W.R.Meredith, Q.C., for the plaintiffs. It is not open to the defendants to say that they are discharged. There is nothing in the pleadings on the subject. The sixth paragraph of the statement of defence reaches co-suretyship only, not joint suretyship, but only co-suretyship in severalty. Again, the resolution was bad for want of power; a bylaw or legal instrument was necessary: Corporation of Toronto v. Bowes, 6 Gr. 1. The resolution was a clear breach of trust. Durand is still liable on the bond. See DeColyar on Guarantees, p. 364; Taylor v. Bank of New South Wales, 11 App. Cas. 596; Pearl v. Deacon, 24 Beav. 186; S. C.. 1 DeG. & J. 461; Wulff v. Jay, L. R. 7 Q. B. 756; Ward v. National Bank of New Zealand, 8 App. Cas. 755. As to the appropriation of payments in bankruptcy or insolvency or winding-up, there must be a pro rata application of the money. But this is different, and the same as a payment by the executor of Brown: Ex parte Rushforth, 10 Ves. 409; In re Sherry, London, and County Banking Co. v. Terry, 25 Ch. D. 692; Commercial Bank v. Muirhead, 4 C. P. 434; Corporation of the Township of East Zorra v Douglass, 17 Gr. 462; Cunningham v. Buchanan, 10 Gr. 525. There is no pretence that an appropriation was made by the payor.

Rae, in reply. The resolution in question was within the ordinary business of the municipal council, and was not ultra vires. In a roundabout way the Durand obligation has been cancelled, for the action has been dropped.

January 24th, 1887. FERGUSON, J.-This is an appeal from the report of the Master at London bearing date the 29th of October, 1886. The appeal is by the defendants. The Guarantee Company was brought in and made a party at the instance of the defendants. They also take part in the appeal. The appeal is on the grounds (1) that the Master should have found that the plaintiffs had released James Durand from all liability under his bond of suretyship, and that in consequence of his having been discharged the appellants were released from any liability to

the plaintiffs on their bond (by which is meant I apprehend the policy sued on); and (2) that in any case paragraph 2 of the report is erroneous in this, that the Master should have held that the defendants are entitled to a rateable or proportionate benefit in the amount realized from the estate of the late John Brown being $14,100 instead of $2100.

The action appears to have been upon a policy of guarantee made and issued by the defendants in the month of May, 1869, in respect to the conduct of the late John Brown, who was the treasurer of the plaintiffs. The third condition endorsed upon the policy is as follows: “3. This policy shall extend to cover only such losses as may have been incurred by reason of any act of fraud or dishonesty committed by the employee within the period of twelve months previous to the date of any notice of claim."

The Master found by the report that the amount of loss in respect of which these defendants are liable is $5964.91. This is not now disputed. The bond spoken of as the bond of James Durand, the Master finds was a bond executed by him, the late Mr. Brown and another, in which the said James Durand was bound in the sum of $5000, and that this amount can be recovered from him unless he has been released by the plaintiffs. The Master finds that the defalcation in respect to which the bond given by Durand is applicable is the total defalcation of Brown from the date of the bond in May, 1869, to the date of his (Brown's) death in June, 1882, and that this amounted to $56,124.99.

The Master says he finds that as to the sum of $12,000, part of the sum of $14,100 (from the estate of Brown), this sum had before the commencement of this suit been received and carried by the plaintiffs to the credit of the earliest items of the indebtedness of Brown to them, and before striking the balance of the total indebtedness to or loss sustained by the plaintiffs at the sum of $80,497.33.

The Master allowed as a deduction in favor of the defendants from the sum of $5,964.91, in respect of the $2,100 to be realized from the estate of Brown the sum of $149.42, and also in respect of the bond of Durand, which he found

to be a valid and subsisting security, the sum of $535.65. These two deductions reduce the sum of $5,964.91 to the sum of $5,279.84.

Before the alleged discharge of Durand an action had been commenced against him by the plaintiffs upon his bond. A resolution was moved in the council of the city of London (the plaintiffs) to suspend the proceedings against Durand, and this was voted down, and lost. A resolution was then moved in the same council to the effect that Durand should be released from his obligation upon the bond, which was carried, and adopted, and as I understand entered or recorded in the book of the proceedings. These papers are not before me, but counsel agree in stating the substance of them.

