Douglas and Anor as Trustees for the Great Southern Land Discretionary Trust v Scanlan - [2010] WADC 126

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: DOUGLAS & ANOR as Trustees for the Great Southern Land Discretionary Trust -v- SCANLAN [2010] WADC 126

CORAM: SCHOOMBEE DCJ

HEARD: 22 JULY 2010

DELIVERED : 2 SEPTEMBER 2010

FILE NO/S: CIV 2064 of 2007

BETWEEN: OLIVER GEORGE DOUGLAS
STEPHANIE DOUGLAS as Trustees for the Great Southern Land Discretionary Trust
Plaintiffs
AND
LAWRENCE JOHN SCANLAN
Defendant

Catchwords:

Statutory limitation - Claim for contribution by guarantor against co-guarantor - When cause of action arises - Whether guarantor has to pay creditor prior to cause of action for contribution claim arising - Guarantor's equitable right to declaratory order

Legislation:

Nil

Result:

Answer to preliminary question:
A cause of action for payment of a contribution between co-guarantors only arises once the guarantor has paid more than his or her share of the debt

Representation:

Counsel:

Plaintiffs: Mr M Levitan
Defendant: Mr D K Barker

Solicitors:

Plaintiffs: Melvyn Levitan
Defendant: Chalmers Legal Studio

Case(s) referred to in judgment(s):

Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342
Bond v Larobi Pty Ltd (1992) 6 WAR 489
Davies v Humphreys (1840) 6 M & W 153
Do Carmo v Ford Excavation Pty Ltd (1984) 154 CLR 234
Ex parte Snowdon; Re Snowdon (1881) 17 Ch D 44
Kent v Abrahams [1928] WN 266
Mahoney v McManus (1981) 180 CLR 370
McLean v Discount & Finance Ltd (1939) 64 CLR 312
Moulton v Roberts [1977] Qd R 135
Rangewood Investments Pty Ltd v Hellyer, unreported; SCt of WA; Library No. 980251; 11 May 1998
Re Anderson‑Berry; Harris v Griffith [1928] Ch 290
Robinson v Harkin [1896] 2 Ch 415
Stirling v Burdett [1911] 2 Ch 418
Tucker v Bennett [1927] 2 DLR 42
Walker v Bowry (1924) 35 CLR 48
Wolmerhausen v Gullick (1893) 2 Ch 514
Woolmington v Bronze Lamp Restaurant Pty Ltd (1984) 2 NSWLR 242

SCHOOMBEE DCJ: This matter comes before me as a preliminary issue. The issue to be determined, by agreement between the parties, is:
"When does a cause of action in respect of a claim for contribution between co-guarantors arise?"

Background facts

Mr Douglas and Mr Scanlan were co-guarantors of a debt owed by Australiana Investments Pty Ltd, the debtor, to Cianiup Pty Ltd, the creditor. The debtor company defaulted in the repayment of the debt and on 7 October 1997 summary judgment in the amount of $79,747.17 plus costs was granted in favour of the creditor against the guarantors of the debt, who were Mr Douglas, Mr Scanlan and Mr O'Rourke. In 1998 the creditor's rights in the judgment were assigned to Mr Scanlan's wife. In about 2002 Mr O'Rourke went bankrupt. Between 2004 and 2007 several attempts were made by Mrs Scanlan to enforce the summary judgment against Mr Douglas. After a successful appeal of an earlier decision, leave to enforce the judgment against Mr Douglas and Mr Scanlan was finally granted to Mrs Scanlan on 9 March 2007.
The judgment was enforced against Mr Douglas on 21 September 2007 by way of a property seizure and sale order and Mrs Scanlan received a sum of approximately $127,000 from the Sheriff's office. The exact amount is in dispute, but is not relevant in determining the preliminary issue. On 8 October 2007 Mr Douglas instituted an action against Mr Scanlan claiming a contribution of half the amount paid by Mr Douglas on the basis that Mr Scanlan was a co‑guarantor in respect of the principal debt and that the other co‑guarantor was bankrupt. Mr Scanlan has not admitted on the pleadings that any amount was paid by Mr Douglas, only that an amount was received from the Sheriff's office. However, for purposes of deciding the preliminary issue the parties accept that Mr Douglas paid an amount to Mrs Scanlan in satisfaction of the principal debt. The parties are also in agreement that as co-guarantors Mr Douglas and Mr Scanlan are each responsible for half of the debt owing to the creditor, as M O'Rourke is bankrupt.
Mr Scanlan has pleaded that Mr Douglas' claim for contribution is statute barred because the cause of action for a contribution arose as soon as the summary judgment was granted against each of the guarantors on 7 October 1997 and more than six years had passed before the writ was issued on 8 October 2007. Mr Douglas submits that his cause of action for a contribution only arose on 21 September 2007 when he made payment of the amount owing to the creditor, who was then Ms Scanlan.

