Ankar Pty Ltd v National Westminster Finance (Australia) Ltd

Ankar Pty Ltd (Ankar) and National Westminster Finance (Australia) Ltd (Natwest) were the parties involved in this matter before the High Court of Australia. The dispute concerned the enforceability of a guarantee provided by Ankar in favour of Natwest, which secured a loan made by Natwest to a third party, A.V. Projects Pty Ltd. Ankar sought to avoid liability under the guarantee, alleging that Natwest had breached its duty of care to Ankar by failing to take reasonable steps to protect Ankar's interests as a surety.

The central legal issue before the High Court was whether a creditor owes a duty of care to a surety to take reasonable steps to protect the surety's interests, particularly in circumstances where the creditor has knowledge of the surety's potential exposure and the principal debtor's financial difficulties. This question required the Court to consider the nature and scope of the duty of care owed by a creditor to a guarantor under Australian law, and whether such a duty extended beyond the contractual obligations between the parties.

The High Court, by majority, held that a creditor does not owe a general duty of care to a surety to take reasonable steps to protect the surety's interests. The Court reasoned that the relationship between a creditor and a surety is primarily governed by contract, and the surety's liability arises from their voluntary undertaking. While a creditor must not mislead or deceive a surety, or conceal material facts that would induce the surety to enter into the guarantee, the law does not impose a positive duty on the creditor to act in the surety's best interests or to take steps to mitigate the surety's potential loss. The Court distinguished this situation from cases where a fiduciary relationship exists or where specific statutory duties are imposed.

The appeal was dismissed, and the orders of the Supreme Court of New South Wales were affirmed.