NAB v Cunningham [2014] NSWSC 1095

The bank initially sued for possession of the guarantors’ property. The guarantors argued that their liability was limited to less than that claimed and that their guarantee and mortgage was void because the bank had breached its obligation to act in good faith. They also argued that the receivers appointed by the bank had breached their duty of care in selling the mortgaged properties and that the bank was liable for their breaches. They also argued that they were released from their guarantee because the bank had released their co-guarantors. The guarantors then agreed to pay what was owed under their guarantee into court in return for a discharge of their mortgage and the sale of the property so that they could bring their claim against the bank. The bank discontinued its possession proceedings and the guarantors claimed against the receivers instead of the bank and this claim was dismissed. The bank then sought to have the monies paid into court paid to it.

The court noted that as things turned out, proceedings were not commenced against the bank, but the receivers. However in these proceedings it was expressly acknowledged by the parties that the funds paid into court covered the bank’s liability for the receiver’s costs and so the court ordered payment to the bank on this basis.

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