Limitation period applicable to a claim for contribution between co‑guarantors

The parties are in agreement that the relevant limitation period is six years whether pursuant to the Limitation Act 1935 (WA) or the Limitation Act 2005 (WA). The question which Limitation Act applies is determined by the issue of when the cause of action accrued, as s 4(1) of the Limitation Act 2005 provides that the limitation periods under that Act only apply to causes of action that accrued on or after the commencement day (which is 15 November 2005). If the cause of action for a contribution from a co‑guarantor only arose after Mr Douglas had made the payment in September 2007, the 2005 Act would apply. If the cause of action for a contribution arose as soon as there was a judgment against Mr Douglas, the 1935 Act would apply.
Section 38(1)(c)(vii) of the Limitation Act 1935 states that all actions not specifically provided for which are in the nature of actions on the case are subject to a limitation period of six years. Professor Handford in "The Laws of Australia" Vol 5, [5.10.1260] (as at 212-4-07) suggests that contribution actions are regarded as actions on the case.
Section 13(1) of the Limitation Act 2005 provides that the relevant limitation period for an action on any cause of action not otherwise provided for is six years. A contribution action between tortfeasors is otherwise provided for in s 17, but not a contribution action between co‑guarantors.
Accordingly, the agreement by the parties that the limitation period is six years, whichever Limitation Act applies, appears to be based on sound principles and the resolution of the preliminary issue may proceed on that basis.

When does a cause of action for a contribution between co‑guarantors arise?

