Canon Australia Pty Ltd v Patton

Canon Australia Pty Ltd appealed to the New South Wales Court of Appeal against a decision of the primary judge which had dismissed its claim against Mr and Mrs Patton for moneys owing under a guarantee. The dispute concerned whether Canon had engaged in unconscionable conduct in its dealings with the Pattons, thereby vitiating the guarantee.

The Court of Appeal was required to determine whether Canon's conduct in failing to supply goods to the trading company, of which Mr and Mrs Patton were directors and guarantors, when the company had outstanding debts, constituted unconscionable conduct under the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)). Specifically, the court considered whether this failure to supply, in the context of the company's financial difficulties and the Pattons' personal guarantees, amounted to conduct that was against good conscience.

The Court of Appeal found that the primary judge had erred in concluding that Canon's conduct was unconscionable. The court reasoned that the failure to supply goods was a commercial decision made by Canon in response to the company's existing indebtedness and was not indicative of unconscionable conduct. The court applied principles of commercial dealings, noting that a creditor is generally entitled to protect its interests when a debtor is in default. The court held that the Pattons had voluntarily entered into the guarantee and that Canon's actions did not amount to exploitation of any special disadvantage.

Consequently, the Court of Appeal allowed the appeal, set aside the orders of the primary judge, and entered judgment for Canon Australia Pty Ltd against the First and Second Respondents (Mr and Mrs Patton) for the sum of $175,869.48, plus interest. The Pattons were also ordered to pay Canon's costs of both the appeal and the trial.