth parts only of the guaranteed amount (Reuss v. Picksley (1); Agar v. Biden (2); American Surety Co. of New York v. Wrightson (3) ). The respondent company having been discharged by the bank from its liability, the appellant's right of contribution has been finally and absolutely determined, and therefore the decree of the court below should have been without prejudice to the appellant's right to bring further proceedings claiming the same relief. . McKillop. The agreement between the respondent company and the bank based upon the document dated 28th November 1929, was terminated by agreement between the parties based on the offer comprised in the document dated 10th September 1930 and the bank's acceptance of the offer by performance. The propér inference to be drawn from the relevant letters, all dated September 1930, and other circumstances is that the bank as to future advances did agree to the substitution of the second agreement for the first agreement. The arrangement was implemented in several definite and conclusive ways and the document of 9th September was retained by the bank. The acceptance of this position by both parties was acted upon by them and continued throughout (Chapman v. Bluck (4); Watcham v. East Africa Protectorate (5); Howard Smith & Co. Lid. v. Varawa (6); Foley v. Classique Coaches Ltd. (7); May & Butcher Lid. v. The King (8); Clayton v. Le Roy (9); Law Quarterly Review, vol. 48, pp. 4, 310; vol. 49, p. 316; vol. 51, p. 277). By reason of the nature of the first agreement, the facts amount to a termination of that agreement within its terms. That agreement was a continuing guarantee comprising an offer under seal by the respondent company and an acceptance by performance on the part of the bank. Onits true construction it was terminable as to future advances, (a) by the company by proper notice, and (b) by the bank in declining to make further advances (Lloyd's v. Harper (10); In re Crace; Balfour v. Crace (11) ). There must be a proper differentiation between the tule governing an agreement of this nature, as to further advances, and the ordinary rule as to release of a contract under seal or an

(1) (1866) L.R. 1 Ex. 342, (6) (1907) 5 C.L.R. 68, at pp. 77, 78.

(4) (1838) 4 Bing. N.C. 187 [132 E.R. (9) (1911) 2 K.B. 1031, at p. 1053. 760. (10) (1880) 16 Ch. D. 290, at p. 319.

(5) (1919) A.C. 533, at p. 538. (11) (1902) 1 Ch. 733, at p. 737.

and (b) acceptance by performance on the part of the bank, requirement as to writing by sec. 9 of the Usury, Bills of and Written Memoranda Act 1902 (N.S.W.) is satisfied. In y event writing is immaterial to the respondent company's case e (a) the new agreement (i) amounted to a determination of agreement which latter was completely executed upon ent off of the overdraft, (ii) was completely executed and

d in a debt due from the respondent company to the bank er v. Breese (1) ), (iii) was a perfect agreement even if not against the bank, and (iv) is used purely as a weapon e (Perpetual Executors and Trustees Association of Australia y. Russell (2); Law Quarterly Review, vol. 50, p. 532). The dence from Ist September to 10th September 1930 shows respondent company intended to intimate to the bank that ny was terminating the first agreement and that the bank tood the company's position. Later correspondence and acts parties confirm this view. The company was not bound the first agreement as from the receipt by the bank of the 'dated 10th September 1930, and the bank had no option but that position. The second agreement was an agreement demnity, not of guarantee. The general rule is that the form be disregarded and the essence of the contract is to be looked ermanent Trustee Co. of N.S.W. Ltd. v. Hinks (3) ). Where, re, a third party promises to save a guarantor harmless in

of liability incurred under guarantee, then, by legal implica- 'the agreement between the guarantor and the third party must yan indemnity and not a guarantee (Thomas v. Cook (4); Wildes Dudlow (5) ; Re Bolton (6); Guild & Co. v. Conrad (7); Re Law Chambers Co. Ltd. (8); Rowlatt on Principal and Surety, |. (1936), pp. 44 et seq). There is, therefore, no right of con- ion (Dering v. Earl of Winchelsea (9) ). If both the appellant ae respondent company are sureties the principle laid down in Earl of Winchelsea (10) still applies, because the risk covered same ; See American Surety Co. of New York v. Wrightson ther test is: Were the two guarantees one and the same

9 SR. (N.S.W.) 457; 26 (5) (1874) L.R. 19 Eq. 198. N. (N.S.W.) 92. (6) (1892) 8 T.L.R. 668, 45 CLR. 146, (7) (1894) 2 Q.B. 885. '34. S.R, (N.S.W.) 130; 51 (8) (1889) 61 L.T. 669, a 37, (9) (1787) 1 Cox, at p. 322 (29 E.R., B. & C. 728 [108 ER. 'at p. 1185). (10) (1787) 1 Cox 318 (29 E.R. 1184}. (11) (1910) 103 L.-T. 663.

ler under seal. The new agreement comprised (a) an offer under H- ©. oF 4.

transaction, or were they separate transactions (Stirling v. Forrester (1); Coope v. Twynam (2))?% There was not a common engage- ment or a common liability (Im re Denton's Estate ; Licences Insur- ance Corporation and Guarantee Fund Ltd. v. Denton (3) ; Craythorne yv. Swinburne (4).

Beale, in reply. The sale of the bonds in August 1932, the placing of them in a suspense account, and the notional crediting of the proceeds to the guaranteed account was either an actual payment or was at any rate a sufficient payment within the meaning of the - cases. If any ratification were needed of the bank's actions in August 1932, then the letter by the appellant to the bank after the suit had been commenced was effective under secs. 14 and 14a (d) of the Moratorium Act 1932-1937 and was acted on by the bank. Tf there were not any payment in August 1932, then the events of February 1937, when the bank settled with the respondent company on the footing of having received £2,936 from' the appellant and treated the account as concluded, was certainly a payment. The total debt on this date was £7.574 and the amount of £4,638 paid by the respondent company could not have been arrived at except by treating the appellant's £2.936 as having been received by the bank. If there was a sufficient payment on either August 1932 or February 1937, then the cases cited in chief show that the appellant acquired a vested right to contribution for the excess paid by him calculated as to the date of payment. The Moratorium Act 1930 does not apply. Bonds are not " chattels " within the meaning of sec. 2 of that Act: Cf. Australian Trust Ltd. v. Ho Chin (5). This being so, the Moratorium Act 1932 does not apply either, because the bonds had been sold before that Act came into force (Callachor v. Moses (6) ). But in any case, neither Act is relevant to the matter, because (a) the Acts were merely for the benefit of mortgagors giving them " days of grace " ; (b) even though the time for payment of the principal is postponed there is nothing to prevent a mortgagor paying: Cf. Moratorium Act 1932-1937, sec. 20, and Re B. A. Davies (Deceased) (7). The test is not whether there is a " presently enforce- able liability", but whether there was a debt and whether it was paid actually or notionally. Here there was a debt and it was paid by the sale of the appellant's bonds and appropriation of the proceeds as shown above. Apart from the question of payment, a surety is

(1) (1821) 3 Bli. 575, at p. 592 [4 (4) (1807) 14 Ves. 160 [33 E.R. 482) E.R. 712, at p. 718}. (5) (1932) 32 S.R. (N.S.W.) 555 50 (2) (1823) Turn, & R. 426 (37 E.R. W.N. (N. 8. 1164}. (6) (1931) 31 S.B. (N.S.W.) 4245 48 (3) (1904) 2 Ch. 178. W.N. (N.S.W.) 149.

having to pay more than his share of the common debt. He is

• entitled to bring such a suit before he pays immediately the position is such that the defendant surety cannot be twice vexed. The appellant relies on the following facts and circumstances as giving tise to his right to bring his suit quia timet : (a) the principal debt was called up on 15th December 1930 and the account stopped ; _ (b) the debtors were insolvent and unable to pay and never have _ paid; (c) demand was made upon the appellant on 7th July 1931 ; (d) the appellant's bonds were sold in August 1932 and realized the sum of £2,936; and (e) the bank might have appropriated this money, assuming it had not already done so in fact, or it might have brought proceedings against the appellant under the Mora- torium Act. The above-mentioned facts a to d show that as from August 1932 the liabilities of the parties had so crystallized that the respondent company could not be twice vexed. The same arguments pply even more strongly to the position on 23rd February 1937, hen it was obvious that the bank was looking to the proceeds of e sale of the appellant's bonds to satisfy the balance of the debt. The events of 23rd February 1937 did not and could not amount to an absolute release. The irresistible inference from the surrounding tances is that, at most, there was merely a covenant by the _ bank not to sue the respondent company. The surrounding cireum- stances are; (a) there was no formal release, the guarantee of 28th November 1929 merely being endorsed as cancelled, and (6) the amount paid by the respondent company, namely, £4,638, was ved at by treating the proceeds of the appellant's bonds, namely, 936, as still being available to the bank or having been paid to by the appellant, the guaranteed account then being treated as et The judge of first instance should have exercised his ion under sec. 68 of the Equity Act 1901 (N.S.W.). He was t bound by the decision in Eshelby v. Federated European Bank (1). Sec. 68 is intended for such a case as the present one and proper course was to have allowed the amendment to prevent u ity of suit. If there was a variation it must have been @ subject of discussion and agreed upon. The onus was on the it company, yet it did not call any evidence of any such . There was not any evidence given of an oral agreement, and the only written evidence shows disagreement. Therefore the rial judge was right in holding that no agreement had in fact been reached. The document of indemnity dated 9th September 1930 is relied upon by the respondent company as being an offer acted | Meea.by the bank, but this (a) was refuted by the bank's letter in (1) (1982) 1 KB. 254.

'entitled to come to the court for a declaration quia timet to avoid 4. ©. oF A.

324 HIGH COURT (1939, H.C. or A. reply ; (6) was never stopped or acted upon; (c) was not referred Hits to in later letters from the bank, reference therein being made only McLrax to the guarantee of 28th November 1929; (d) was not cancelled or v. handed back on 23rd February 1937; (e) was tentative only; 'apeemtad (f) was not sent by the bank to its solicitors when giving instructions Finance to sue; and (g) was not referred to in the respondent company's Lea letters of February 1931. The release of the film which belonged to the debtors, and the payment by them of £7,000 to the bank, was made independently of the indemnity dated 9th September 1930 and was a separate matter. The payment was made on 10th September 1930 and the indemnity was not received till the next day. The pencilled notation on the guarantee of 28th November 1929 was put on in error. This is borne out by the bank's letters. The form of the writ was due to the same error and the bank's letters show this also. The instructions to counsel to settle the declaration and the form of the declaration would have amply proved that this was so and the judge should have admitted them into evidence. Apart from the indemnity of 9th September 1930 there is not any evidence to show that any alleged variation to the guarantee of 28th November 1929 had been agreed upon prior to 3rd December 1930 and the onus is upon the respondent company" to show this. The settlement of 23rd February 1937 negatives any suggestion that the liability had been varied as claimed, because (a) it was made in respect of the whole of the debtors' account ; (6) the document which was cancelled was that of 28th November 1929 and not 9th September 1930, and (c) the fact that the respon- dent company paid only £4,638 is entirely neutral because the total liability was only £7,574, and the bank had money of the appellant amounting to £2,936. As to the alternative submissions that there was a variation from £10,000 to £5,000 though still in respect of the common debt, the correspondence shows that although the bank - was willing to do this as an act of grace only the parties contemplated the execution of a formal document and this was never forthcoming. Therefore there was.not any binding agreement: See Sinclair, Scott & Co, Ltd. v. Naughton (1) and Chillingworth v. Esche (2).

