BankWest v Hodgkinson [2011] NSWSC 96

This case concerned the bank’s claim against a guarantor Mr Justin John Brown. Mr Brown claimed he was removed as guarantor in respect of a facility to a business associate, Mr Lance Vincent Hodgkinson, for a commercial development. Mr Brown argued that the bank’s spoken words as to his removal as guarantor constituted misleading and deceptive conduct sufficient to raise an estoppel. The bank argued that Mr Brown is precluded from raising any cross-claim until he first pays the debt owing under the terms of the guarantee due to a clause in the guarantee which contractually obliges him not to make any cross claim or set off until the debt is paid.

The court found for the bank and held it to be a question of construction of the terms of the guarantee which clearly provide for the waiver of any right of counter-claim as a defence to payment under the guarantee. The court also noted the difficulty of relying upon spoken words to found a misleading and deceptive conduct claim, in the absence of contemporaneous records or corroboration, because they must be proved with sufficient precision, taking into account the nuances from the use of particular words and the fallibility of human memory which increases with time. The court rejected My Brown’s evidence.

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