The crucial question is: when did Mr Douglas' cause of action for a contribution against Mr Scanlan arise; after the judgment had been entered against Mr Douglas or only after he had paid the debt to the creditor?
A cause of action is "simply the fact or combination of facts which gives rise to a right to sue.": Do Carmo v Ford Excavation Pty Ltd (1984) 154 CLR 234 at 245.
Professor Handford in "The Laws of Australia", op cit, [5.10.1320] states that a cause of action in respect of a right of contribution between co-guarantors arises at the time one guarantor pays more than her or his share of the liability. Professor Handford relies on Walker v Bowry (1924) 35 CLR 48 for this statement. In Walker v Bowry (supra) at 56 and 59 the High Court held that a co‑guarantor's right to a contribution did not arise before he had made payment to the creditor and the period of limitation did not start to run until payment was made. Isaacs J distinguished a claim for payment of a contribution from an equitable right to a declaratory order and said the following at 56 in this regard:
"No doubt Walker had an equitable right, even before payment, to protect himself, but he had no right before payment to recover from Bowry (the co-guarantor) what he is now claiming, namely, reimbursement for money actually paid."
Starke J also rejected the argument that the period of limitation had started to run prior to payment by the guarantor and noted that any such approach was based on observations in Wolmerhausen v Gullick (1893) 2 Ch 514 and Robinson v Harkin [1896] 2 Ch 415.
In McLean v Discount & Finance Ltd (1939) 64 CLR 312 the main issue was whether a surety had in fact paid the principal debt to the bank. The bank had sold bonds provided by the surety as security and allocated the funds to the principal creditor's account without telling the surety. The Moratorium Act 1930 gave the surety the right to claim an extension of time for the payment of the principal debt, but he had not availed himself of this right. The issue was whether the allocation of the funds by the bank qualified as payment by the surety. The majority came to the decision that there had been payment and that the surety was therefore entitled to make a claim for contribution against the co-surety. In the course of his judgment Starke J made the following observation at 341 regarding an equitable right:
"At common law, no doubt, a surety could not maintain an action for contribution or money paid until he had actually paid more than his just proportion of the principal debt. But the authorities support the view that in equity the right to contribution can be declared before actual payment is made or loss sustained provided that such payment or loss is imminent (Wolmerhausen v Gullick). A judgment against a surety for the whole amount of the principal debt justifies such a declaration, as does the allowance of a claim by the principal creditor against the estate of a deceased surety (Wolmerhausen v Gullick). The apprehended loss or over-payment thus appears sufficiently imminent, and the court acts quia timet (Wolmerhausen v Gullick; In re Anderson-Berry)". (Footnotes omitted)
It is important to note that Starke J referred to a "declaration" which may be made before actual payment has occurred and relied on Wolmerhausen v Gullick (supra) as authority for this finding.
In Wolmerhausen v Gullick judgment had been granted in favour of the creditor against the estate of a deceased surety. The estate of the surety had not yet paid the claim, but instituted proceedings against co‑sureties for a contribution. Wright J referred to "Lindley on Partnership" 5 Ed, p 374 where the learned author explained that a right to contribution is only enforceable at law by a surety who can prove that he has already sustained a loss. However, in equity a surety can enforce his right before he has sustained actual loss, provided the loss is imminent. It is not necessary that the surety wait until he has been ruined by the payment. As soon as the creditor has acquired a right to immediate payment from the surety, the surety is entitled to call upon the principal debtor to pay the amount of the debt guaranteed, so as to relieve the surety from his obligation. The learned author also refers to co‑partners or co‑directors who may be entitled to call for contributions from each other before a payment is made.