This is what is relied on by the defendants when they say that Durand was discharged without any notice to them or concurrence on their part. They (the defendants) now contend that they were joint sureties with Durand, and that such release of Durand operated as a release and discharge of them all.

What the defendants set up, in their pleading, on this subject is contained in the sixth paragraph of their statement of defence, and is as follows: "In case the said policy should be produced and proved the defendants say that the same was granted upon the express understanding or agreement that, as against every corporation then being or thereafter becoming security or surety for the said John Brown, therein called the employé, in his employment as aforesaid, the said company should have and possess the right of ratable contribution and all other the rights and remedies, both legal and equitable, of co-sureties; that one James Durand became and was a co-surety with the defendants in the sum of $5000; and that after the alleged loss of the plaintiffs through the said Brown, the plaintiffs released and discharged the said James Durand from all liability under the said bond or obligation."

From another policy of the defendants which has been left with me, and which is in a printed form of policy, I

see that this pleading sets forth accurately the substance of a condition or provision contained in the defendants policies.

On the argument, it was stated and conceded to be correct, that leaving, out of the case the questions as to the total discharge of the defendants from liability by reason of what occurred in respect to the obligation of Durand, and as to the right of the plaintiffs to make the appropriation that they did make of the $12,000 received from the estate of Brown, before the commencement of this action, the defendants have, by the report of the Master, all the benefits they now contend for, and that the questions to be determined by me upon this appeal were really only two-namely, (1.) Was there the alleged total discharge of the defendants; and (2.) Have the plaintiffs the right as against the defendants so to appropriate this sum of $12,000?"

As to the alleged discharge: In the case of Ward v. The National Bank of New Zealand, 8 App. Cas., at p. 765, Sir Robert P. Collier, delivering the judgment of the Court, said: "The right of contribution was established in the case of Dering v. Lord Winchelsea, 1 Cox 318, affirmed by Lord Eldon, in Craythorne v. Swinburne, 14 Ves. 169, and is thus explained by Lord Redesdale in Stirling v. Forrester, 3 Bli. 590: "The principle established in the case of Dering v. Lord Winchelsea, is universal, that the right and duty of contribution is founded on doctrines of equity, it does not depend upon contracts. If several persons are indebted and one makes the payment, the creditor is bound in conscience, if not by contract, to give the party paying the debt, all his remedies against the other debtors. It would be against equity for the creditor to exact or receive payment from one, and to permit, or by his conduct to cause the other debtors to be exempt from payment."

*

Now, I think that what is contained in the condition or proviso in the defendants' contract, and stated in the pleading that I have before referred to, expresses nothing

more than was and is well established as a matter of equity, and that the contract would, in this particular respect, be of the same effect if it did not contain this proviso or condition. The defendants would, on payment by them, as a matter of law, have the right of contribution as against their co-sureties, in as full a manner as stated in this proviso or condition, if this had been left out of the contract altogether.

The defendants did not contract jointly with Durand nor did Durand contract with them. Moreover, that in regard to which the defendants by their contract became sureties was not at all co-extensive with that in regard to which Durand by his contract became surety. The one, it is true embraced the other, but much more than this other; and in no way that I can consider the matter can I arrive at the conclusion that the defendants and Durand were joint contractors or joint sureties, and besides, a joint suretyship is not set up in the pleadings. In the same case in 8 App. Cas. and on the same page Sir R. P. Collier says: "But where it is no part of the contract of the surety that other persons shall join in it, in other words, where he contracts only severally, the creditor does not break that contract by releasing another several surety, the surety cannot therefore claim to be released on the ground of breach of contract. It is true that he is entitled to contribution against other several sureties to the same extent as if they had been joint, but the right of contribution among such sureties depends not upon contract but on principles established by Courts of Equity."

In Brandt on Suretyship, sec. 373, it is stated: "When by the act of the creditor the surety has been deprived of the benefit of a fund for the payment of the debt, and the contract by which the surety is bound is not changed, he is only discharged to the extent that he is injured, as in such case it is the fact that he is injured that entitles him. to the discharge. But where the creditor relinquishes a security for the debt, and thereby materially alters the contract, the surety is wholly discharged, whether he is

91-VOL. XIII. O.R.