AMP Bank Limited v Brown and Kavanagh

In the matter of AMP Bank Limited versus Brown and Kavanagh, the dispute centred on the rights of sureties in the context of a guarantee and indemnity arrangement. The Federal Court was tasked with determining the enforceability of a guarantee provided by Brown and Kavanagh, who were co-sureties for a loan made by AMP Bank to a third party. The central legal issues were whether the co-sureties had the right to seek contribution from one another, and if so, whether the court had the authority to adjust the contribution based on the respective culpability or responsibility of each surety for the debt.

The court considered whether the equitable principle of contribution, which allows one surety to seek contribution from co-sureties, could be adjusted to reflect the varying degrees of responsibility each party had for the debt. The court noted that while the general rule is that co-sureties are jointly and severally liable, this does not automatically confer a right to seek contribution. Additionally, the court held that there is no general equitable jurisdiction to adjust the rights of contribution based on culpability. The court found that such an adjustment would interfere with the contractual arrangement between the parties and the established principles of suretyship law.

In conclusion, the court determined that while co-sureties have the right to seek contribution from one another, this right is not subject to adjustment based on culpability. The court dismissed the application for an adjustment of contribution rights and held that the co-sureties were to be treated equally in their liability. The court's decision emphasised the importance of contractual clarity and the limited role of the court in altering the terms of a suretyship agreement.