Wright J came to the conclusion that this statement of the law by "Lindley on Partnership" was authority in favour of the view that some relief could be given prior to payment by the surety, but said that it was not clear from any of the authorities cited what form or limit that relief should take. In the case before him Wright J came to the conclusion that if the creditor had been made a party to the action, an order could have been made that the estate of the surety pay only its proportion of the debt to the creditor. However, as the creditor was not a party, an order could not be made preventing him from enforcing his judgment for the full debt against the estate of the surety. It was also not possible to make an order that the co-sureties pay their proportion to the estate of the surety, because, prior to payment, the estate could not give the co-sureties a discharge as against the creditor's claim.
Nevertheless, Wright J came to the conclusion that a prospective order could be made pursuant to which it would be declared that the estate of the surety had a right of contribution against the co-sureties whenever the estate had paid a sum beyond its share. The court also made a declaration that once the estate of the surety had paid its share, the co‑sureties were to indemnify it against further liability by paying their share to the creditor or otherwise.
Wright J further referred to the question when the limitation period in respect of the claim for contribution had started to run. His Honour did not decide that question but came to the conclusion that "even if the statute can begin to run before the surety has paid more than his proportion, at any rate it does not run until his liability is ascertained and that did not occur until 1890". The creditor's claim against the estate of the deceased surety was determined by the court in a particular sum in 1890.
It is important to note that Wright J held that the executor of the surety's estate was not entitled to claim a contribution from the co-sureties prior to the estate having made payment to the creditor. The surety's executor only had a right to a declaration which was prospective in nature. As regards the issue of limitation, Wright J did not make a finding as to when a cause of action arises, but only came to the conclusion that it could not arise until the surety's liability had been ascertained.
In Mahoney v McManus (1981) 180 CLR 370 a director of a company, who was also a surety for a debt owed by the company to a creditor, had provided money to the company which the company used to pay its debt to the creditor. The issue was whether the director had provided the money to the company as a loan which the company could use as it wished but did use to pay the creditor, or whether the payment was in exercise of the director's obligation as a surety of the company's debt to the creditor. The majority came to the conclusion that the payment had been made in exercise of the director's obligation as surety and that he was therefore entitled to a contribution from the co-surety. Although the majority, including Gibbs CJ, accepted that payment had been made by the surety to the creditor, Gibbs CJ made the following obiter comment in the course of his judgment:
"The right to contribution arises when a surety has paid or provided more than his proper share of the principal debt, but it may also be enforced by a surety who has not made payment; the circumstances in which a surety who has not made payment may enforce a claim to contribution have not been precisely defined, but it appears that he may at least do so as soon as the creditor has acquired a right to immediate payment from him. The amount of contribution recoverable depends on the number of sureties who are solvent at the time when contribution is sought and on the proportion for which each is liable. As authority for these principles, it is sufficient to refer to McLean v Discount Finance Ltd (1939) 64 CLR 312 at 328, 336-7, 341; Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350-2; Halsbury, 4^th ed, vol 20, paras 220-227 and Goff & Jones Law of Restitution, 2^nd ed (1978), pp 212 17." (Presumably a reference to pp 212 - 217)
The statement that a surety who has not made payment may "enforce" a claim to contribution as soon as the creditor has acquired a right to immediate payment from him, may be read to indicate that there is a right to payment of a contribution and not only to a declaratory order. However, if reference is made to the authorities that were relied upon for this statement, it is clear that the observation by Gibbs CJ was not intended to go that far.
