Davridge Pty Limited v Commonwealth Bank of Australia

Davridge Pty Limited (the appellant) appealed to the New South Wales Court of Appeal against a decision of the Supreme Court of New South Wales. The dispute concerned the appellant's liability to the Commonwealth Bank of Australia (the respondent) under a guarantee.

The primary legal issue before the Court of Appeal was whether the respondent had acted in a manner that discharged the appellant from its obligations under the guarantee. Specifically, the appellant argued that the respondent's conduct in relation to the principal debtor's affairs, including the release of certain securities, had prejudiced the appellant and therefore released it from its liability as guarantor.

The Court of Appeal, applying established principles of guarantee law, found that the respondent's actions did not amount to a material alteration of the contract or a release of securities that would prejudice the guarantor. The Court held that the respondent was entitled to deal with the principal debtor and its assets in the manner it did, and that the terms of the guarantee itself permitted such actions. The Court affirmed that for a guarantor to be discharged due to the creditor's conduct, there must be a substantial alteration to the contract or a release of security that materially prejudices the guarantor, which was not demonstrated in this instance.

The appeal was dismissed.