A borrower was lent money on the security of a mortgage and “all moneys” guarantees. The loan was refinanced but the guarantees continued for any future lending. The lender’s rights under the guarantees were transferred to BOQ and before BOQ lent money to the borrower to refinance its existing facilities, the borrower and BOQ entered into a deed of consent in which they agreed that the guarantees continued as security for repayment of the BOQ loans. The borrower defaulted and the bank appointed a receiver and sold the properties and demanded payment under the guarantees to cover the shortfall. The borrowers sued the bank seeking a declaration that it was not entitled to any payment under the guarantees on two bases:
- The guarantees did not secure the BOQ loans; and
- BOQ breached its duties in appointing a receiver and selling the mortgaged properties.
BOQ cross-claimed for the balance owed.
The court found that the terms of the guarantees, as modified by the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) operated to secure money owed by the borrower to BOQ. Even if they did not secure the BOQ loans, the borrower would be estopped from denying this on the basis of its dealings with BOQ in relation to the loans. Furthermore, the guarantees require payment of the amount owed without set off. The claimed breached of duty are irrelevant. The court dismissed the borrower’s claim and ordered them to pay the balance of the loans to BOQ.