Kimberley Securities v Esber [2008] NSWCA 301

This appeal court case involved a loan of $2.7 million. No interest was to be charged, instead there was a fee payable by the borrower of $2 million. Mortgages were given by two guarantors. However, the guarantees were limited to the $2.7 million (and did not extend to the $2 million fee).

The two guarantors also gave mortgages. However, due to negligent drafting, the mortgages secured monies owing under the guarantee and the loan (including the $2 million fee).

Neither party sought rectification of the documents (which they probably should have) and instead the argument revolved around what interpretation should be given to the documents. As the documents did not make any clear sense, this task was convoluted and arguable either way leading to this appeal.

The trial judge found in favour of the guarantors as did the appeal court. No satisfactory principle of law arises from case as the judges were being asked to do something impossible (interpret ambiguous documents). The lesson is to use experienced solicitors when drafting documents so that unnecessary legal expenses are not incurred.

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