Willis & Bowring v Ziade Investments [2005] NSWSC 952

In this case, the borrower denied he and his wife were liable under their guarantees because:

(a) The lender’s employees represented the lender would fund 100% of the costs needed to acquire the land and complete construction so long as the total amount lent did not exceed 2/3 of the gross value of the completed development;

The court found that any representations the borrower believed were made to him over lunch and a site visit from the lenders employees were no more than a statement of intention, it was not a commitment to lend an unspecified sum of money on the terms claimed.

(b) The loan agreement was void for uncertainty;

The court found the loan agreement was not void for uncertainty. The uncertain aspects of the contract were able to be corrected by supplying, omitting or correcting words to avoid inconsistency or an absurd interpretation. Errors in the contract included typographical errors and a reference to an incorrect clause of the agreement when it was clear what section was supposed to have been referred. The court noted the fact a document had not been dated when it was signed did not amount to an inconsistency.

(c) The lenders failure to make a progress payment amounted to a breach of the loan agreement by the lender meaning the guarantees were discharged.

The court found that for a breach of loan to discharge a surety, the breach must be a fundamental breach or repudiation of the loan, which authorised the borrower to terminate the contract. Mr and Mrs Ziade failed to establish the lender had breached its contract by not paying the progress claim.

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