Ausn Securities & Investment Com v DB Management- Southcorp Wines v DB Management

The dispute before the High Court of Australia concerned the interpretation of a guarantee provided by Ausn Securities & Investment Co Pty Ltd (Ausn) and Southcorp Wines Pty Ltd (Southcorp) in favour of DB Management Pty Ltd (DB Management). Ausn and Southcorp had each entered into separate agreements with DB Management, and as part of those agreements, they provided guarantees in respect of the obligations of a third party, A.C.N. 007 540 017 Pty Ltd (in liquidation) (ACN). The core of the dispute revolved around whether the guarantees extended to liabilities that arose after the date of the guarantees.

The High Court was required to determine whether the guarantees, which were expressed to be continuing guarantees, covered liabilities incurred by ACN after the date on which the guarantees were executed. Specifically, the court had to consider the proper construction of the guarantee clauses in light of the surrounding circumstances and the language used by the parties to ascertain the intended scope of the guarantors' obligations.

Gummow and Hayne JJ held that the guarantees were intended to cover all liabilities of ACN to DB Management, whether present or future, that arose during the currency of the agreements. Their Honours reasoned that the language of the guarantees, particularly the use of the phrase "continuing guarantee" and the reference to "all moneys which now are or which hereafter may become owing or payable," indicated an intention to provide security for an ongoing relationship and future indebtedness. The court applied the principle that the construction of a guarantee is a matter of determining the intention of the parties as expressed in the document, read in its commercial context. The appeal was dismissed.