I have already referred to the findings by Starke J in McLean v Discount &Finance Ltd (supra) at p 341 that before payment has been made by the surety to the creditor, a claim against a co-surety for money to be paid cannot succeed and that the surety is confined to a declaratory order regarding his right to a contribution. The other statements in McLean v Discount and Finance Ltd relied upon by Gibbs CJ are at p 328 and pp 336 – 337. At p 328 Latham CJ came to the following conclusion:
"The right of a surety to actual payment of money by way of contribution 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; Ellesmere Brewery Co v Cooper; Stirling v Burdett )." (Footnotes omitted)
At p 336 Latham CJ, who wrote the minority judgment and came to the conclusion that the surety had not yet made a payment to the bank, stated that the surety could therefore not claim contribution from any co‑surety.
The findings in McLean v Discount Finance Ltd relied upon by Gibbs CJ in Mahoney v McManus (supra) do not support a conclusion that a surety may claim payment of a contribution from a co-surety prior to having made payment to the creditor. The statement by Gibbs CJ that a surety may "enforce a claim to contribution … as soon as the creditor has acquired a right to immediate payment from him" does not necessarily mean that the surety has a claim for payment of a contribution. Gibbs CJ may only have meant to refer to a declaratory order.
The other authorities relied upon by Gibbs CJ also do not allow for more than a declaratory order where no payment has been made by the surety. In Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 350 – 352, Kitto J held that the right by a surety to a contribution from a co-surety was available in law as well as in equity, although the doctrine of equality operated more effectually in a court of equity than in a court of law and that there were differences as to the mode and conditions of its application. Kitto J summarised the extent of the right to a contribution at law and in equity as follows:
"The right arises at law when 'one of several persons has paid more than his proper share towards discharging a common obligation': Davies v Humphreys (1840) 6 M & W 153, 168, 169; 151 ER 361, at pp 367, 368; [1835 – 92] All ER Rep 101; Dimdore v Leventhal (1936) 36 SR (NSW) 378, at p 385, and it arises in equity when a liability of one of several to pay more than his share has been ascertained: Wolmershausen v Gullick [1893] 2 Ch 514; McLean v Discount & Finance Ltd (1939) 64 CLR 312, at p 341; … "
It should be noted that Kitto J relied on Wolmershausen v Gullick and McLean v Discount & Finance Ltdfor the finding that the right to contribution arose in equity when the liability of one surety had been ascertained. In both those cases the Court came to the conclusion that the relief in equity prior to payment by a surety was only a declaration of the surety's right to a contribution from the co-surety.
The next authorities relied upon in the judgment by Gibbs CJ in Mahoney v McManus are "Halsbury", 4^th Ed, Vol 20 at par 220 – par 227 and Goff & Jones "Law of Restitution" 2^nd Ed (1978), at pp 212 – 217. The reference to par 220 – par 227 in "Halsbury", 4^th Ed, Vol 20 must be a typing error. Those paragraphs deal with a guarantor's right to sue to the principal debtor and the guarantor's right of subrogation. It is pars 256‑259 which deal with a guarantor's right of contribution from a co‑guarantor.
Both authors refer to the entitlement of a surety or guarantor to obtain a declaration of his right to contribution from his co-surety once the creditor has obtained a judgment against the surety or has some other right to immediate payment. Both authors rely for this statement on Wolmershausen v Gullick and make the comment that the circumstances under which a declaratory order may be obtained and the precise extents of the relief are uncertain.
None of the authorities citied by Gibbs CJ therefore indicates that a surety may enforce a claim for a contribution by way of payment from a co‑surety prior to the surety having made payment to the creditor himself.
In Ex parte Snowdon; Re Snowdon (1881) 17 Ch D 44 the English Court of Appeal made it clear that a surety is not entitled to claim a contribution by way of payment from a co-surety unless the surety has paid more than his proportion of the debt to the creditor. James LJ held at 47 that until the whole debt had been paid by one surety or as much as he could ever be called upon to pay, there could be no equitable debt from the co-surety to the surety, as that debt would not yet have been ascertained. Prior to payment of the debt by the surety to the debtor the only proper cause would be for the surety to bring an action against the co-surety to compel him to contribute to payment of the debt directly to the creditor.

