Antonio and Filippa Modderno v Australian and New Zealand Banking Group Limited

Antonio and Filippa Modderno (the guarantors) appealed to the New South Wales Court of Appeal against a decision of the Supreme Court of New South Wales which had dismissed their claim against the Australian and New Zealand Banking Group Limited (the bank). The dispute concerned the bank's conduct in relation to a loan facility provided to a company, Modderno Pty Ltd, for which the guarantors had provided personal guarantees. The guarantors alleged that the bank's actions had led to the company's default and, consequently, their liability under the guarantees.

The central legal issues before the Court of Appeal were whether the bank had breached its contractual obligations to the guarantors, thereby discharging them from their liability under the guarantees, and whether the bank owed a duty of care to the guarantors in its dealings with the principal debtor. The guarantors contended that the bank's conduct, including its alleged failure to properly manage the loan facility and its dealings with the company, amounted to a breach of contract and a breach of a duty of care.

The Court of Appeal, comprising Handley and Stein JJA and Fitzgerald AJA, found that the terms of the guarantees did not impose any contractual obligations on the bank towards the guarantors beyond those expressly stated. The court held that the bank was entitled to act in its own interests and was not obliged to protect the guarantors' interests or to ensure the success of the principal debtor's business. Furthermore, the court determined that, in the absence of specific circumstances giving rise to such a duty, a bank does not owe a duty of care to a guarantor in its dealings with the principal debtor. The appeal was accordingly dismissed.