Canty v PaperlinX [2014] NSWCA 309 (5 September 2014)

A husband and wife guaranteed the debts of their company to a supplier and the supplier sued on the guarantees. The court found in favour of the supplier and the husband and wife appealed. One basis of their appeal was that the wife should be released from the guarantee as it was unjust under the Contracts Review Act because:

  1. the wife did not get independent legal advice;

  2. the wife did not get financial advice; and

  3. the wife was unaware of the history of financial difficulties the company had in paying the supplier.

The wife’s appeal was not that she did not understand the nature of a guarantee.

The Court found that “she must take responsibility for her own actions” because:

  1. the wife had a history of acting on request for her husband as she trusted his business judgment;

  2. she was not denied the opportunity to seek advice, she simply did not see the need;

  3. she was not under some special disability such as lack of education or intelligence, gullibility, or exploitation by her husband;

  4. she had a material interest in the business and therefore derived a benefit;

  5. she willingly signed the guarantee at the request of her husband, as was her usual practice and chose not to enquire into the circumstances in which the guarantee was required.

The court took account of the fact that the Guarantee itself contained a prominent statement on the front and execution page inviting guarantors to seek independent legal advice prior to execution and also contained an acknowledgement that she had the opportunity to seek independent legal advice as to the nature and effect of the guarantee.

The court said:

It does not follow from the absence of independent legal or financial advice that the primary judge should have made a finding of unfairness. Whether or not independent or other expert advice was obtained is simply one factor to be taken into account.

The appeal was dismissed.

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