Teece K.C., by leave. The point upon which it was cited in this case was not fully argued in Australian Trust Ltd. v. Ho Chin (3), and the relevant point was not raised in Re B. A. Davies (Deceased)

(4). Cur. adv. vult. (1) (1929) 43 C.L.R. 310. (3) (1932) 33 S.R. (N.S.W.) 55; 50 (2) (1924) 1 Ch. 97. W.N. (N.S.W.) 28.

• The following written judgments were delivered : - Laraam C.J. This is an appeal from a decree of the Supreme ourt of New South Wales dismissing a suit by the appellant, W. R. ean, which was brought to enforce contribution from the defen- nt company, as his co-surety, in respect of a debt owed by the ther three defendants (who trade under the firm name of George Wall) to the National Bank of Australasia Ltd. The bank was not urty y to the proceedings. The members of the firm were joined in order to dispense with the necessity of proof of insol- of the firm (Lawson v. Wright (1); Hay v. Carter (2) ). The nsolvency of the firm, however, is not disputed. _ The plaintiff in his statement of claim in its original form claimed payment of contribution from the defendant company upon basis that the appellant was liable as surety to the amount of 3,000 and the defendant to the amount of £5,000. The debt of the m for which the sureties ultimately were actually made liable was 172 178, 3d., which included interest and bank charges as well as ipal. When the case went to trial it was discovered by the iff that the defendant had, on 28th November 1929, guaranteed rm to the extent of £10,000, and the claim was amended accord- , contribution being claimed on the basis that the defendant ny should bear ten-thirteenths of the liability, and not only ths, as originally claimed. The learned judge, however, eld that the plaintiff had not, before action brought, actually paid oneys to the creditor. An amendment was allowed to intro- ce a quia-timet claim for a declaration of liability of the defendant ny and an order for payment within a time to be fixed by the 'The learned judge held that payment had been made by the intiff, but only after the proceedings were instituted, and that therefore there was no cause of action at the time of action brought. 'Suit was dismissed without prejudice to fresh proceedings. The intiff appeals, and the defendant, contending that the suit should been dismissed outright, cross-appeals with respect, to the given t6 the plaintiff to institute further proceedings. evidence is almost entirely documentary in character. I e first to state the facts in outline, and then to examine them particularly, so far as necessary, in relation to the relevant les of law. 28th November 1929 the company became surety to the bank the firm for past debts and future advances to the amount of

(1) (1786) 1 Cox 275 (29 E.R. 1164). (2) (1935) Ch. 397

£10,000. A clause in the guarantee entitled the company to deter- mine the guarantee at any time as to future advances,

In September 1930 the company made proposals for a determina- tion of the existing guarantee and the substitution of a new guarantee limited to £5,000, and also limited to the liability of the bank under a guarantee which the bank had given to the Collector of Customs in respect of customs duties payable by the firm. The company maintained that this variation was actually made. The plaintiff contended that no new agreement was in fact made, although such an agreement had been suggested and discussed, and that the original guarantee of £10,000 remained in full force and effect. The learned judge found in favour of the contention of the plaintiff.

On 3rd December 1930 the plaintiff executed a guarantee in favour of the bank in respect of all indebtedness of the firm to the bank. The guarantee was in the form of a letter of lien under seal over Commonwealth bonds of a face value of £3,000, which were deposited by the plaintiff with the bank. By this document the plaintiff charged the bonds with the amount of the firm's liability to the bank and gave authority to the bank to sell the bonds and to apply the proceeds in discharge of the firm's indebtedness. The guarantee contained a provision that the bank might release any person liable to the bank in respect of the debt of the firm without discharging or affecting in any way the plaintiff's liability as surety. The letter of lien did not contain any personal covenant for payment by the plaintiff: Cf. Perry v. National Provincial Bank of England (1). '

On 15th December 1930 the principal debtors made default.

On 15th January 1931 the bank claimed from the firm payment in full of the indebtedness of the firm to the bank stated at an amount of £9,981 1s. 3d. This liability was subsequently reduced by pay-. ment of £2,000, which sum, however, was found by the leamed trial judge not to have been paid by the defendant company. This finding is not challenged by either party. On the same date the bank made a written demand on the company. The letter from the bank informed the company that the bank had paid the sum of £6,000 to the Collector of Customs under the guarantee given to the collector by the bank, and claimed payment in full of the indebtedness of the company to the bank by virtue of the guarantee dated 28th November 1929 in favour of the bank "in the sum of £10,000 and interest which was reduced in amount by subsequent correspondence to £5,000 and interest."

Oi 7th July 1931 the bank made a demand upon the plaintiff, iving notice of default by the customer, and stating that it proposed exercise the powers conferred upon it by the letter of lien given the bank by the plaintiff. The bank did not sell the bonds immediately. On 19th December 0a Moratorium Act came into operation, and it may have been account of the provisions of this Act that the bank did not act . On Ist August 1932, however, the plaintiff sent a letter to bank in which he said that " he would like to confirm his expressed vish that the bonds being held by the bank be converted into cash 'sale, such action to, of course, in no way prejudice my case." On 9th August 1932 the bank sold the bonds for £2,936 16s, 3d. bank had received a sum of £197 5s. 2d. as interest on the bonds had appropriated it in part payment of the overdraft liability of the firm. Thus the amount of money which the plaintiff has ded in respect of his obligation as surety is £3,134 1s, 5d. 'is no evidence to show that the plaintiff heard anything more rom the bank about the matter at any time. The evidence does ot show that the plaintiff was at the time aware of certain facts, which I propose now to refer, which took place between 9th 1932 and 23rd February 1937. ithout any intimation to the plaintiff the bank placed the sum '£2,936 16s. 3d. in a suspense account which was headed in its ss - George Wall, W. R. McLean Treasury Bonds, Manager's Account." This amount remained as a credit in the account 1932, and this was still the position when the action was tried. without any communication to the plaintiff, the bank treated overdraft liability of the firm as if it had been reduced by the dd amount and charged interest only on the balance of the over-

On 23rd February 1937 the defendant company paid to the bank amount of £4,638 16s. 10d. This amount, together with the unt of £2,936 16s. 3d., paid off the liability of the firm to the infull. That liability included liability to the Customs Depart- nt, Which the bank had guaranteed and had paid. On or about date the company's guarantee of 28th November 1929 was ncelled by the bank. Lines were drawn across the guarantee, and » word " cancelled " was written between them, and the signatures | the seal were struck out. There is no evidence to show when intiff became aware that the company had been a surety to th in respect of any liability of the firm. On 13th April 1938 the statement of claim in the suit was issued. the day on which the case was called on for trial (9th November

1938. the plaintiff signed a letter witnessed by a solicitor (who was not the solicitor for the bank), which was in the following terms : - "T understand that on receipt of the proceeds of the sale of my bonds in August 1932 you appropriated the said proceeds of sale towards payment of the debt of the above firm to the bank in that when you paid the said proceeds to a separate account you allowed a set-off of interest as though the said amount had been paid to the credit of the said account. This is to ratify and confirm your action in that respect." It is contended by the plaintiff that by virtue of the Moratorium Act 1932-1936, sec. 14, this letter brings about the result that the plaintiff actually paid to the bank on 9th August 1932 the amount realized by the bonds.

A creditor to whom guarantees have been given may compel any surety to pay according to his contract. He is not bound to take - any steps to distribute the burden among the sureties. Thusa surety who has guaranteed the whole of the debt may be compelled to pay the whole debt even though there are other sureties. But as between co-sureties the rule is " equality of burthen and benefit." A surety who has paid more than his share of the debt as between himself and his co-sureties is entitled to compel them to contribute in pro- portion to their respective liabilities. This rule applies not only where sureties are bound jointly and severally, but also where they are bound severally and whether by the same or different instruments. The rule is also applicable even though the surety claiming contribu- tion did not know when he became a surety that there were co- sureties (Dering v. Earl of Winchelsea (1); White and Tudor's Leading Cases, 9th ed. (1928), vol. 2, p. 488 ; Craythorne vy. Swin- burne (2) ).

The right of a surety to actual payment of money by way of con- tribution arises when the surety has actually paid more than his share. Until it is clear that he has paid more than his proportion he has no equity to receive a contribution (Davies v. Humphreys (3); Ellesmere Brewery Co. v. Cooper (4); Stirling v. Burdett (5) ).

If the plaintiff and the company were co-sureties and the plaintiff has made any payment to the bank, then, as between himself and the company, he has paid the bank more than his share of the guaranteed debt, whether his share be three-eighths or three-thir- teenths. He puts his case in two ways: Hither he paid before action brought, and so is entitled in this action to claim the overpayment from his co-surety by way of contribution ; or he paid after action

(1) (1787) 1 Cox 318 (29 E.R. 1184]. (3) (1840) 6 M. & W., at pp. 168, 169 (2) (1807) 14 Ves., at p. 165 [33 E.R., [151 ELR., at pp. 367, 368). at p. 484). (4) (1896) 1 QB. 75.

is that the company is bound to make a payment by way of

tribution because at the time of action brought, to put it shortly,

| money was in peril (Wolmershausen v. Gullick (1) ).

