In Case Law



Alteration of obligation: Corumo Hldgs v C Itoh [1991] 24 NSWLR 370; Pritchard v Djz Constructions Pty Ltd and Ors; Gilles and Anor v Djz Constructions Pty Ltd and Ors [2012] NSWCA 196

Variation of guarantee without knowledge of surety – variation not material: Farrow Mortgage Services v Slade [1996] 38 NSWLR 636

Variation of principal obligation – non-consensual variation: Bond v Hong Kong Bank (1992) 25 NSWLR 286

Husbands’s borrowings on behalf of company also secured by guarantee provided by wife – subsequent credit contract offered to company – held credit contract was in substance a replacement agreement which adversely affected wife’s liability under guarantee – wife only liable under guarantee if she consented or entered into new guarantee -Ankar’ principle: Australia and New Zealand Banking Group Ltd v Manasseh [2016] WASCA 41

Loan agreement guaranteed by six co-guarantors including respondent – borrower failed to pay money on agreed date – terms of loan renegotiated – proposed amendments included provision of mortgage over property owned by company and guarantee from company – lender, borrower and company agreed that company’s liability as guarantor limited to amount realised from sale of property – Deed of Variation executed by appellant, borrower, guarantors and company – agreement as to company’s liability not disclosed in Deed or otherwise – borrower failed to pay money due – appellant required payment from guarantors – respondent contended he was discharged from liability as guarantor because of agreement to cap company’s liability – primary judge found respondent not liable as guarantor for money not paid in accordance with original loan facility – decision upheld on appeal: Adisan Pty Ltd v Irwin [2015] NSWCA 217


Standing of assignee to sue on guarantee – whether privity of contract required: Farrow Mortgage Services Pty Ltd v Hogg [1995] 64 SASR 450

Effect of assignment of principal debt upon enforceability of guarantee: Clark v. Dedvukaj [1993] 2 Qd.R. 10 (Where he appellants relied on Consolidated Trust Co Ltd v Naylor 55 CLR 436 for the proposition that where the instrument creating or evidencing the guarantee is one and the same as that creating or evidencing the principal debt then an assignment of the principal debt will carry with it an assignment of the guarantee.)


Where the principal discharged one co-guarantor, all other co-guarantors were also discharged: James v Surf Road Nominees Pty Ltd [2004] NSWCA 475

Where respondents jointly liable under guarantee for debts of insolvent company – claim against second respondent settled – first respondent sought declaration second respondent liable for contribution to any payments made in excess of 50 per cent – second respondent became bankrupt between judgment and appeal – whether bankruptcy affected first respondent’s liability – bankruptcy had no affect on first respondent’s liability but was discretionary consideration militating against grant of relief – relief refused on discretionary grounds as no prospect asserted rights to seek contribution from insolvent co-surety would arise: Harpley Nominees Pty Ltd v Jeans [2006] NSWCA 176


Discussion of principles under which a court will construe the terms of a bank’s undertaking in a performance guarantee, and the contract between a contractor and an owner: Wood Hall Ltd v Pipeline Authority (1979) 141 CLR 443

New guarantee securing higher amount given to replace earlier guarantee – creditor permitting debt to continue – no new financial accomodation provided – whether guarantee unenforceable for want of consideration – meaning of “providing financial accomodation”: McKay & Anor v NAB [1998] 1 VR 173

Mortgagor in default – reliance on guarantee – alleged absence of consideration for guarantee: Australia Bank v Hayek [1999] NSWSC 607

Construction and effect of guarantee – handwritten information provided in guarantee: Electrical Pty Ltd v Hamlo (Australia) Pty Ltd [2001] QSC 179


Not available where common law indemnity available – discussion of principles – exoneration – contribution in equity not available: Official Trustee in Bankruptcy v Citibank [1995] 38 NSWLR 116

See also under “Equitable Jurisdiction” below

Equitable Jurisdiction

Guarantee and indemnity – equitable jurisdiction – contribution between co-sureties – defendants guaranteed company’s obligations to plaintiff – no dispute defendants liable in equal shares as co-guarantors to plaintiff – question was whether Court could adjust defendants’ respective liability – first defendant submitted Court was justified, on basis of second defendant’s conduct and other matters, to declare that second defendant should bear greater liability than him – held: Court not empowered by equitable principles to adjust monetary obligations between co-sureties in reflection of “one co-surety’s greater ‘culpability’ or ‘responsibility’” – even if Court could adjust the obligations, first defendant’s evidence provided no basis on which Court could make ‘logical or principled reallocation of liability’ – cross-claim dismissed: AMP Bank Limited v Brown and Kavanagh [2017] NSWSC 313


Form for signing by two guarantors – only one signs – whether he’s bound: Taubmans Pty Ltd v Loakes (1991) 2 QdR 109

Whether guarantee executed personally or in capacity of trustee: Re Interwest Hotels (1993) 12 ACSR 78

Disputed effect of execution provision – whether rectification necessary and available – whether principal debtor clause effective – whether need for demand before commencement of suit: Benson-Brown v Smith [1999] VSC 208

Construction and effect of contract for guarantee – form of guarantee signed by one director  – whether form to be signed by co-director – whether intention guarantors should be jointly and severally liable: Dimitrakipoulos v Farm Pride Foods Ltd [2000] QCA 80

Consequence of person named as co-surety not being shown to have executed guarantee: Gattellaro v Westpac Banking Corporation (2004) 204 ALR 258 (High Court)


