Adisan Pty Ltd v Irwin

Adisan Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against a decision of the primary judge concerning a guarantee and indemnity. The dispute arose from a deed of variation presented to the guarantors (the respondents) to extend an existing guarantee to cover a "new loan contract". The terms of this new loan contract included an agreement to cap the liability of a co-guarantor, which was not disclosed to the respondents when they were asked to execute the deed of variation.

The Court of Appeal was required to determine two primary legal issues. Firstly, whether the deed of variation was effective to extend the guarantee to cover the borrower's liability under the new loan contract, specifically in light of the undisclosed capping arrangement for the co-guarantor. Secondly, the Court considered whether the presentation of the deed of variation without disclosing the capping agreement constituted misleading or deceptive conduct under section 87 of the *Trade Practices Act 1974* (Cth) (now the *Australian Consumer Law*), and if so, whether the guarantors suffered or were likely to suffer loss or damage as a result.

The Court of Appeal dismissed the appeal, upholding the primary judge's findings. The Court reasoned that the failure to disclose the capping arrangement to the co-guarantor was a material omission. This omission rendered the presentation of the deed of variation misleading and deceptive conduct, as it created an inaccurate impression of the extent of the guarantors' potential liability. The Court applied principles of contract interpretation and consumer protection law, finding that the undisclosed capping arrangement fundamentally altered the nature of the guarantee as presented to the respondents. Consequently, the deed of variation was not effective to extend the guarantee to the new loan contract in the manner intended by the appellant, and the conduct was found to be misleading.

The Court of Appeal ordered that the appeal be dismissed, set aside an order made on 1 August 2014, and ordered the appellant to pay the respondent’s costs of the appeal.