In order to succeed upon either claim the plaintiff must first show

• that the defendant was at the relevant time a co-surety with him. He must therefore show that the defendant was a surety for the

ne debt - namely, the debt owed by the firm of George Wall to

ned or varied, there can be no doubt that the plaintiff and defendant were liable respectively up to a maximum of the value

argues that the facts show that a new agreement was made it and the bank which displaced the earlier guarantee and that this agreement was made before the plaintiff became a surety yn 3rd December 1930. The learned trial judge took the view, the correspondence which was in evidence, that no new agree- nt was actually concluded. This conclusion is challenged by the \dant company. As I have the misfortune to differ from the med judge and from my colleagues upon this part of the case, "think it proper to state my reasons fully for coming to the con- 'ion which commends itself to me. Both the plaintiff and the defendant company were content to _ ely upon documentary evidence with respect to this part of the ease. Neither party called as witnesses any officers of the bank to ve evidence upon this matter. The first relevant document is a dated Ist September 1930, written to the bank by Messrs. bell, Campbell & Campbell, who acted as solicitors for the firm George Wall and also for the defendant company. 'This letter shows that negotiations had been in progress for some readjustment -of the liabilities of the firm to the bank and of the company as surety 'the firm. It is written upon the basis that an agreement has n reached and that all that is necessary is that, as the first para- States, settlement should take place at an early date. The Summarizes the arrangements, which were stated to be eally complete. These arrangements were stated to be as ows : - (a) The overdraft of the firm of approximately £7,000 to 'extinguished ; (6) the security held by the bank over the ourney's End" contracts to be released; (c) the guarantee by and Finance Ltd. to be released ; (d) the bank to continue guarantee of £6,000 to the Collector of Customs; (e) the bank (1) (1893) 2 Ch. 514.

brought, and in that event is entitled to a declaration ona quia-timet H.C. or A.

to be secured by either (i) a guarantee limited to £5,000 from Discount and Finance Ltd., or (ii) arrangements being made with the Sun Insurance Co. to protect the bank in relation to any payments which it might make for the firm to the Collector of Customs; (f) " The liability of Discount and Finance Ltd. under the new guarantee, if it is required, will be only in respect of the - customs." It is evident that these various arrangements were interdependent ; it was not contemplated that one or some only of the terms could be accepted and the others rejected. :

It is convenient at this stage to state what actually took place in relation to each of the matters mentioned : - As to a - The overdraft - of £7,000 was paid off ; as to b - The security held by the bank over _ contracts relating to a film known as "Journey's End" was hs released ; as to c - The defendant asserts and the plaintiff denies ; that the guarantee, that is, the £10,000 guarantee by Discount and - Finance Ltd., was terminated ; as to d - The bank did continue a guarantee of £6,000 to the Collector of Customs ; as to e - A deed of indemnity was executed by the company protecting the bank to a limit of £5,000 and also a covenant was given by the members of the firm to obtain an indemnity from an insurance company in respect of the liability of the bank to the Collector of Customs under its guarantee of the firm; as to f - The liability of the company under the new instrument was limited to customs transactions.

Thus all the proposals were accepted and put in legal form except, according to the plaintiff's argument, that which was the most important matter from the point of view of the company, namely, the reduction and limitation of its liability to the bank in relation to the firm. This (the view now submitted by the plaintiff), how- ever, was not the view of the parties to the transaction - the bank and the defendant company. After the correspondence was con- cluded and the legal documents had been executed and forwarded

"to the bank, both the company and the bank acted upon the basis

that the liability of the defendant company to the bank was limited to £5,000 and to customs transactions. The security officer of the bank made a memorandum to that effect upon the £10,000 guarantee. On 3rd September 1930, the bank replied to the letter of Ist September. The letter begins with the following words : " Referring to your letter of 1st instant we are prepared to make settlement in the following manner." Thus this letter also assumes that arrange- ments have been made for a readjustment and that all that is further required is to make a settlement in the ordinary way by executing - and handing over the necessary formal documents. The letter then recites that £7,000 is to be paid off Wall's account and that the

surity over the film is to be released, but requires that a second

e over the film should be given to the bank. Such a second was in fact given. The bank required that this security be given in addition to " the guarantee for £5,000 by Discount e Limited." This phrase shows that the bank accepted that there was to be a new guarantee in place of the and that it was to be a guarantee of the description ed in the letter of Ist September 1930, namely, £5,000 to customs transactions. The letter added that the bank eing to the proposals on the understanding that W. G. M.

ee of the firm given by the bank to the Collector of Customs. actual result the bank accepted an indemnity from the nt company together with a covenant by the members of the m to arrange an indemnity insurance policy with an insurance

iment by way of discharge of mortgage for execution by the ttorney. This discharge or release was executed by the < (item 6 of the letter of 1st September). The letter further } that Mr. Wall had informed the writer that he expected to

"Of course some assurance of this kind must be given completion of the matter." Such an assurance was given, as 'stated, in the form of a covenant to the bank (item e (ii) letter of Ist September). The letter concludes with a request form of guarantee for execution by the company. A form was but it was altered so as to become an indemnity, and not e. It was headed " indemnity."

September the solicitors wrote another letter, forwarding d mortgage, which had been asked for by the bank in the of 3rd September. The letter also enclosed an indemnity by

Ltd.'s liability under the indemnity being £5,000" (i)). The letter continued: '" We understand that Discount nance Ltd.'s undertaking " (item e (i) ) " is to be operative only indemnity policy " (item e (ii) ) "is arranged and is then to

tter asked for a letter to be written stating that the existing for the company for £10,000 had been cancelled. There lence that any such letter was sent, but at some time,

certainly before January 1931, the security officer of the bank wrote a memorandum on the company's £10,000 guarantee in the following words: "This guarantee is limited to £5,000 vide arrange- ment and covers only guarantee to Customs Department."

The document of indemnity (called a guarantee by both parties) which was forwarded with this letter was dated 9th September 1930 and was under the common seal of the defendant company. There is no evidence to show that the bank has ever contended that this indemnity did not become effective in substitution for the older guarantee. The bank retained possession of it and, as will be seen, though there was some confusion about the matter, never claimed from the defendant company any sum as surety except upon the basis of limitation of liability to £5,000 and to customs transactions, The confusion arose from the fact that an officer of the bank appar- ently treated the memorandum on the old guarantee as the record of the transaction, and did not seek for and find the deed of indemnity which was in fact the formal expression of the intention of the parties.

By the deed of indemnity the company agreed to pay to the bank on demand all such sums as might be demanded or claimed by the Collector of Customs by virtue of the guarantee given by the bank to the Collector of Customs in respect of duties of customs payable by the firm, with a proviso that the amount ultimately payable by the company should not exceed £5,000. It is now contended by the plaintiff that this document is entirely ineffective and that, although every other part of the proposed readjustment was carried out, and although the reduction of the company's liability was evidently one of the substantial objects (if not the substantial object) to be attained, yet this single part, of the transaction was not effec- tive, though expressed in a deed sealed and delivered and held by the bank.

The argument for the plaintiff upon this point depends entirely upon the terms of a letter of 15th September 1930, written by the bank to the solicitors for the firm and for the company. In this letter the bank recites the history of the matter and includes in that history a statement that the bank agreed to reduce the company's guarantee to £5,000 upon receiving £7,000 in reduction of the indebtedness of the firm to the bank. The letter then continues by representing as a "suggestion" the proposal (which in fact had already been accepted and performed) that the guarantee should be limited to the customs liabilities. The letter proceeds to state that "the bank prefers to continue the general form of guarantee as at present held so that we are covered whether Wall's commitments to the Customs involve us partially in overdraft as well as outstanding

sk that you be so good as to arrange for fresh guarantee on the of that already held but for the agreed reduced amount of 54 00." (In fact no such fresh guarantee was ever arranged. The nk did nothing further in pursuance of its request, but was content tain the deed of indemnity.)

learned trial judge held that this letter shows that there was no concluded agreement between the bank and the company for he reduction of the guarantee to £5,000 and the limitation of it to ustoms liabilities.

In my opinion the prior correspondence, together with the execu- ion of the release of the existing mortgage, the execution of a second the execution of the document of indemnity to the bank, d the delivery of that document to the bank, actually constitute t of completed contractual arrangements which the bank was it liberty to alter or set aside by making statements as to what "prefer" and by making new requests. The whole nt proposed in the first of the letters mentioned was d out. One mortgage was discharged, another mortgage was £7,000 was paid off the overdraft, and an indemnity was n to the bank together with a covenant to secure an indemnity an insurance company in respect of customs liabilities. As a in the mortgage of the film " Journey's End" dated 9th ber 1930, that is, the new second mortgage, the bank agreed ) give or to continue its guarantee to the Customs. It is in this q that the firm agreed to arrange and to keep on foot an insurance policy with an insurance company in favour of

e subsequent conduct of the parties strongly supports the view at a new agreement was actually made. As I have already said, certain that both the bank and the company were of the opinion 'it had been made. When, in January 1931, the bank made a nd upon the firm to settle its indebtedness, the demand related the moneys owed by the firm to the bank. But when, on the day, a demand was made upon the company, the letter of stated that the liability of the company was limited to 0, and claim was made only in respect of the moneys paid by to the Collector of Customs. | 21st January 1931, when the company's solicitors replied to mand, they said that their client's guarantee was for £5,000 it related solely to a customs guarantee (that is, by the bank) . When the bank, on 27th January 1931, replied to the letter, it was not disputed that the liability of the company 'LxIv. 2

' lity under our guarantee to the Customs. We would therefore ¥- ©: oF A-

was so limited. When the bank decided to take legal proceedings against the company its solicitors were given the guarantee for £10,000 bearing the pencil note that it had been reduced to £5,000 and had been limited to customs transactions. On 2lst January 1931 the bank issued a writ against the company, claiming £5,132 18s. 1d, under a guarantee given by the company to the bank " to the extent - of £10,000 and interest which said guarantee the said plaintiff bank - subsequently agreed to limit to the amounts which the said plaintiff _ bank might be called upon to pay to the Collector of Customs on - behalf of the said firm of George Wall and to the extent of £5,000 only and interest."

Thus the documentary evidence shows that the parties oom in negotiations which resulted in an agreement to substitute for the - £10,000 guarantee a new protection to the bank which was to be limited to £5,000 and to customs transactions. This agreement was actually carried out by the execution of the necessary documents. These documents included the document of 9th September. I am unable to discern any justification for dealing with the case as if this document did not exist.

In my opinion, therefore, the conclusion should be drawn that after 10th September 1930, when the bank received (and thereafter retained) the indemnity mentioned, the company was liable only up to a maximum of £5,000, not of £10,000. This conclusion affects the proportion in which contribution should be made by the defen- dant if any contribution is payable.

The plaintiff, up to a maximum limit of the value of his bonds, was subject to the liability of having his bonds sold and of the proceeds being applied by the bank in reduction of the general indebtedness of the firm to the bank. The defendant company, subject (in my opinion) to a maximum limit of £5,000, was liable to be called upon, under its indemnity, to pay to the bank such part of the general indebtedness of the firm to the bank as was repre- sented by payments made by the bank under its guarantee to the Customs on account of the firm and not made good by the firm to the bank. Thus there was, I think, a liability for a common debt to which the general principle of contribution was prima facie applicable: See Duncan Fox & Co. v. North and South Wales Bank (1) : - " Where a creditor has a right to come upon more than one person or fund for payment of a debt, there is an equity between the persons interested in the different funds that each shall bear no more than its due proportion. This is quite independent of any contract between the parties thus liable."

1 of £2,936 before or after action brought or at all. I do not this question, because I am of opinion that, by reason of dorium Act 1930, the plaintiff, even if he has at any time ny amount under the guarantee constituted by the letter of . has paid prematurely. A surety cannot claim contribution a co-surety if he has paid before he was under any liability , $o, also, where the basis of a claim for contribution is to be ad in the realization and application of the proceeds of a security by the surety, the liability of a co-surety cannot be accelerated. of contribution, by the surety suffering such realization application at a date before the creditors had any right to call the surety.

