Summary

The claimant was entitled to a contribution from the defendant of one half of the amount that he had been called upon to pay under a joint and several guarantee. Neither the Civil Liability (Contribution) Act 1978 nor s.10 Limitation Act 1980 applied to contribution claims between co-sureties.

Facts

The claimant ('H') sought a contribution from the defendant ('M') equal to one half of the amount that he had been called upon to pay to Barclays Bank plc ('the Bank') under a joint and several guarantee given by them both in relation to the indebtedness of a property development company ('the Company'). H and M owned the share capital of the Company in the proportion 80:20 respectively. Following the collapse of the property market in 1990, the Company ran into severe financial difficulties. In February 1992 the Bank made formal demand of both the Company and of H and M for repayment of the amount of the Company's indebtedness. By March 1996 H had paid #478,400.36 to the Bank, which agreed to write off the remaining balance of #51,905. H first made a claim for contribution from M in November 1997, and did not commence these proceedings until March 1998. By his defence M contended that: (a) the general rule as to equal sharing of the guarantee burden was implicitly varied either to 100:0 or to 80:20 as between H and M respectively; (b) H had been guilty both of diverting labour and materials from the Company and of failing to pay for services rendered by the Company, such as to reduce wholly or pro tanto M's liability to contribute; (c) the Civil Liability (Contribution) Act 1978 applied to contribution claims as between co-sureties, with the result that H's claim was statute-barred under s.10 Limitation Act 1980; (d) in the alternative, the court should apply a two-year limitation period by analogy with s.10 of the 1980 Act; and (e) the claim was unenforceable by reason of laches, acquiescence and delay.

Held

(1) There was nothing in the conduct of the parties which went any way towards establishing that H and M had agreed that the usual rule of equality would not apply as between them. (2) Even if there had been some diversion of labour and materials, and/or non-payment for services rendered, the fact remained that the Bank had foregone over #50,000 of debt. Since M could not hope to establish that H's alleged defaults had caused the Company loss in excess of that amount, the issue was irrelevant to the quantum of M's liability. (3) The 1978 Act did not apply to the obligations of H and M to the Bank under the guarantee. The liability under the guarantee was in debt, and not in damages. It followed that s.10 of the 1980 Act was of no relevance. (4) There was no warrant for applying a two-year limitation period by analogy. (5) The defences of laches, acquiescence and delay failed.

Judgment for the claimant.