Creditor sued two company directors claiming they were liable to pay sums pursuant to deed of guarantee and indemnity – first defendant contended he was not liable because signature on deed forged – Court not satisfied first defendant executed deed or authorised anyone else to do so in his name – plaintiff’s claim against first defendant failed: C.A.R.S. Pty Ltd v Brent [2015] TASSC 23


Enforcement of guarantee when company under administration – operation of s440J(1) of the Corporations Act: National Australia Bank Ltd v King [2003] NSWSC 525

Surety – rights against creditor – creditors duty to prevent security becoming worthless – delay in realising security: China & South Sea Bank v Tan [1989] 3 AER 839

Guarantee “under this lease” – lease in registrable form but not registered – whether obligation to pay under guarantee: Chan v Cresdon (1989) 168 CLR 242

Breach of contract – repudiation – termination – guarantee of performance by repudiating party – liability of guarantor for damages for breach: Womboin Pty Ltd v Savannah Island Trading Co Pty Ltd (1989-90) 19 NSWLR 364

Breach of contract – repudiation – termination – whether guarantors promised to pay a sum of money in the event of purchaser not completing the contract: Sunbird Plaza v Maloney (1988) 166 CLR 245.

Distinction between guarantee of obligation to pay damages and guarantee only to pay rent/instalments: Moschi v Lep Air Services [1973] AC 331

Enforceability of guarantees relating to unenforceable penalty clauses: Citicorp Australia v Hendry [1985] 4 NSWLR 1 

Unusual nature of principal transaction – whether knowledge of those matters conveyed to surety: Pooraka Holdings v Participation Noms [1992] 58 SASR 184

Whether person procuring guarantee acted as agent of creditor – whether conduct of that person attributable to creditor: Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180

Disclaimer by liquidator of obligations under lease – whether affected obligations of guarantor and indemnifier – meaning of “liabilities”: Sandtara Pty Ltd v Abigroup Ltd (1996) 131 FLR 393

Principal debtor procuring surety’s signature to guarantee – creditor’s liability for wrongful acts of principal debtor – agency and agents – notice – whether creditor owes surety a duty of care: H G & R Nominees Pty Ltd v Fava & Ors [1997] 2 VR 368

Guarantees – former adjudication  – judgment inter partesres judicata distinguished from issue estoppel and Anshun principle  – rights of surety: Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450

Commercial tenancies  – leases – repudiation and termination  – application for rent arrears and damages – plaintiff leased premises to first defendant under lease guaranteed by second defendant – whether guarantor liable: Glentham Pty Ltd v Luxer Holdings Pty Ltd [2006] WASC 132


How an implied indemnity arises: Birmingahm District & Land Co v Northwestern Railway (1886) 34 Ch 261

Indemnity clauses – scope of indemnity: Colliers Jardine Pty Ltd v Castle Mall Properties Pte Ltd [2005] NSWCA 311

Indemnity to be construed strictissimi juris in favour of the indemnifier where indemnity ambiguous: National Roads and Motorists’ Association v Whitlam [2007] NSWCA 81


Where guarantor deceived by fraudulent misrepresentations of co-guarantor – whether creditor precluded form enforcing against him: Challenge Bank v Pandya [1993] 60 SASR 330


Effect of – whether mistake destroyed apparent assent – discussion of circumstances in which mutual mistake will operate to allow a contract to be avoided – held that the guarantee was limited to what could objectively be discerned from the face of the document: Houlahan v ANZ (1992) 110 FLR 259


Co-guarantors – release – appeal from trial judge’s decision finding appellants liable pursuant to guarantees: James v Surf Road Nominees Pty Ltd [2004] NSWCA 475

Rights of guarantor against principal debtor

Rights of guarantor against principal debtor at law and in equity – the right to indemnity which the surety has against the principal debtor does not arise at law until the surety has discharged its debt – the surety’s equitable right to obtain relief from the indemnifying party, which arises as soon as the surety’s liability to the principal creditor arises, does not constitute a debt – therefore, there was no debt due by the respondent to the appellant and there would be none until the appellant discharged its debt: Abigroup Ltd v Abignano (1992) 39 FCR 74

Set Off

Whether guarantor can plead equitable set off in answer to action on guarantee – Whether in absence of principal debtor as a party guarantor may plead in answer to an action on guarantee an equitable set-off that debtor would have in an action on principal obligation: Elkhoury v Farrow Mortgage Services (1993) 114 ALR 541


Bank guarantee – loan facility granted by plaintiff and secured registered mortgage – all directors of second third party gave joint and several guarantee and indemnity – defendants directors of second third party: National Australia Bank Ltd v Petit-Breuilh [1999] VSC 368

Application to set aside guarantee on account of alleged unconscionable conduct arising from relationship of influence between brothers-in-law – guarantor mistaken about purport and effect of transaction – failure of bank to explain transaction – whether unconscionable for bank to enforce guarantee and mortgage: Kranz v National Australia Bank Ltd [2003] VSCA 92

Mortgage secured by guarantee from husband and wife – wife denied liability here two defences being unconscientious dealing and undue influence – wife failed to make out defences on facts: National Australia Bank Ltd v Wehbeh [2014] VSC 431

Garcia unconscionability – whether wife signed guarantee – whether lenders were aware that the guarantor was the wife – whether wife was a volunteer – where wife received benefits through the company whose debts she has guaranteed – where company the vehicle through which the husband and wife jointly pursued profit – Amtel Pty Ltd v Ah Chee [2015] WASC 341