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Contract - Guarantees II

. Moodie v. Canada

In Moodie v. Canada (Fed CA, 2021) the Federal Court of Appeal identifies when limitations start to run when there has been a payment by a guararantor, thus invoking their subrogation rights:
[10] There are several reasons why the appellants’ interpretation of subsection 23(4) must be rejected. Firstly, it is contrary to the plain and ordinary meaning of the statute. The concept of subrogation is not contentious and the date upon which it occurs is generally accepted to be the date upon which the guarantor or surety pays the debt to the creditor, and in so doing acquires the creditor’s rights in respect of the debt. Black’s Law Dictionary defines subrogation as "“[t]he substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor”": Bryan A. Garner, ed., Black’s Law Dictionary, 11th ed. (Thomson Reuters, 2019) [emphasis added]. The subrogated party must actually pay the debt to obtain the creditor’s rights through subrogation.
. Madison Joe Holdings Inc. v. Mill Street & Co. Inc.

In Madison Joe Holdings Inc. v. Mill Street & Co. Inc. (Ont CA, 2021) the Court of Appeal cites the 'Fair Protection Rule' of the law of guarantee:
[32] I agree with this clear and careful analysis and conclusion. Importantly, and at a minimum, the motion judge’s analysis and conclusion are far removed from being a palpable and overriding error. Indeed, the motion judge’s interpretation is the only interpretation consistent with what the leading scholar on guarantees describes as the Fair Protection Rule:
As a general principle, the courts always interpret a guarantee so that the protection or security which it affords to a creditor is rendered real rather than illusory. Alternatively stated, guarantees are read so as to give effect to the apparent intent of the parties, so as to afford fair protection to creditor in accordance with that apparent intent. This rule should be stated as the most basic principle of guarantee interpretation because it is clearly necessary to give a guarantee instrument an interpretation which is fully consistent with its apparent purpose.
See Kevin McGuinness, The Law of Guarantee, 3rd ed. (Toronto: Lexis Nexis Canada, 2013), at pp. 281-82.


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