Suncorp v Wharington [2013] QSC 201

The borrowers guaranteed a chattel mortgage over their company’s two vessels. The company defaulted and the lender compromised the amount owed to it by a little less than half the full amount, most of which was paid to the lender bar 6%. The lender served default notice on the guarantor and claimed the full amount due under the facility. The purchaser of the vessel paid the remaining amount due under the deed together with interest and costs and a further settlement deed was entered into to this effect, with the guarantors agreeing that the release of the lender’s security did not affect their liabilities. The purchaser then claimed the full amount owing from the guarantor. The guarantor denied liability on the basis that payment by the purchaser albeit late released the guarantor pursuant to the first settlement deed.

The court made the following findings:

  1. It was arguable that time was not of the essence for the final payment under the settlement deed, since it was of subsidiary importance. The court expressed no final view because this was not the basis of the lender’s case;
  2. Under the first settlement deed, payment had to be made by (or on behalf of) the company, or the guarantors. Although the lender entered into a settlement deed with the purchaser in respect of its payment, that payment was credited to the amount owing under the loan.
  3. The second settlement deed merely acknowledged that release of the security did not affect the guarantors’ liabilities and did not preclude an argument that payment by the purchaser reduced the debt owed to the lender.

The court dismissed the lender’s application for summary judgment.

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