Buckeridge v Mercantile Credits Ltd

HIGH COURT OF AUSTRALIA

Gibbs C.J., Murphy, Aickin, Wilson and Brennan JJ.

BUCKERIDGE v. MERCANTILE CREDITS LIMITED

(1981) 147 CLR 654

25 November 1981

Guarantee

Guarantee—Surety—Discharge—Guarantee of loan to company secured by mortgage over land—Additional security of debenture charge—Default by principal debtor under both securities—Appointment of receiver and manager under debenture—No provision in mortgage for appointment of receiver and manager—Business then conducted at a loss—Further loans by principal creditor to receiver and manager—Later sale of land and business—Deficit of principal and interest—Liability of guarantors—Whether for whole of deficit including receiver and manager's losses, fees and borrowings—Whether guarantors entitled to complain against failure to pursue power of sale under mortgage.

Decisions

November 25.
The following written judgments were delivered: -
GIBBS C.J. I would dismiss this appeal. I am in general agreement with the reasons for judgment that had been prepared by my brother Aickin and by my brother Brennan and could not usefully add anything to them. (at p660)

MURPHY J. I agree with Brennan J. The appeal should be dismissed. (at p660)

AICKIN J. This is an appeal from the Full Court of the Supreme Court of Western Australia which allowed an appeal by the present respondent from the decision of Lavan S.P.J. (at p661)

2. In September 1971, the respondent agreed to advance a sum not exceeding $300,000 at an interest rate of 13 1/2 per cent to Melbourne Hotel Pty. Ltd. ("Melbourne Hotel"). As primary security for the loan an instrument of mortgage of the hotel premises was executed on 23 September 1971 by Melbourne Hotel and it was duly registered. Pursuant to that instrument the freehold title to land belonging to Melbourne Hotel upon which a hotel business was conducted by it was mortgaged in the respondent's favour. (at p661)

3. The mortgage instrument contemplated that the principal sum was to be advanced by instalments over a two year period; Melbourne Hotel covenanted to pay the interest on the sums advanced by 24 monthly payments and thereafter to pay 23 equal monthly instalments of principal and interest with a final instalment of $271,887 which became due on 5 October 1975. (at p661)

4. As a further condition of the loan each of the present appellants was required to enter into a deed of guarantee under which they jointly and severally guaranteed the due and punctual payment by Melbourne Hotel of the principal sum advanced to it by the respondent and interest thereon. That guarantee which was also executed on 23 September 1971 contained the following recitals and provisions:

"NOW THIS GUARANTEE WITNESSETH that in consideration of the premises and in the performance of the said condition and in consideration of the Mortgagee at the request of the Guarantors making the said loan to the Mortgagor the Guarantors DO and each of them DOTH HEREBY JOINTLY AND SEVERALLY GUARANTEE to the Mortgagee the due and punctual payment by the Mortgagors of the said principal sum and interest in the manner in the said Mortgage provided AND IT…