Brett LJ held the following in this regard:
"When does the claim of the one surety against the other for contribution arise? It is not when he has paid only his own half of the amount for which he originally became surety, but his claim arises when he has paid more than half of the whole of the debt due to the creditor. That is the doctrine which was laid down in Davies v Humphreys, and it was a doctrine taken from the Courts of Equity, and adopted by the Court of Law. The doctrine laid down in Davies v Humphreys has never been questioned, and it seems to be absolutely in accordance with what Lord Eldon said in Ex parte Gifford, upon the authority of which Davies v Humphreys was decided. There is nothing to the contrary in the other cases which have been cited, and the doctrine of Davies v Humphreys remains untouched, that a surety has no claim against his co-sureties until he has paid more than his share of the debt due to the principal creditor."(Footnotes omitted)
Cotton LJ also emphasised that a surety could only claim payment from the co-surety if he had paid more than his proportion. If the surety had only paid his half, he was not entitled to seek a contribution from the co-surety who was still liable to pay the other half to the creditor.
In Davies v Humphreys (1840) 6 M & W 153, 168 Baron Parke also came to the conclusion that a surety did not have a right to a contribution from a co-surety until he had paid more than his proportion to the creditor. Baron Parke held the following in this regard:
"And this appears to us to be very reasonable: for, if a surety pays a part of the debt only, and less than his moiety, he cannot be entitled to call on his co-surety, who might himself subsequently pay an equal or greater portion of the debt; in the former of which cases, such co-surety would have no contribution to pay, and in the latter he would have one to receive. In truth, therefore, until the one has paid more than his proportion, either of the whole debt, or of that part of the debt which remains unpaid by the principal, it is not clear that he ever will be entitled to demand anything from the other: and before that, he has no equity to receive a contribution, and consequently no right of action, which is founded on the equity to receive it."
The same conclusion was reached in Stirling v Burdett [1911] 2 Ch 418 at 430. (See also Tucker v Bennett [1927] 2 DLR 42).
In Kent v Abrahams [1928] WN 266 the plaintiff had paid the creditor £250, whereas her share, as one of five guarantors of a debt of £500, was only £100. Astbury J made a declaratory order that the plaintiff was entitled to a contribution from two of the co‑guarantors in a sum equal to the proportion of the debt guaranteed by each and that they should exonerate the plaintiff accordingly. A similar order was made against the other two co‑guarantors by consent. It is not quite clear from the decision whether the orders granted went beyond declaratory orders. In any event, the guarantor had paid more than her share, although she had not paid the full debt.
In Moulton v Roberts [1977] Qd R 135 one guarantor had paid the whole debt to the creditor and was held to be entitled to a contribution from a co‑guarantor. The issue in that case was whether a contribution was payable where the creditor had not yet made a formal demand for payment on the principal debtor or the guarantor, although the principal debtor had become insolvent and the guarantor had paid with the knowledge and approval of the co‑guarantor. Williams J held that a demand by the creditor was not a pre‑requisite for the guarantor's claim for contribution against a co‑guarantor.
Williams J also observed at 138 that a claim for contribution by one surety against a co‑surety is available where the surety has either paid off the debt or "is prepared to pay it off to the advantage of his co‑sureties". This remark is sometimes relied upon as authority for the proposition that a surety has a claim for payment of a contribution even though payment by the surety to the creditor has not yet been made, but is imminent (see, for example, "The Laws of Australia", op cit, [5.10.1320]). However, this observation by Williams J was made obiter, as in Moulton v Roberts the guarantor had paid the total amount of the debt to the creditor.
Counsel for Mr Scanlan also relied on Woolmington v Bronze Lamp Restaurant Pty Ltd (1984) 2 NSWLR 242. In that case a guarantor sought an order that the principal debtor pay the creditor and a declaration that the guarantor was entitled to a contribution by a co‑guarantor in the event that the principal debtor failed to comply with the order against him. Needham J granted the order against the principal debtor, but declined to make a declaratory order against the co-guarantor on the basis that the guarantor would not be entitled to a declaratory order or an order for payment of a contribution from the co‑guarantor until he had paid the full amount of the debt, or at least his share, or had "satisfied the court that he was willing, able and prepared to pay that amount". In refusing both, an order for payment and a declaratory order against the co‑guarantor, Needham J relied on Wolmershausen v Gullick, Kent v Abrahams (supra), Moulton v Roberts and Re Anderson‑Berry; Harris v Griffith [1928] Ch 290.
Woolmington v Bronze Lamp Restaurant Pty Ltd is also not authority for the proposition that a guarantor may enforce payment of a contribution against a co-guarantor prior to paying the debt to the creditor. The reference by Needham J to "willing, able and prepared to pay" was made obiter and was only to the effect that because the guarantor had not even been "willing, able and prepared" to pay the debt, he was not entitled to a declaratory order (and even less) to payment of a contribution.
The cases relied upon by Needham J also do not support the proposition that willingness to pay the debt entitles a guarantor to claim payment of a contribution from a co-guarantor. I have already examined the first three cases cited. In Anderson‑Berry; Harris v Griffith (supra) a surety sought an order that the principal debtor pay the creditor. The principal debtor was an administrator of a deceased estate and had threatened to distribute the assets of the deceased without taking account of the debt. That case did not deal with a claim for contribution by a guarantor against a co‑guarantor.
