Elders Limited and Ors v Swinbank and Ors a11/2000

Elders Limited and Ors (appellants) appealed to the Full Court of the Federal Court of Australia against a decision of a single judge. The dispute concerned the interpretation and enforceability of a guarantee given by the respondents (Swinbank and Ors) in favour of Elders Limited. The guarantee related to the indebtedness of a company, Elders Rural Finance Pty Ltd, to Elders Limited.

The primary legal issue before the Full Court was whether the guarantee, which was expressed to be a continuing guarantee, was discharged by a fundamental breach of contract by Elders Limited. Specifically, the court had to determine if Elders Limited's conduct in continuing to lend money to Elders Rural Finance Pty Ltd after becoming aware of its financial difficulties constituted a breach of an implied term of the guarantee, thereby releasing the guarantors from their obligations.

The Full Court, comprising Hayne and Callinan JJ, held that the guarantee was not discharged. Their Honours reasoned that the terms of the guarantee itself contemplated that Elders Limited would continue to lend money to Elders Rural Finance Pty Ltd and that the guarantee was intended to cover the ongoing indebtedness of the company. There was no express or implied term that prohibited Elders Limited from continuing to advance funds to the company, even if it was aware of its financial difficulties. The court applied the principle that a guarantor's liability under a continuing guarantee will not be discharged by the creditor's actions unless those actions are contrary to the express terms of the guarantee or amount to a fraud or misrepresentation by the creditor.

The appeal was allowed, and the decision of the single judge was set aside. The Full Court ordered that the respondents were liable under the guarantee.