Arab Bank of Australia Ltd v Jeitani

Arab Bank of Australia Limited (the Bank) sought a declaration that it owed no duty to a guarantor, the respondent, to enforce certain gross-up clauses in the sale contracts of properties sold after the mortgagor went into default. The Bank was the mortgagee of certain properties, the mortgagor (Mr Jeitani) had defaulted on the mortgage, and the Bank had sold the properties. The gross-up clauses in the sale contracts required the Bank to pay the GST on the sales proceeds. The Bank did not pay the GST. The Bank argued that it was not required to pay the GST as the gross-up clauses should not be enforced. The Bank also argued that it owed no duty to the guarantor in relation to the gross-up clauses. The guarantor argued that it had suffered a loss by the Bank’s failure to enforce the gross-up clauses and that the Bank owed a duty to the guarantor to enforce the clauses.

The court held that the Bank was not required to pay the GST on the sale of the properties. The court held that the gross-up clauses should not be enforced because the Bank was not a party to the sale contracts, and the clauses were not incorporated into the mortgage. The court held that the Bank owed no duty to the guarantor in relation to the gross-up clauses. The court held that the guarantor had not suffered any loss as a result of the Bank’s failure to enforce the gross-up clauses because the guarantor had not been called upon to pay any amount under the guarantee. The court held that the Bank’s refusal to discharge the mortgage was not unreasonable, and the mortgagor was not required to tender the amount owing to the Bank in the face of the refusal to discharge.