Moratorium Act 1930 was in force on 9th August 1932, when, g to one view, the plaintiff made a payment of £2,936 to the In sec. 2 "' mortgage " was defined as follows : " ' Mortgage' pany deed, memorandum of mortgage, instrument, or agree- whereby security for payment of moneys or for the performance y contract is granted over land or chattels or any interest in respectively, and includes an equitable mortgage by deposit e deeds, and any document by which the duration of a mort- is extended." The question which arises is whether the letter of lien was a mortgage of chattels. In Australian Trust Ltd. v. Chin (1) it was held by the Full Court of the Supreme Court of South Wales that a "lien" in favour of a company over its shares, created by the articles of association, was not a mortgage the definition quoted. Such a lien did not involve the on of any chattel or give any security over any chattel. : opinion was expressed that the word " chattel" was limited

mal property which is capable of being transferred by actual and which can be the subject of occupation or manual pos-

plaintiff's guarantee was a mortgage of Commonwealth bonds. 'the letter of lien the bank was entitled to the physical posses-

the bonds. Indeed, such physical possession was the neces- € it in the security, as the bonds were transferable by . A lien over bonds which, by the terms of the lien, must Temain in the possession of the lienee, is a very different from the "lien oi over shares which was under consideration lustralian Trust Ltd. v. Ho Chin (1). In the present case the 'and the value of the lien consisted in the physical possession 0 Thus the lien given by the plaintiff was, in my opinion, (1) (2932) 33 SR, (N.S.W.) 55; 50 W.N. (N.S.W.) 28.

ye next question which arises is whether the plaintiff paid the 1. ©. or 4.

a mortgage within the definition of the Moratorium Act 1930. Sec, 16 of the Act extended the time for payment of the principal sum secured by any mortgage to which the Act applied, and in the case of the plaintifi's letter of lien the due date became 28th Feb: 1933. By subsequent legislation the date upon which the money became payable was fixed at 28th February 1940: See Moratorium - (Amendment) Act 1937, sec. 2.

According to another view the plaintiff made a payment on 23rd February 1937 or on 9th November 1938, At each of these times the Moratorium Act 1932 (as amended) was in force. It is not disputed that the letter of lien was a mortgage within the definition of mortgage contained in that Act. Under that Act the due date for payment became 28th February 1940. |

I am therefore of opinion that the appeal should be dismissed on the ground that the plaintiff had, by reason of the moratorium legis- lation, not become liable before action brought and has not yet become liable to pay any sum to the bank, or, more strictly, to suffer the application of the proceeds of the bonds by the bank to the debt of the firm, and that therefore he cannot claim contribution from any co-surety. In view of the contrary opinion of my colleagues it is not necessary for me to deal with the cross-appeal.

Two of my colleagues are of opinion that judgment should be given for the plaintiff for £1,552 9s. 4d. Two are of opinion that the amount of the judgment should be £1,340 6s. 6d. There is agreement that judgment should be given for the plaintiff for at least £1,340 6s. 6d. The order of the court should therefore be that judgment should be given for the plaintiff for £1,340 6s. 6d. with interest at the rate of four pounds per centum per annum from 23rd February 1937 to the date of the decree in the Supreme Court, 20th March 1939.

Ricu J. The suit which stands dismissed by the decree now appealed from was brought by a surety to recover from an alleged co-surety contribution so that each would bear the just proportion of the principal debt. The doctrine which the plaintiff invokes for this purpose cannot be stated more clearly that it was by Hamilton J., as he then was, in American Surety Co. of New York v. Wrightson (1): - "I think . . . that where sureties have guaranteed a principal debtor by separate instruments for different sums their position is exactly the same as if they had guaranteed him by the same instrument stipulating that their liability should differ in amount, and that then the sureties should make contribution

object, both with regard to contribution of sureties and the rule with regard to double insurances, is to put people who have commonly or commonly insured in the same position as if the 'principal creditor or the assured had pursued his remedies ratably | them instead of doing as he is entitled to do, exhausting 'ham to suit himself against one or other of them."

'The principal debtor was a firm of customs agents carrying on a ze business. The parties did not regard it as worth while to op in evidence the course of the business carried on or the dings of the transaction. But it would seem that the firm customs duties by their own cheques drawn upon their bank reimbursed themselves by cheques from their clients which they ? into their banking account. Apparently His Majesty's Customs

ted their cheques because they had given a customs bond for supported by some obligation which the bank entered into 'surety. 'The course of business required the firm to find a margin f finance, which they did by a floating overdraft of fluctuating nt. To support this overdraft the respondent company gave bank a continuing guarantee limited in amount to £10,000. 'he guarantee covered the principal debtors' liabilities to the bank ofall kinds, and thus included its liability to His Majesty's Customs der its bond or obligation. At a subsequent date, viz., 3rd ber 1930, the plaintiff gave to the bank a security over some mwealth bonds to the amount of £3,000 to support the over- and the firm's liabilities generally. Ultimately the respondent ny paid to the bank under its suretyship the sum of £4,638 10d., and the plaintiff was called upon to bear £2,936 16s. 3d. sums which together made up the amount owing by the firm to bank. This amount included a large sum which the bank paid ) His Majesty's Customs - the balance of the overdraft to the debit lich had been carried the bank's liability of £6,000 which it had called upon to pay to His Majesty's Customs. If the matter d there, it would be clear that the plaintiff had paid more than Proportion and that he was entitled to contribution. But spondent company says that the matter does not stand thus Sets up several answers to the suit. first answer set up is that the guarantee of £10,000 was and replaced by an " indemnity " given by the respon- company to secure only the bank's liability to His Majesty's on its bond or obligation. This involves three results : that the respondent company was no longer a surety, (b) that the or liability was not the same as that for which the plaintiff had

inter se in proportion to the amount of their guarantees; that the H- ©. or 4.

338 HIGH COURT (1939. H.C. or A. become surety; and (c) that in any event the limit of its liability wey was £5,000 and not £10,000, so that the proportions of contribution McLeax Would be five-eighths and three-eighths and not ten-thirteenths and v. three-thirteenths. The arrangement or negotiations relied upon to couse produce this result took place in September 1930 between the bank Fiance and a firm of solicitors representing the principal debtor and the wie respondent company. The evidence as to what arrangement or Rich J. agreement was arrived at is restricted to letters passing between the 3 solicitors and the bank dated Ist September, 3rd September, 8th September. 10th September, and 15th September, a form of "indemnity" dated 9th September executed by the respondent company and sent to the bank, a mortgage dated 9th September executed by the firm or principal debtor and sent to the bank, to certain notations made by a bank clerk on the original guarantee, and to the fact that on 10th September the bank received £7,000 as part of the transaction. I do not propose to discuss these docu- ments and matters at length, but merely to state my conclusion, [ feel sure that the bank never agreed to accept the so-called "indemnity" in substitution for its original guarantee. It is obvious from the course of business I have described that to secure itself against liability in connection with His Majesty's Customs the bank required much more than an indemnity against liability under its bond or obligation. The bond or obligation was furnished in case the bank dishonoured cheques drawn by the firm for customs duties. But one of the risks of the bank was that after it had honoured cheques for customs duties the firm might fail to procure and pay in its customers' cheques by which the firm was reimbursed and the account replenished. This seems to me to be the meaning of the bank's last letter, and the earlier correspondence is not incon- sistent with the result. I have felt, however, a good deal of doubt as to whether the bank did not give a binding undertaking to reduce the limitation on the guarantee of the resident company from £10,000 to £5,000. I think the burden of proof on this question of fact lies upon the respondent company. Nicholas J. found against it, evidence was available to prove it which was not called, and on the whole I am not satisfied that such an agreement was made, and at any rate I am not prepared to disturb the finding of Nicholas J The reduction in the amount of the limit upon the guarantee is doubtless an important matter, because it affects the proportion of contribution. But I have not been able to grasp the importance of the alleged substitution of the so-called " indemnity." The name "indemnity" can hardly matter, and the relations between the respondent company and the firm obviously remained those of

Majesty's Customs formed the most substantial item in the over- ft; so that the sureties were not guarantors of different debts, possibly there would be an overlap in the case of the However, upon my view of the facts these questions do

The next matter relied upon by the respondent company was that ore suit brought no actual payment had been made by the plaintiff surety and that the proceeds of the bond had not been applied discharge of the principal debt. This depends on the banking tice of carrying payments by a surety to a suspense account. "Payment is not a technical word ; it has been imported into law ings from the exchange, and not from law treatises" (per e J. in Maillard v. Duke of Argyle (1) ). 1 have on a former n discussed the meanings of the word : See J. C. Williamson's

Livoli Vaudeville Pty. Ltd. v. Federal Commissioner of Taxation (2). 'are here dealing with a conception of equity based on or connected

th its doctrines of equality and marshalling. I should have thought what we should look for is the maturing of the liability of the ety suing for contribution in such a form that he has clearly arged the burden imposed on him by his guarantee and to a greater extent than is just. Starke J. and Evatt J., whose judgments have had the advantage of reading, are both of opinion that pay- was made before the commencement of the suit, and in this I concur. Indeed, I consider the payment was: made when

on 9th August 1932. _ The third answer given by the respondent company depends upon the effect of the New-South-Wales Moratorium Acts. 1 think

Moratorium Act 1930-1931 did not cover mortgages of choses in tion, but was limited to securities over land and chattels. The 's bonds were not, I think, " chattels" within the purview e Act: Of. Australian Trust Ltd. v. Ho Chin (3). By the time Moratorium Act 1932 came into force the bonds had been sold as I think, the plaintiff's right to contribution had matured. any event the bank held no property of the plaintiff's after that _ The proceeds of the bonds were not a fund to be held in specie.

) (1843) 6 Man, & G. 40, at p. 45 (2) (1929) 42 C.L.R. 452, at pp. 476- [134 E.R. 801, at p. 80: 478. (8) (1982) 33'S.R. (N.S.W.), at p. 60; 50 W.N. (N.S.W.), at p. 29.

s of the sale of bonds were carried to a suspense account .

and surety. The £6,000 for which the bank was liable to 4- © oF 4.

In my opinion the appeal should be allowed and a decree should be made that the appellant is entitled to a contribution from the respondent company on the basis that the former should bear only three-thirteenths and the latter ten-thirteenths of the amount paid to the bank by them in combination.

Srarke J. Appeal from a decision of the Supreme Court of New South Wales which dismissed a suit brought by the appellant against Discount and Finance Ltd. (hereinafter called " the respondent") and others.

