The courts have stressed this many times: in order to proceed
against a surety, the creditor must have respected the conditions
of the suretyship contract.
The contractual provisions most often submitted to the courts in
these matters concern: (1) the notice that the creditor who has not
contracted directly with the general contractor (a subcontractor,
for example) must give to the general contractor within 60 days of
starting the work or supplying the materials, and (2) the notice of
claim that the creditor must give within 120 days following
completion of the work or final delivery of materials.
In many cases, a default or irregularity involving such notices
results in automatic dismissal of the proceeding.
However, as the Quebec Superior Court has recently reminded
us1, it all depends on the circumstances of the case, as
the law recognizes that a surety remains bound despite imperfect
compliance with a condition of the suretyship contract when the
latter is substantially respected.
In that matter, the general contractor and its surety argued
that Panfab, the supplier of a subcontractor, had not respected the
formal requirements applicable to the notice to be given to the
general contractor under the suretyship contract, as the notice had
not been given "directly" to the latter, who was instead
provided only with a copy. They also argued that the notice
appeared to indicate that the price was fixed rather than
The Court found that these irregularities were inconsequential,
that the suretyship contract did not expressly require that the
nature, price and terms of payment for the supplier's materials
be specified, and that the purpose of the formal requirements had
been met, since the general contractor had effectively been
informed that its subcontractor had entered into a contract with a
This decision is essentially based on the principles established
in 1983 by the Supreme Court of Canada2, when it refused
to allow a defence that was "technical in the extreme" on
the part of a professional surety. In that matter it had been shown
that the surety had effectively been provided with information that
technically was supposed to have been provided to it in writing,
and that a holdback had consequently been made vis-à-vis the
principal debtor, such that the intended purpose of the condition
had been achieved and the surety had not been prejudiced in any
It should be noted that in 1989, the Quebec Court of
Appeal3 also refused to give precedence to the
formal requirements of a suretyship contract, given that the
intended purpose of its conditions had been met and the
irregularity relied on by the appellant had not caused it any
prejudice. In examining the validity of the notice to the general
contractor, the Court made a distinction between the date of the
initial delivery of the materials and the actual commencement of
Thus, courts in Quebec were already applying these principles
before the Panfab case, but appear to have been rarely
called upon to consider the specific circumstances justifying their
An interesting aspect of the Walsh decision is that the
Court of Appeal recognized that the absence of a contract of
enterprise between the beneficiary of the surety (a
sub-subcontractor, for example) and the general contractor does not
prevent the latter from being solidarily liable jointly and
severally with the surety, despite the suretyship contract
requiring such an agreement.
While the Court in the Panfab case did not specifically
say so, its conclusions in favour of the plaintiff, the supplier of
a subcontractor, apply not only to the surety but to the general
contractor as well.
Thus, in addition to the terms of the suretyship contract, which
of course must be examined carefully, it is important to bear in
mind the following:
the importance of the factual background when considering an
irregularity under a suretyship contract;
the possibility that an apparent default is not truly a default
or is not fatal;
fulfilment of the purposes intended to be achieved by the
provisions of the contract, such as effective knowledge of the
information covered by the notice requirement, the possibility for
the general contractor to require that its subcontractor provide it
with the appropriate acquittances, or the possibility of making a
holdback, may defeat an excessively technical defence on the part
of a "professional" surety.
1 Industries Panfab Inc. v. Axa Assurances
Inc., 2016 QCCS 1625
2 Citadel General Assurance Co v.
Johns-Manville Canada Inc.,  S.C.R. 513
3 Walsh & Brais Inc. v.
Tro-Chaînes Inc.,  R.L. 635 (C.A.,
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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