NAB v Hunter [2013] NSWSC 1642

A husband and wife guaranteed company loans, secured by an earlier all monies mortgage over their home. The bank sought possession and a money judgment against the wife. The wife cross-claimed that the two guarantees she signed were void because had she known that the mortgage was an “all monies” mortgage and had the bank complied with the Code of Banking Practice which formed part of the guarantees and supplied her with security documents a day prior to executing the guarantees, she would not have provided any of the guarantees. The husband is a bankrupt and did not appear in the proceedings.

The circumstances of the wife’s execution of two guarantees were in dispute. The wife obtained independent legal advice on a previous guarantee but not the later two guarantees which replaced the previous less than 2 years prior. The court believed the bank and found that the bank officer had explained the nature and effect of the later first guarantee and only asked the wife to sign once he had decided that her solicitor’s advice on the previous guarantee was sufficiently recent to not require another certificate of independent legal advice from a solicitor. The court also noted that the earlier independent advice would have been a recent reminder that the mortgage could secure any later obligations.

The court found that the wife was aware of the mortgage at the time she signed both the first and second guarantees. Further, the court found that even if the wife had been given the security documents the day before the signing each guarantee as the Code required, which had not occurred, she would still have signed them.

The court did not find the Code provisions described as principles of conduct in the guarantees to be conditions precedent to the contracts and further found that their breach did not render the guarantees unenforceable. In any case, the court found that the wife waived compliance and the breach, because as a lawyer herself she could have asked for another day to consider the documents but proceeded nevertheless. Interestingly the court noted that the position may well be different in other circumstances and for a person not as well legally qualified as the wife. However in any case, the court found no damage because the wife would have proceeded in any event.

The court granted possession to the lender.

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