Counsel for Mr Scanlan also relied on Bond v Larobi Pty Ltd (1992) 6 WAR 489. The issue in that case was whether the plaintiff's claim for a contribution against a co‑guarantor should be struck out by reason of the fact that the plaintiff had not yet paid the judgement debt to the debtor nor demonstrated that he was ready, willing and able to pay. Owen J referred to the judgment by Gibbs CJ in Mahoney v McManus, Goff & Jones "The Law of Restitution", 3^rd Edition at 278 – 278, Wolmershausen v Gullick, Kent v Abrahams (supra), Moulton v Robertsand Woolmington v Bronze Lamp Restaurant Pty Ltd (supra), which authorities I have already discussed.
Having referred to the above authorities, Owen J noted that the plaintiff was primarily seeking a declaration of rights and orders consequent upon those declarations. His Honour came to the following conclusion at 503:
"Noting the prospective orders made in the Wolmershausen and Kent cases and the quia timet order made in Re Anderson‑Berry (supra), I can see no reason in principle why a demonstration of willingness and ability to pay should be a condition precedent to the accrual of the cause of action."
His Honour then drew a distinction between the accrual of the cause of action and the nature of the relief granted. His Honour said the following in this regard at 503:
"It seems to me, as a matter of general principle, that the right to contribution, in the sense of the cause of action, accrues once there is a judgment against the surety regardless of whether the judgment has been satisfied or whether the surety is willing or able to pay it. … On the other hand, whether the plaintiff is willing and able to pay the debt, or at least his just proportion, is a matter which could be relevant to, and may well govern, the relief which a court will grant. It seems to me that the Woolmington case can be explained on this basis and so too can the prospective orders made in the other cases to which I have referred."
Having made these findings, Owen J then noted that the appropriate orders to be made in favour of the plaintiff would be prospective, that is, conditional on him having made payment. It is not apparent from the decision what orders were finally granted and whether the plaintiff's claim against the co‑guarantor was struck out. However it seems that Owen J's comments with regard to the accrual of a cause of action in respect of a right to contribution were made in the context of declaratory orders that had been sought. It does not seem to me that his Honour's findings mean that a guarantor may sue for the payment to him of a contribution by the co‑guarantor prior to the guarantor himself having made any payment to the creditor. Such a finding would be contrary to the decisions of the High Court in Walker v Bowry (supra) and McLean v Discount & Finance Ltd (supra). The conclusion that Owen J did not intend to allow a claim by a surety for payment of a contribution prior to the surety having paid the creditor, is supported by his Honour's finding that the appropriate orders, if any, to be made in favour of the plaintiff would be prospective, that is, conditional on him having made payment.
Counsel for Mr Scanlan also relied on the decision by Master Sanderson in Rangewood Investments Pty Ltd v Hellyer, unreported; SCt of WA; Library No. 980251; 11 May 1998. In that case a guarantor of a debt had sought summary judgment against two co‑guarantors. The relief sought was not an order that the co‑guarantors pay an amount to the guarantor, but a declaratory order that the co‑guarantors were liable for a contribution. The guarantor had not yet paid any amount to the creditor, because land held as additional security by the creditor had not yet been sold and it was not clear what amount the creditor would demand from the guarantors. Master Sanderson was nevertheless prepared to make a declaratory order against the co‑guarantors, although the decision does not say exactly what the order entailed. In my view, there is nothing in this case which contradicts the authorities that have held that a guarantor is not entitled to claim payment of a contribution from a co-guarantor until he has paid the creditor.
In summary, a careful examination of the case law demonstrates that, apart from some obiter remarks, it has been accepted in England as well as in Australia that a guarantor is not entitled to claim payment of a contribution from a co‑guarantor, unless he has paid the full amount of the debt, or at least more than his share to the creditor. I do not read the findings made by Owen J in Bond v Larobi Pty Ltd (supra) as detracting from that accepted principle. In any event, the High Court has clearly spelled out in Walker v Bowry and McLean v Discount and Finance Ltd that a guarantor cannot maintain an action against a co-guarantor for payment of money by way of a contribution until he has paid more than his just proportion of the principal debt.
It is not necessary for me to decide what declaratory orders might be available to a guarantor and under exactly what circumstances. However, the authorities examined seem to indicate that a guarantor who has not yet paid anything to the creditor or, in any event, not more than his share, but is able and willing to pay more than his share, is entitled to a declaratory order against a co‑guarantor which fixes the percentage of the contribution that the co‑guarantor would have to pay to the guarantor in the event that the guarantor paid more than his share to the creditor (see, for example, Wolmershausen v Gullick at 529). A guarantor may also be entitled to a declaratory order against a co‑guarantor that he or she make a contribution to the total debt, in an amount to be fixed by the court, to be paid to the creditor. The creditor would have to be a party to such an action (see Wolmershausen v Gullick at 528 - 529). Lastly, a guarantor may obtain a declaratory order against the debtor to the effect that the debtor is obliged to pay the creditor (see Wolmershausen v Gullick at 528; Re Anderson‑Berry; Harris v Griffiths (supra) at 308-309).

Answer to preliminary issue

The answer to the preliminary question the following:
A cause of action for payment of a contribution between co‑guarantors only arises once the guarantor has paid the full debt to the creditor or at least more than his or her share of the debt.
In this case Mr Douglas has not asked for a declaratory order. He has claimed that Mr Scanlan pay to him half the amount that he had to pay to the creditor, who is now Mrs Scanlan. Mr Douglas was not entitled to maintain an action for payment of a contribution against Mr Scanlan until he himself had paid the full debt to the creditor or had paid more than his share. This occurred, accepting that payment was made by Mr Douglas, at the earliest in September 2007. The writ was instituted in October 2007. Accordingly, Mr Douglas' claim for payment of a contribution is not statute barred.