How does the law apply to dividends received by a creditor in the bankruptcy of a principal?

A good summary of the law applicable in this regard is found in Rowlatt on Principal and Surety, 4th ed., at pp. 98 and 99-100: With regard to dividends obtained by the creditor in the bankruptcy of the principal, these are considered as made rateably in respect of every part of the debt, and operate, if not otherwise agreed by the surety, in relief of the guarantor or guarantors rateably. The creditor, therefore, in suing the surety, must give credit for all dividends received from the bankrupt upon the amount for which he is suing the surety, unless the proper construction of the guarantee is that it covered the amount remaining due after payment of any such dividends … If the amount for which the surety is liable is less than the total debt owing to the creditor by the principal, it becomes material to consider whether the surety is bound for the whole of that debt with a limitation of his liability, or whether he is bound only for a part of it equal to the amount for which he is liable. If the former is the case, he has no right to a dividend until the creditor has received 100 pence in the pound on the whole. If the latter, he is relieved to the extent of the proportion of the dividend attributable to that part of the debt which he has guaranteed, just as if the amount he has guaranteed were a separate distinct debt from the rest of the creditor’s claim. The rule is that where the surety gives a continuing guarantee of limited amount to secure an indefinite liability, as, for instance, the amount of advances which may be made to the principal, the guarantee is prima facie to be taken as extending only to a part of the ultimate amount of the debt equal to the amount of the guarantee, and the surety will be entitled to that proportion of the dividends, the principle being that the surety is a stranger to the excess, and that the creditor swells his demand beyond the sum guaranteed at his own risk. The principle is exemplified in a line of cases referred to and distinguished in Ellis v. Emmanuel. Such a principle does not apparently apply where the surety is not a stranger to the excess, but expressly guarantees (subject to the limit as to the amount he is actually to pay) the whole amount to become due from the principal, even though that may be the ultimate balance on a running account. And in such cases the creditor would, perhaps, be entitled to retain the dividends even without an express proviso to that effect. Where the guarantee is given in respect of a floating balance, it is clear from Ellis v. Emmanuel, that, where it is given in respect of an ascertained debt, the full amount of which is named as the subject of the guarantee, a limitation of the liability cast upon the surety will not be construed as preventing the guarantee applying to the whole debt, so that in such a case the surety has no right to dividends until 100 pence in the pound is paid on the whole debt.