All the security properties were sold but that still left a shortfall of $3.1 million. The bank sued the guarantors, and one of them filed a cross-claim alleging that the bank sold the property at undervalue in breach of s420A of the Corporations Act. The bank argued it owed no duty to a guarantor, the judge agreed:
There is nothing in s 420A, or elsewhere in the Corporations Act, which indicates that it was enacted for the protection of guarantors who incur obligations by reference to the obligations of the corporation.
The remaining grounds of the cross-claim were arguable but were equitable in nature and so equitable relief needed to be sought. Unfortunately the cross-claim sought common law damages and statutory damages for their breach. Accordingly the judge ordered the whole defence to be re-pleaded.