The appellant claimed contribution from the respondent as co-surety with him of a debt or liability of a firm of George Wall to the National Bank of Australasia Ltd. of so much of the debt or liability paid by the appellant as was in excess of his proper share and proportion or a declaration that the respondent was liable as co-surety with the appellant to contribute its proper share and

proportion of the debt or liability and ancillary relief. The firm of -

George Wall, hereinafter called "the principal debtors," was a customer of the National Bank of Australasia Ltd. and was largely overdrawn on current account. In November 1929 the respondent by a guarantee in writing undertook to pay to the bank on demand all moneys then owing or which might from time to time be owing to the bank on any account or in any manner by the principal debtors either alone or jointly with any other person or corporation, but it was agreed that the amount ultimately payable by the respondent under the guarantee should not exceed the sum of £10,000 and interest thereon. It was a continuing guarantee. It also provided that the bank might without affecting the guarantee grant time or other indulgence to the principal debtor or any person or corporation whatsoever or release, abandon, relinquish or renew in whole or in part any security or right held by the bank.

In December 1930 the appellant by a document in writing charged bonds specified in the schedule thereto and called "deposited documents " with the payment to the bank, on demand, of all such advances and of all debts and liabilities which were then or might be thereafter owing to the bank on any account by the principal debtors either alone or jointly with any other person or corporation. It was provided by this lien or charge that the bank might, without the necessity of requesting the appellant to do so, sell or otherwise dispose of for valuable consideration the deposited documents and

apply the net proceeds thereof in discharge pro tanto of the principal _

debtors' indebtedness to the bank, together with all interest, costs and expenses which might have accrued or been incurred in respect

o provided by this lien or charge that the bank might with- appellant's assent grant time or other indulgence to the pal debtors or any person or persons and compound with or them or any of them or release, abandon, vary, or relinquish ¢ or in part any security for the time being held by the bank t discharging or affecting the appellant's liability thereunder. y bonds having a face value of £3,000 were deposited with pursuant to the lien or charge. The appellant, it will be incurred no personal obligation under this lien or charge, the respondent under its guarantee, but the principles of law din the surety cases are applicable to the case (Smith vy. Wood

he claim of the appellant is founded upon the equitable principle , whenever a surety has been required to pay the principal debt ility or more than his just share or proportion of the debt or , then he is entitled to contribution from his co-sureties in t of the excess. The equity arises from the fact that the

are co-sureties of the same principal debt or liability and is 0 upon contract (Dering v. Earl of Winchelsea (2) ). But said that the right to contribution only arises when a surety d or provided the principal debt or more than his just share tion thereof (Maxwell v. Jameson (3) ; Davies v. Humphreys Wolmershausen v. Gullick (5) ). At common law, no doubt, a could not maintain an action for contribution or money paid he had actually paid more than his just proportion of the debt. But the authorities support the view that in equity ht to contribution can be declared before actual payment is 'loss sustained provided that such payment or loss is imminent

lausen v. Gullick (5) ). A judgment against a surety for e amount of the principal debt justifies such a declaration, 8 the allowance of a claim by the principal creditor against ite of a deceased surety (Wolmerhausen v. Gullick (5) ). The ed loss or over-payment thus appears sufficiently imminent, court acts quia timet (Wolmershausen v. Gullick (5); In re

B (6) ). And the amount of contribution that can be or in respect of which the right can be declared is in m to the limits of the respective liabilities of the sureties

(4) (1840) 6 M. & W. 153 [151 E.R. Cox 318 [20 E.R. 1184). 361).

and should account for the surplus, if any, to the appellant. 4 ©: oF 4.

The facts in the present case may now be considered. In July 1931 the account of the principal debtors with the bank stood in debit about £7,800. The bank notified the appellant that the principal debtors had made default in payment of their indebtedness. and that it was proposed to exercise such powers as were conferred upon it by the lien or charge already mentioned. The principal debtors, who are parties to this action, were not in a position to meet and did not meet their indebtedness to the bank: in fact, they were not solvent: See Rowlatt, Principal and Surety, 3rd ed. | (1936), p. 234. Nothing seems to have been done until August 1932, _ when the bank inquired of the appellant whether he had any objec-_ tion to the conversion of the bonds into cash and he replied that he had not. And on Ist August 1932 he confirmed by letter the bank's expressed wish that the bonds be converted into cash by sale, such action in no way to prejudice his case. The bonds were sold on 5th and 6th August 1932, and realized net £2,936 16s. 3d. The bank did not carry this sum to the credit of its principal debtors' account, but on 9th August 1932 opened a manager's suspense account to which it credited the sum of £2,936 16s. 3d., where it remained at credit until 9th November 1938. Interest was not credited to the suspense account in respect of the sum mentioned, nor on the other hand was interest debited, after the opening of the suspense account, - on a sum of £2,936 16s. 3d., to the principal debtors' account. Apparently these interest charges were regarded as offsetting one another and were omitted from the accounts. Subsequently, in November 1938, the appellant confirmed this action of the bank. In February 1937 the principal debtors' account with the bank stood in debit in the sum of £7,575 13s. 1d. On 23rd February 1937 the respondent paid to the bank the sum of £4,638 16s. 10d., which. was credited to the principal debtors' account, leaving it in debit. in the sum of £2,936 16s. 3d., which was precisely the amount at the credit of the manager's suspense account. At the same time the word " cancelled " was written across the respondent's guarantee of November 1929, lines were also run through the signatures of the directors, and a second mortgage by way of assignment of rights in a motion picture given by the principal debtors to the bank in September 1930 was endorsed " discharged." And on 9th Novem- ber 1938 the sum of £2,936 16s. 3d. was carried, so the court was informed, from the manager's suspense account to the principal debtors' account with the bank, thus closing it.

It was contended for the respondent that this sum of £2,936 16s. 3d. at the credit of the suspense account could not be treated as paid by the appellant or at all on account of the principal debt until

November 1938, when it was transferred and appropriated by the #- © oF 4-

bank to the account of the principal debtors (Commercial Bank of Australia Ltd. vy. Official Assignee of Estate of Wilson & Co. (1) ). 'This appropriation was after the commencement of the suit, from which was deduced the conclusion that the appellant could have no

• enforceable right to contribution from the respondent at that time. namely, on 13th April 1938. In my judgment the argument is untenable. Under the lien or charge the authority of the bank was to sell deposited securities and apply the net proceeds in "discharge, pro tanto, of the principal debt. And the acts of the : bank, which I need not recapitulate, between the beginning of July 1931 and the end of February 1937, expressed in the final entry of November 1938 transferring the amount at credit of the suspense account to the principal debtors' account, evince its intention to appropriate the sum of £2,936 16s. 3d. towards payment of the prin- _ cipal debt and an actual application of the sum in and towards satisfaction of the principal debt on 23rd February 1937, if at no earlier date, But, even if this view were rejected, still the appellant would be 'entitled to a declaration establishing his right to contribution from _ the respondent because the evidence makes it clear that the bank intended to and would apply the proceeds of the appellant's bonds _ inits hands in and towards satisfaction of the principal debt, whereby 'the appellant would almost certainly provide more than his just i share of the principal debt. The transfer in November 1938 of the _ proceeds of the bonds from the suspense account to the account of _ the principal debtors makes it clear that the bank did what must have been apprehended in February 1937 and was then almost certain. The application of the proceeds of the bonds proposed or

a by the bank in 1937 put the appellant in danger of aa it loss or payment in excess of his just share or proportion _ of the principal debt. The amount of that debt was ascertained. In February 1937 the amount of the principal debt in the books was £7,575 13s. ld. The bank accepted £4,638 16s. 10d. of this

• sum from the respondent and proposed to and did satisfy the balance of the account, £2.936 16s. 3d., with the proceeds of the appellant's _ bonds at credit of the suspense account. In addition, the bank had also collected a sum of £197 5s. 2d. for interest from the appel- _lant's bonds and credited it to the principal debtors' account. 'The limits of the appellant's and respondent's liabilities were £3,000 (the face value of the bonds deposited) and £10,000, the limit of the

'Tespondent's guarantee. The appellant and the respondent should

H.C. oF A. therefore respectively contribute in the proportion or shares of 1939, three-thirteenths and ten-thirteenths of the total liability paid or

cee discharged by them in respect of the principal debt. That as v already indicated was £7,772 18s. 3d., as follows: £197 5s, 2d. - ree interest on bonds, £2,936 16s. 3d. - proceeds of bonds, £4,638 16s, 10d.

Francs - discharged by respondent. But the appellant's contribution was Tap. or would be £1,793 14s. 11d. (three-thirteenths of £7,772 18s. 3d.), Starke J. - whereas his bonds and interest provided £3,134 1s. 5d., which exceeds or would exceed his proper share or proportion of the total liability by a sum of £1,340 6s. 6d. On the day of the opening of the suspense account in August 1932 the corresponding amount would have been £1,552 9s. 4d. Consequently it is clear that before suit commenced the appellant had provided more than his just share of the principal debt or was threatened by a bank with action which must result in the appellant providing more than his just share of that debt. Some further contentions were put forward by the respondent in answer to this suit which require consideration. One was that about September 1930 an arrangement was made between the bank and the respondent which closed or put an end to the common obligation of the appellant and the respondent for the principal debt. It was said that the respondent's guarantee of 1929 was cancelled and a new arrangement substituted whereby the respondent under- took to indemnify the bank against claims on the bank by the Customs under a guarantee which in 1930 it had given to the Customs in respect of customs duties payable by its principal debtor, but stipulated that its liability should not exceed £5,000. Apparently the principal debtors' account was in an unsatisfactory state in 1930. On Ist September 1930 the solicitors who acted for the principal debtors and the respondent wrote to the bank that arrange- ments were practically complete to enable the principal debtors to pay off the overdraft with the bank and seeking the bank's confirma- tion of certain proposals. The bank replied that it was prepared to make a settlement on the terms it set out. But it insisted that the arrangement was tentative and subject to "an arrangement with the Sun Insurance Co. to reimburse the bank to the extent of £6,000 should the bank be called upon to make any payments up to £6,000 under the guarantee to the Customs." On 10th September 1930 the solicitors forwarded a number of documents to the bank for the purpose of carrying out the proposals already mentioned. But the covering letter stated : - You will note that in accordance with your instruc tions the security specifically provides for a full indemnity policy to be arranged in favour of the bank. Mr. Wall informs us that arrangements are on foot with Lloyds . . . for the issue of @

nents and also let us have a letter stating that the existing 7 e from Discount and Finance Ltd. in respect of George Vall's overdraft has been cancelled?" But the bank replied on September reviewing the position. It said that "as an act of ce it was agreed that the Discount and Finance Co.'s guarantee d be reduced to £5,000 upon the picture film loan of £7,000 received for reduction of bank indebtedness. Your present tion is that we accept a qualified guarantee of £5,000 from ). & F. Ltd., limiting their liability strictly to cover our obliga- in respect of the Customs guarantee (but excluding any over- ft) given on account of Wall. . . . the bank prefers to con- nue the general form of guarantee (as at present held). . . .

would therefore ask that you be so good as to arrange for fresh rantee on the lines of that already held but for the agreed reduced of £5,000. We may say that we would be agreeable to the D, & F. Ltd.'s request to release their guarantee provided security in substitution thereof is furnished to the bank t the amount is to be £6,000." But the insurance suggested was t obtained, nor was a fresh guarantee prepared nor given on the required by the bank, nor was £6,000 approved security in itution of such guarantee furnished to the bank. The bank 'not willing to give up its guarantee of 1929 until it obtained a one approved by it. It is said that some of the suggestions by the respondent's solicitors were carried through and But it is clear that the bank did not accept the so-called of 9th September 1930, which was one of the documents ed to the bank with the letter of 10th September 1930. And m the face of the documents no concluded agreement is shown d ig the old guarantee unless a new and approved one was A pencil memorandum was, however, placed by one of the officers on the respondent's guarantee of 1929 in these terms : guarantee is limited to £5,000 vide arrangement and covers to Customs Department." Despite this indorsement, 's solicitors, on 16th December 1930, notified the respondent, and Finance Co. Ltd., that the Customs had made a n the bank and that the bank's liability was protected by the it's guarantee of 1929. About the middle of January 1931 went to the bank's solicitors to take action and a notice was served upon the respondent under the guarantee of Which, the demand stated, "was reduced in amount by subse- lence to £5,000 and interest." But nothing was 'the respondent, and writs were issued on 21st January 1931

. . . Will you please acknowledge receipt of these H- © oF A.

