A director failed to pay on his guarantee of his company’s debt and the bank sought possession of his property. The guarantor admitted the loan and guarantee but not either of the two variations, and claimed that he was thereby discharged from any liability and sought orders that the mortgage and guarantee be discharged. The guarantor also claimed that the bank had acted unconscionably to increase his potential liability without his consent.
The court found that the amended defence and cross claim were not doomed to fail because there was an arguable case that the bank was put on notice by the suspect signature on the first variation that the guarantor may not have been aware of the increase in the facility and the guarantee and there was an arguable case that the bank had acted unconscionably in relation to the second variation if there was a change in the guarantors after it was signed by the guarantor. The court granted leave for the defence and cross claim to be filed.