The bank sued the two guarantors for $5 million when the borrower failed to repay. The guarantors claimed that the bank breached its oral agreement to provide further funding in excess of the facility limit as required and sued for breach of contract and misleading and deceptive conduct.
The court found no collateral oral agreement of such a term and said that the statements made were general and imprecise and not supported by the documentation. The court found that any statements made by the bank as to increased funding did not go so far as to convey that it was automatic but rather subject to an application being made and approved and were therefore true in the circumstances, where application was made but rejected.
In any case, the court found no reliance because the guarantors knew that an employee’s authority to approve credit was limited and they understood the facility limit to be legally binding. The court said that the mere fact that representations as to future funding do not come to pass does not make them misleading or deceptive. The judge concluded:
The agreement sets out the terms and there is no reference at all to the borrower being permitted to increase or reduce the facility. The limits are clearly and unambiguously stated. There was no provision for a reversion to the previous limit, whether in relation to the construction facility or otherwise. Given that the varied facilities were documented and signed by all the parties, they are bound by the specific terms of the document executed by them. There is no claim for rectification and it is not asserted that the variation arose out of duress, undue influence or was otherwise unconscionable. Further, the evidence does not support any collateral oral agreement to such a term.
The guarantors failed in their claim, the court gave judgment for the bank.