H.C. or A. against both the principal debtors and the respondent. The bank's

claim against the respondent was founded on the guarantee of 1929, "' which said guarantee," the particulars of claim alleged, " the said plaintiff bank subsequently agreed to limit to the amounts which the said plaintiff bank might be called upon to pay to the Collector of Customs on behalf of the said firm of George Wall and to the extent of £5,000 only and interest." Proposals were made for the settlement of the actions which the bank accepted with some modifications: See correspondence between the solicitors to the parties 18th February 1931, 24th February 1931, 26th February 1931. Apart from the bank being paid two sums each of £1,000 "as an act of grace and without any condition," the modified pro- posals were not carried out. But the bank does not seem to have further pursued its actions. The learned trial judge was not satisfied that the respondent paid the two sums each of £1,000. They were paid by solicitors who acted for the principal debtors as well as for the respondent, and there was no evidence that the respondent put the solicitors in funds to make the payments : in fact, the principal debtors did so. This finding has not been challenged. Further, the learned judge found that the respondent's guarantee of 1929 had not been reduced from £10,000 to £5,000, or limited to the Customs- guarantee account. Apart from the endorsement on the guarantee, the particulars in the writ, and the bank's demand, the documentary evidence adduced does not establish any concluded agreement to cancel or vary the guarantee of 1929 ; and persons who took part in the negotiations for alteration of the guarantee and who might have deposed to the precise terms of any arrangement that was made were not called by either party. The indorsements and the bank's demand do not bind the appellant nor establish against him the cancellation or variation of the respondent's guarantee of 1929. These indorse- ments and the demand may have been due to want of proper instruc- tions to the bank's solicitors or to counsel. Instructions to counsel who drew the indorsement were tendered, objected to and rejected, and a possible explanation of the indorsement thus excluded. In my opinion it was for the respondent to satisfy the trial judge that its guarantee of 1929 was cancelled or varied, and it did not do so. The finding of the learned judge ought not, in the circumstances mentioned, to be disturbed, unsatisfactory as is the evidence upon the matter.

Another contention of the respondent was that the transaction of February 1937, when the respondent paid the bank £4,638 16s. 10d. and its guarantee of 1929 was indorsed " cancelled," released it and deprived the appellant of any right to contribution against the

d Ea parte Gifford (1) and Ward v. National Bank of '- © ov & Zealand Ltd. (2) were referred to. But the argument is unten- reas The bank did not release the respondent, as I understand the forza s, from any part of the principal debt. It required and obtained ® nt of the whole of the principal debt. It had in hand from Deo = nt £3,134 1s. 5d. (£2,936 16s. 3d. and £197 5s. 2d. interest Fuxaxce onds), and the respondent paid the balance of the principal then owing, £4,638 16s. 10d. The bank had exercised its rights Starke J ainst each party whereby unequal contributions to the principal had arisen: Cf. Rowlatt on Principal and Surety, 3rd ed. (1936), 173, 174. But it is the unequal contribution so enforced that b the right to contribution on the part of the party who ded more than his just proportion. y, the respondent relied upon the Moratorium Acts of New Wales. The Moratorium Act 1930-1931, now repealed, was rred to, but it seems probable that the lien or charge in the nt case was not caught by its provisions owing to the inter- clause. "Mortgage" in that Act means any deed, r of mortgage, instrument, or agreement whereby rity for payment of moneys or for the performance of any con- ract is granted over land or chattels or any interest therein. Under Moratorium Act 1932-1937, however, " mortgage" means any d, memorandum of mortgage, instrument, or agreement whereby iy for payment of moneys or for the performance of any con- ct is granted over real or personal property in New South Wales y interest therein: See sec. 2. It was conceded, rightly I

within this definition: See also sec. 41. | Then by sec. 6 it is that a mortgagee under a mortgage shall not exercise any 'tights, powers, or remedies against the mortgagor or mortgaged for the recovery of the moneys secured by the mortgage tion of the security without the leave of the court, unless : gives notice of his intention so to do to the mortgagor, who

of his rights, powers, and remedies under the mortgage the suspension thereof. But provision is made for the t of the mortgagor in certain cases: See sec. 14. Further. rovided by sec. 18 (3) that the date for repayment of the prin- secured by a mortgage to which the Act applies shall, if 2 pal sum is payable on demand, be 28th February 1940.

ct of 1932 received the Royal assent on 21st December 1932. 'contended that the bank had not, by reason of these provisions,

(1802) 6 Ves, 805 [31 E.R. 1318}, (2) (1883) 8 App. Cas. 755.

any right to enforce the lien or charge of 1930 for payment of the

principal debt and that its action in realizing the security and appro-

priating the proceeds towards satisfaction of the principal debt

could not be treated as a payment of that debt or accelerate in any

way the right to contribution from the respondent. Indeed, it was

claimed that the bank's act was a nullity (Coroneo v. Australian Provincial Assurance Association Ltd. (1) ). In my judgment this

contention should be rejected. If the proceeds carried to the credit

of the suspense account on 9th August 1932 be treated as a payment

on that date on account of the principal debt then it would seem

that the charge or lien of December 1930 given by the appellant to the bank had ceased to be a mortgage security before the Act came into operation and its provisions would then appear to have no operation. But that does not appear to me to be a right view of the facts. The intention of the bank, so far as that is material, was to hold the proceeds of the bonds in suspense and not appropriate them to payment of the principal debt. It is possible that the bank's action was dictated as much in the interest of the appellant as in its own interests. Be that as it may, all the bank's acts in connection with the proceeds and the suspense accounts were ultimately approved and ratified by the appellant. The 23rd February is, I think, the date on which the proceeds of the bonds to the credit of the suspense account were appropriated to payment of the principal debt. The Moratorium Act 1932 was then in opera- tion. The principal debt was ascertained and the debtors had made default in payment. The Moratorium Act 1932-1937 did not dis- charge nor, in the present case, even suspend payment of the principal debt. It suspended, no doubt, the bank's right to enforce its rights under the lien or charge given by the appellant without the leave of the court or the consent of the appellant. There is nothing, how- ever, in the Act which prohibits a mortgagor from paying debts that he owes nor a surety from discharging debts that he has guaranteed or given security for payment: Cf. Electrolytic Zine Co. of Australasia Ltd. v. Knight (2); Barcelo v. Electrolytic Zine Oo. of Australasia Ltd. (3). Such payments are lawfully made and discharge | obligations due though payment be suspended if mortgagors within the Act stand on its provisions. Indeed, sec. 41 (11) of the Act provides that nothing in this Act or in the Moratorium Act 1930- 1931 as amended by subsequent Acts shall be construed to impair the right of a guarantor to reimbursement by a mortgagor or to

(1) (1985) 35 S.R. (N.S.W.) 391; 52 (3) (1932) 48 C.LAR. 391, at pp- $15, W.N. (N.S.W.) 131. 416. (2) (1932) V.L.R. 193, at pp. 219, 220.

at by this section was sec. 4 of the Act No. 66 of 1931, which provides all covenants for the payment or repayment of any moneys secured by a mortgage of real property shall, except for the purpose enabling a mortgagee to exercise all or any of the rights against

the mortgaged property, be void and of no effect. But it makes that the substance of the respondent's contention is that the ppellant's bonds were realized and applied towards payment of the debt at a time when the appellant was not compelled or to provide for it. It may be that a prior consent was by the bank as a justification for its action in selling the despite the subsequent confirmation by the appellant: Cf. able Life Assurance of the United States v. Bogie (1). But that

is a matter between the appellant and the bank and not between tl it and the respondent. The appellant was under no to claim the benefit of the Moratorium Act for the benefit of

nt did not so claim. plain facts of the case are that the bank realized and applied roceeds of the appellant's bonds: towards satisfaction of the debt. The appellant acquiesced. But, even if he had not ced or consented in the manner required by the Act, still bank had acted and appropriated the proceeds of the appellant's ds. The appellant is under no obligation to obtain a refund of he proceeds from the bank : he can lawfully treat them as applied at voluntarily but pursuant to his obligation under his lien or e towards satisfaction of the principal debt. It may be that bank acted without the authority required by the Moratorium but that would not, with respect, make its unauthorized act nullity for all and every purpose. According to the Coroneo Case 'a mortgagor would have no right of action for damages against gagee for a sale without leave of the court or the consent of

ty bonds, bona fide and without notice of any contravention Moratorium Act obtain no title ¢ In the case of real property er might be put upon inquiry as to the right to sell, having 'to the Moratorium Act, but an unauthorized sale would not, d think, be classed as a nullity, though it might confer no title. title of the present holder of the treasury bonds sold by the I think, unassailable and unaffected by any contravention part of the bank of the Moratorium Act.

1. (1905) 8 CLLR. 878, at p. 896, (1935) 35 S.R, (N.S.W.) 391; 52 W.N, (N.S.W.) 131.

ibution from any co-guarantor. One of the provisions aimed H- ©. oF A-

In my opinion this appeal should be allowed and declarations and an order made to the following effect : - 1. That the appellant and the respondent are liable to contribute in the proportions of three-thirteenths and ten-thirteenths respectively of the sum of £7,772 18s. 3d. paid or provided by them on or before 23rd February 1937 in respect of the principal debt of the firm of George Wall to the National Bank of Australasia Ltd. ; 2. That the appellant has paid or discharged £1,340 6s. 6d. of such liability in*excess of his proper share and proportion ; 3. Order that the respondent pay to the appellant the said sum of £1,340 6s. 6d.

Evarr J. The question to be decided is whether, according to well-settled principles of equity, the appellant has become entitled to a co-surety's contribution from the respondent company upon the footing that the appellant has paid or been called upon to pay more than his just proportion of the liability of the partnership known as "George Wall" (hereinafter called the principal debtor) to the National Bank of Australasia (hereinafter called the bank).

