The lender advanced funds to develop a hotel in World Square. The loan went bad and the guarantor was sued. The guarantor lodged a defence claiming that the interest only period was two years (not six months) and therefore the loan was not in default.
The Judge disbelieved the guarantor because:
- The guarantor took no issue with the six month interest only period until the proceedings were commenced three years later;
- The documentary evidence (such as letters between the parties negotiating the loan) did not support the conversations the guarantor alleged took place;
- The borrower never took issue with the six month interest only period.