Starrs v CBA [2013] SASCFC 94

The bank lent to a company and the husband and wife provided guaranteed secured by a mortgage over their property. The mortgage was not registered until two years after the facility was made. The loan went into default. The guarantors argued that their guarantees were not effective and their liability never arose because of the bank’s failure to register the mortgage at the time the facility was first made. The court gave judgment for the lender and the husband and wife appealed.

The Court of Appeal found the guarantees effective. The court noted that the issue was one of construction. The court found that the clause in the guarantees which expressly provided that their liabilities were not affected by any failure on the part of the bank to register any security or to effectively secure any other guarantee applied to the mortgage. The failure of the bank to register the mortgage did not excuse the guarantors from their obligations under their respective guarantees. On a proper construction, the terms of the guarantees themselves gave the bank the option to register the mortgage but did not impose an obligation to do so. Even if it had, the failure to register it means no more than a breach of that term. A breach of a term of contract does not annihilate the contract.

The appeal was dismissed.

Click here to read the full judgment

Scroll to Top