The appellant became bound to the bank on 3rd December 1930, when he executed a letter of lien whereby, in consideration of advances made, or to be made, by the bank to the principal debtor, he charged certain securities deposited by him with the bank with the payment to the bank on demand of all advances, debts and liabilities owing by the partnership. By this document, the appel- lant irrevocably appointed the bank's officers as his attorneys to sell the deposited securities and to apply the net proceeds of sale in discharge pro tanto of the indebtedness of the principal debtor. On the same day - 3rd December 1930 - the appellant duly deposited with the bank Commonwealth bonds to the face value of £3,000. This figure, £3,000, has been taken as measuring the appellant's due proportion of the total guarantees covering the liability of the principal debtor to the bank; so that, if the right of contribution has arisen, the proper share for which the appellant is chargeable, as against a co-surety who is guaranteeing the same indebtedness to the extent of £10,000, is according to the ratio of three to ten, Le., the appellant is chargeable with only three-thirteenths of the total indebtedness. The fact that under the document of lien the appel- lant was not under a personal liability does not affect his equitable right to contribution if the other conditions of enforcement are satis- fied. Nor is the appellant's right dependent upon the fact of notice or knowledge by either co-surety of the responsibility assumed by the other (Smith v. Wood (1) ).

ppellant claims that at all material times after 3rd December

0 he and the respondent company remained co-guarantors of the ral liability of the firm to the bank ; but the respondent company ontends that its document of guarantee dated 28th November 1929 duly terminated or rescinded prior to 3rd December 1930. By document, the respondent company guaranteed (to the limit

e preliminary question is of crucial importance. It turns upon ther Nicholas J. was right in finding that the 1929 agreement not replaced by an agreement by which, as to future advances the bank, the company merely indemnified the Collector of toms to the extent of £5,000 in accordance with the company's offer dated 10th September 1930.

n his judgment, dated 3rd March 1939, Nicholas J. has fully set t the correspondence and facts relied upon to establish the fact cceptance of the offer of 10th September 1930. The learned judge ound that, despite certain authorized or unauthorized admissions m the part of several bank officials, the guarantee of 1929 would treated as though the respondent company's liability was by way of indemnity and to the extent of £5,000 only - there has never been a consensus ad idem between the bank and the defendant y by which another agreement was substituted for that

ed in the document of 1929." part of the case was fully and lucidly argued by Mr. McKillop 'Mr. Beale. 1am of opinion that Nicholas J. was right in finding gainst the respondent company. On 15th September 1930, after date of the alleged offer, the bank dealt expressly with the respon- 'company's "present suggestion... that we accept a ed guarantee of £5,000 from the D. & F. Ltd., limiting their strictly to cover our obligations in respect of the customs intee (but excluding any overdraft) given on account of Wall." ply to the company's suggestion, so stated, the bank said : nature and conduct of Wall's transactions with the customs h that the bank prefers to continue the general form of rantee (as at present held) so that we are covered whether Wall's \itments to the customs involve us partially in overdraft as 'outstanding liability under our guarantee to the customs." of this, it seems evident that no concluded agreement had reached on 15th September 1930. Certainly, I think it is ible to find that the guarantee of 28th November 1929 was by another agreement between the bank and the respondent

company before 3rd December 1930, when the plaintiff executed his guarantee to the bank.

Indeed, the respondent company has not been able to answer the question - when did the variation of the 1929 agreement take effect ? If an agreement for alteration or termination was made, it must have taken place between officers exercising high executive authority in the case both of the bank and of the respondent company. But the respondent company did not call a single witness to prove any such altered arrangement and the date thereof. The court is merely asked to infer from certain letters and the subsequent conduct of the two parties that, on some occasion or other, an arrangement must have been come to. As the plaintiff duly proved the execution of the respondent company's guarantee of 28th November 1929, it was for the company to show that the relation of suretyship estab- lished by such document had been altered before the plaintiff executed his letter of lien. The form of the writ issued by the bank against the respondent company has to be considered, but that may have been due to a misapprehension of the position, and, if, as was suggested, the instructions to solicitors and counsel would have disclosed such an error, evidence to this effect could, and should, have been admitted. Further, when the settlement of 23rd February 1937 was made between the respondent company and the bank, for the sum of £4,638, this settlement was made in respect of the whole of the principal debtor's liability, and it is noteworthy that the document then cancelled was that of 28th November 1929, and not any other document.

It follows that at all material times the relationship of co-sureties existed between the appellant and the respondent company.

The other material facts of the case may be summarized in the following chronological order : - (a) 15th December 1930: Default on the part of the principal debtor. (6) 15th January 1931: Demand on principal debtor by the bank. (c) 15th January 1931: Demand upon respondent company by bank. (d) 7th July 1931: Letter from bank to appellant informing him of default of the principal debtor, and of the bank's intention to exercise its powers under the letter of lien. This letter stated that the interest collected on the deposited bonds had already been credited against the indebtedness of the principal debtor. (e) 1st August 1932: Letter from appellant to bank confirming appellant's wish that bonds held by the bank should be converted into cash by sale - ' such action to . . . inno way prejudice my case." (f) 9th August 1932: Sale of plaintiff's bonds by the bank for £2,936, and deposit of such sum. to a suspense account.

standing to the credit of the suspense account was credited by the bank to the overdrawn account of the principal debtor, and the i it says that this crediting is a sufficient appropriation to establish the fact of payment by him to the bank as at 9th August 1932. But, in the circumstances, I think that something more : tangible was required to establish payment by the appellant. The _ establishment of a " suspense " account may be fairly regarded as indicating that the bank was acting provisionally rather than

• definitively. The occasion did not demand final action on the part of the bank, and the deposit is capable of being explained as _ evidencing a mere change in the form of security. On the whole 1 am not satisfied that the appellant, who bears the onus of this issue, has established the fact of payment on 9th August 1932. However, I am satisfied that on 23rd February 1937 the appellant must be taken as having paid the bank, and that the rights of the ies to this appeal should be adjusted upon that footing. It was as has already been pointed out, that the bank came to a final settlement with the respondent company. On that day, the total indebtedness of the principal debtor exceeded the amount of the j of sale of the appellant's deposited securities (i.e., £2,936)
• exactly £4,638 16s, 10d. It was upon payment of this sum (ie, £4,638 16s. 10d.) that the respondent company became discharged from its obligations under the guarantee of 28th November 1929, Point is lent to this part of the appellant's case by the respondent company's contention that this discharge by the bank operated to release the appellant's obligation to the bank to the _ extent of the right of contribution lost by the discharge. In my
• opinion, the transaction of 23rd February 1937 did not release the 7 in any respect whatever. The proper inference is that on that day the bank, which was under no obligation to notify the appellant of its decision, finally and definitively appropriated the
• proceeds of the sale of the appellant's securities towards the payment 'of the debt of the principal debtor. Such appropriation was within _ the plain authority given by the letter of lien. After and as a conse-
• quence of such appropriation of the sum of £2,936 16s. 3d., then 'standing to the credit of the suspense account, the indebtedness of _ the respondent company was fixed at £4,638 16s, 10d., which was the balance of the principal debtors' indebtedness to the bank. In _ mny view, the transaction is inexplicable upon any hypothesis other 'than that of payment by the appellant of £2,936 towards the satis- faction of the indebtedness of the principal debtor. Upon the finding of payment by the appellant on 23rd February 1937, it follows that,

After this last day, 9th August 1932, the interest upon the £2.936 H. C. or A.

H.C. or A. subject to one further argument, the appellant is entitled to an order

against the respondent company in the sum of £1,340 6s. 6d., which the parties have agreed was the amount paid in excess of the three- thirteenths liability which alone was the plaintiff's equitable share of the common burden. It becomes unnecessary to consider whether in any event the plaintiff is entitled to a declaration quia timet upon the finding that actual payment had not taken place at the com- mencement of the suit.

The final argument of the respondent company is that at no time before the commencement of the suit was the appellant under any presently enforceable liability to pay the bank, because, throughout the whole period in question, he was protected by the terms of the New South Wales Moratorium Act.

Under the Moratorium Act 1930-1931, it was provided that a mortgagee should not, without leave of the court, exercise any power of sale, and also that the time of repayment of the principal sum secured by a mortgage to which the Act applied should be extended to a date specified in sec. 16 of the Act. By sec. 2 of the Act of 1930-1931, a mortgage was defined as meaning an instrument whereby security for payment of moneys, etc., was granted " over land or chattels or any interest therein respectively, and includes an equitable mortgage by deposit of title deeds." I am of opinion that this Act did not apply to securities where, as in the present instance, the property charged consisted of Commonwealth bonds. As Harvey J. said in Australian Trust Ltd. v. Ho Chin (1), "although shares, debts, and other choses in action, may, in some contexts, be included under the expression ' chattels,' I think there are indications that the word ' chattels ' is, in this definition, limited to personal property which is capable of being transferred by actual delivery and can be the subject of occupation or manual possession."

But, as the date of payment by the appellant did not take place until 23rd February 1937, it is also necessary to consider the subsequent Moratorium Act 1932-1937. By that Act, "mortgage" was extended to cover securities " over real and personal property in New South Wales or any interest therein" (sec. 2 (1) ). This broader definition would no doubt cover a lien over the securities lodged by the plaintiff. Further, the Moratorium Act 1932-1937 extended the date of payment of the principal sum of a mortgage until 28th February 1940.

But, in my opinion, these Moratorium Acts cannot be construed as depriving a co-surety who has paid the principal debt after the | date for payment fixed by the security, but before the prescribed

(1) (1932) 33 S.R. (N.S.W.), at p. 60; 50 W.N, (N.S.W.), at p. 2

as extended by the statute, from enforcing as against a co-surety to contribution which would otherwise exist. Perhaps sec. f itself sufficient to show that the right of a guarantor to bution from a co-guarantor is not to be impaired by the Acts. hen, sec. 20, which provides that, where the principal sum secured -a mortgage is paid after the date for payment fixed by the mort- but before the prescribed statutory date for repayment, the is not entitled to receive any payment by way of interest of notice, strengthens the conclusion which I have stated. r, a8 has been held, a mortgagor is entitled to redeem on any after the date fixed for payment by a mortgage and before the prescribed date without payment of interest up to the date to which he Act has extended the time for repayment. I entirely agree with

observations of Long Innes J.: '' Having regard to the general et of the Moratorium Act 1930, and to its title, which is 'An to make provision for a moratorium ; to restrict temporarily

tain of the rights possessed by mortgages, vendors, and others ; ind for purposes connected therewith,' and to the intention of the ture as expressed in the Act itself, I should myself have thought the Act was not intended to deprive a mortgagor of his right off a mortgage on the date fixed by the agreement between s, if notwithstanding the depressed condition of the y and the fall in real estate values he was in a position, and 80 to do" (Re BE. A. Davies (Deceased) (1) ).

mortgagors by giving them an extension of the time of the equivalent of a statutory period * "of grace," but not to 'Prevent a mortgagor from paying an existing debt,

L ~~ opinion, the appeal should be allowed, and an order should J that the respondent company should pay to the appellant um of £1,340 6s. Gd. which is the sum payable to the appellant the basis of a three-thirteenth contribution as at 23rd February together with interest on the said sum from the said date up @ date of decree.

