Dynamic Supplies v Gina Lorna Morrison [2005] NSWSC 1307

This matter involved a guarantee that the sole director of an IT company gave to a supplier to support its credit limit. The guarantee included a charging clause whereby the guarantor charged all interests that she had in any real property.

The supplier approved an increase in the IT company’s credit limit after receiving the signed guarantee by fax. The director said the fax was mistakenly sent by her receptionist, although she had signed the documents she intended to seek legal advice before faxing it back. The guarantee required punctual payments of all accounts whereas previously she had up to 30 days to pay. The relationship between the director and supplier continued for several more years.

When a bill remained outstanding after a letter of demand had been sent, the supplier put a caveat over the director’s property. The supplier then sought a declaration that it had a valid charge over the property and was entitled to lodge the caveat.

The director argued that she had faced a number of difficulties, including late notice of the proceedings, an inability to pay the suppliers costs if the matter was adjourned so she could properly prepare, that she saw the caveat as preventing refinance or sale of the property, and that the supplier had adopted an uncommercial approach in the circumstances. The judge noted the distinction between the matters which are relevant to the director’s practical perspective and what is relevant to the decisions the court must make:

Ms Morrison also, I think, understands that matters which may seem very relevant to her from a practical perspective are not necessarily relevant to the decisions which the Court must from a legal perspective

The court declared the land was subject to the equitable charge the director had given to the supplier and that the caveat was validly lodged.

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