Tagged: guarantees

Guarantees and the Code of Banking Practice – compliance with the Banking Code required to enforce a guarantee

Case Note by Kieran Hickie and Andrew Kirby. The recent decision of the Supreme Court of Victoria in National Australia Bank Ltd v Rice [2015] VSC 10 highlights that care and attention must be taken by banks and lenders to ensure compliance with the Banking Code is taken in order for guarantors to understand their rights and liabilities under a guarantee. Non-compliance with the requirements of the Banking Code can result in guarantees not being enforceable.

High Court finds settlement between one co-surety and lender does not affect other co-surety’s right to claim contribution in equity where contribution disproportionate

The decision of the High Court of Australia confirms and explains the application of the equitable doctrine of contribution between co-sureties. It provides a helpful summary of the law in respect of co-ordinate liabilities and the nature of covenants not to sue, all of which should be kept in mind by co-sureties when settling recovery proceedings brought against them by a lender.

Guarantors as ‘privies’ of a principal debtor – can they be bound by a decision of a Court in circumstances where they are not a party to litigation?

Co-authored by Andrew Kirby and Kieran Hickie: Guarantors commonly have some association or relationship with a principal debtor. If proceedings are taken against a principal debtor, but not a guarantor, resulting in a binding judgment, the Victorian Supreme Court has recently held that in subsequent proceedings against a guarantor, the guarantor is not a ‘privy’ of the principal debtor and therefore is not bound by the determination of issues in the earlier proceeding.