NaN J. The first question is whether the defendant was a surety of the principal debt of which the plaintiff he has paid a greater share than as between himself and ipany it was equitable for him to bear. The debt was the of the other defendants, a firm of customs agents, on their

account with the bank. The letter of lien which the plaintiff executed on 3rd December 1930 made him a surety of that debt, It contains no personal covenant by the plaintiff to pay : no point is made of the absence of such a covenant. The defendant company's guarantee of 28th November 1929 had made it a surety of the same principal debt as that to which the plaintiff's letter of lien related, No question is raised whether the plaintiff could be entitled to a surety's right of contribution when he did not know at the time he executed the letter of lien that the defendant company had executed the guarantee. It is clear that, if the guarantee was in - force when the letter of lien was executed, the defendant company and the plaintiff would have become co-sureties of the same principal debt. The learned trial judge found that the guarantee was then in force. The letter of 1st September 1930 which the defendant com- pany's solicitors sent to the bank shows that it was sought to release the guarantee of 28th November 1929 and to substitute an instrument described as an indemnity which would be limited to the liability of the bank to the Customs Department under a guarantee which the bank had given for the firm's liability to the department. The bank's guarantee was limited to £6,000, and it was proposed that the defendant company's indemnity to the bank should be £5,000. Although there are a number of considerations which can be thrown in the balance against the plaintiff, there are two things which, in my opinion, weigh down the scale in his favour on the question whether the guarantee of 28th November 1929 was released prior to the execution of the letter of lien on 3rd December 1930. First, there is the fact that on 23rd February 1937 or soon after the bank had the defendant company's guarantee of 28th November 1929 marked with the word " cancelled." It did so on receiving from the respondent company its cheque for the sum of £4,638 16s. 10d. This was the balance due by the firm to the bank after it credited the account with the proceeds of the sale of the plaintifi's bonds. This evidence shows that the guarantee of 28th November 1929 was treated as being in force until 23rd February 1937. Secondly, the bank's letter of 15th September 1930 explicitly rejected the proposal that the form of the existing guarantee which covered the general indebtedness of the firm on their trading account should be replaced by a guarantee that was limited to a particular liability. This letter was sent in answer to a letter from the defendant com- pany's solicitors. In the course of that letter they wrote: " We also enclose indemnity by Discount and Finance Ltd. in respect of your guarantee to the Customs, the total limit of Discount and Finance Ltd.'s liability under the indemnity being £5,000. We

rstand that Discount and Finance Ltd.'s indemnity is to be ive only until the indemnity policy is arranged and is then be released and we would be glad if you would confirm this. you please acknowledge receipt of these documents and also have a letter stating that the existing guarantee from Discount Finance Ltd. in respect of George Wall's overdraft has been Notice of the bank's security has been given to Australian Ltd. and the latter's acknowledgment will be forwarded to

is liable to £1 stamp duty and we would be glad if, after the document, you would return it to us so that we may tamped." The bank's reply was in the following terms : - present suggestion is that we accept a qualified guarantee of

iny overdraft) given on account of Wall. The nature and conduct Wall's transactions with the Customs are such that the bank

rs to continue the general form of guarantee (as at present so that we are covered whether Wall's commitments to the ms involve us partially in overdraft as well as outstanding under our guarantee to the Customs. We would therefore ¢ that you be so good as to arrange for fresh guarantee on the } of that already held but for the agreed reduced amount of We may say that we would be agreeable to meet the D. & request to release their guarantee provided approved in substitution thereof is furnished to the bank but the ount is to be £6,000 as already stipulated." It should be observed it this reply was made by the bank after the so-called indemnity had been sent to it; also that the bank did not comply with the ) request in their letter of 10th September 1930 to return ocument to them for stamping. The bank's letter shows that 'not content that the guarantee of 28th November 1929 should d by the indemnity. The letter also shows that the would have been content with a guarantee in the same form

the guarantee of 28th November 1929 but limited to £5,000. ut there is no evidence that the solicitors carried out the bank's "to arrange for the fresh guarantee." No such guarantee

to have been sent to the bank, and, as the solicitors did out the bank's request, it is impossible to conclude that guarantee had been released or superseded. The as already observed, shows that the guarantee of 28th r 1929 was not cancelled until 23rd February 1937. There s, however, on the margin of the guarantee a note written by hand

in these words: " Guarantee is limited to £5,000 vide arrangement and covers only guarantee to the Customs Department." There is no evidence showing who gave instructions for this note, which was written in pencil, to be put on the guarantee. The writer of the note was not called as a witne: It is clear that the note had no operative effect on the guarantee, and, even if it were to be regarded as evidence of an arrangement entered into between the bank and the defendant company, it would be necessary to assume, before :

would have any weight, either that the bank had in its letter of 15th September 1930 repudiated an agreement to release the guaran- tee and to have the limited form of guarantee substituted for it or that it subsequently retreated from the position taken up in that letter. There is, I think, nothing to justify either assumption. Some of the documentary evidence in the case shows that the solicitors acting for the bank in proceedings against the defendant company did take the view that the original guarantee had been varied. But it is not shown that they had any other material upon which to form this view than the letters in evidence and the note on the guarantee. When it is shown that the correspondence is in

conflict with their views and the note is presumably incorrect, any document prepared by the solicitors which expresses the view that the guarantee was released or varied can have little, if any, weight

in favour of the defendant company on the issue whether or not the

original guarantee was in force when the plaintiff gave the letter of

lien to the bank. In my opinion, the inference to be drawn from

the evidence. such as it is, is that the defendant company's guarantee

was in force on 3rd December 1930 and that the limit of the guarantee,

which was £10,000, had not been reduced. It follows, therefore,

that on 3rd December 1930 the plaintiff and the defendant company

became co-sureties of the debt with the payment of which the plaintiff

then agreed by his letter of lien to charge the bonds deposited by

The plaintiff's liability as surety under the letter of lien has been: | discharged, but the grounds upon which the defendant company opposes his claim to contribution make it necessary to determine at what date the liability was discharged. In my opinion, that date was 9th August 1932, when the bonds were sold and the proceeds taken by the bank. The proceeds were paid to the credit of a suspense account in the bank's books for the purpose - and it may be observed that the plaintiff did not know that the bank had done this - but the evidence shows that as from the date of the sale of the bonds the bank charged interest on the principal debt as if it had been reduced by an amount equal to the sum which the bank

February 1937 the bank accepted from the defendant company faction of its liability as a surety a sum equal to the difference en the amount of the principal debt and the proceeds of the 'of the bonds. It is amply proved that on 9th August 1932 the eds of the sale of the bonds were, with the plaintiff's consent, by the bank in satisfaction of the pecuniary obligation which mdertook as a surety by the letter of lien. In my opinion, the ik had then enforced against the plaintiff payment of a part of | principal debt equal to the proceeds of the sale of the bonds. 1¢ amount paid exceeded the proportion of the debt which as en the plaintiff and the defendant company it was equitable m to bear, it is difficult to see why a right to contribution did on 9th August 1932 against the defendant company because nk for its own purposes and without the plaintiff's consent put proceeds of the sale of the bonds into the suspense account. is contended that, even if the plaintifi's obligation to pay the Y debt was performed at that date, the payment did not nd a right to contribution against the defendant company, e the moratorium legislation of New South Wales applied to v of lien and the plaintiff's obligation as a surety was not ible by the bank on 9th August 1932 because of the operation legislation. But even if the legislation did apply, it would -make the performance of the obligation at the time it fell due performance according to the terms of the letter of lien a voluntary . The legislation extended the time for the performance of he obligation, and, in my opinion, whether it was performed at the pulated time or within such further time allowed by the legislation, vas still a performance by the plaintiff of his obligation as a surety a part of the principal debt and not the voluntary ption of a burden which the defendant company was not bound with him, The moratorium legislation did not compel the if he were entitled to take advantage of it, to perform his nh as a surety to pay the principal debt when called upon o by the bank, at a later date than that upon which it became performance according to the tenor of the letter of lien. ys, in my opinion, that, even if the moratorium legislation to the letter of lien, the plaintiff did not lose his right to ition by declining to take an advantage of the legislation. The total sum which the plaintiff paid to the bank in reduction of debt was £3,134. This sum consisted of £2.936, the of the sale of the bonds, and £197, the amount of interest by the bank from the bonds and credited by it to the prin- debtor's account. If the finding is correct that the plaintiff

by selling the bonds. The evidence also shows that on 4. ©. oF A-

and the defendant company became co-sureties and their obligations as sureties were determined by the letter of lien and the guarantee of 28th November 1929 respectively, the proportions of the principal debt which inter se they were bound to pay were three-thirteenths and ten-thirteenths. The defendant company has paid £4,638 in reduction of the principal debt. It follows that at 9th August 1932 the plaintiff had contributed more than three-thirteenths of that debt and he then became entitled to a contribution.

The plaintiff and the defendant company have agreed that, if the court decided that payment of the proceeds of the sale of the bonds was made on 9th August 1932 and the plaintiff was entitled to a decree for contribution, the amount of contribution payable by the defendant company should be £1,552 9s. 4d.

It may be observed that, if the finding that the plaintiff and the defendant company were co-sureties is correct, there is no ground for suggesting that the bank released the defendant company befor 9th August 1932. The company's guarantee was not cancelled by the bank until it received payment on 23rd February 1937 of the sum of £4,638.

In my opinion, the appeal should be allowed and the cross-appeal dismissed.

Appeal allowed with costs. Cross-appeal dismissed with costs. Decree of Supreme Court set aside. In liew thereof declared : (1) that the appellant and the respon- dent Discount and Finance Ltd. are liable to contribute in the proportion of three-thirteenths and. ten-thirteenths respectively of the sum of £7,772 18s. 3d. paid or pro- vided by them on or before 23rd February 1937 in respect of the principal debt of the firm of George Wall to the National Bank of Australasia Ltd. : (2) that the appel- lant has paid or discharged £1,340 6s. 6d. of such liability in excess of his proper share and proportion. Orier that the said respondent pay to appellant the said sum of £1,340 6s. 6d. with interest at the rate of four pounds per centum per annum from 23rd February 1937 to date of payment of the said sum together with costs of the suit. Liberty to apply to Supreme Court.

Solicitors for the appellant, 7'. W. Garrett, Christie & Buckley.

Solicitors for the respondents, Campbell, Campbell & Campbell. Fi