Gujarat NRE India Pty Ltd v Wollongong Coal Limited

Gujarat NRE India Pty Ltd (Gujarat) and Wollongong Coal Limited (Wollongong) were the parties involved in this dispute before the High Court of Australia. The core of the disagreement concerned the interpretation of a deed of company arrangement (DOCA) and its effect on a guarantee provided by Gujarat in favour of Wollongong. Wollongong sought to enforce this guarantee, which Gujarat resisted on the basis that the DOCA had discharged its obligations.

The High Court was required to determine whether the DOCA, which provided for the orderly winding up of the company, operated to release Gujarat from its liability under the guarantee. Specifically, the Court had to consider the interplay between the terms of the DOCA and the general provisions of the *Corporations Act 2001* (Cth) relating to the effect of deeds of company arrangement. The central question was whether the DOCA's provisions for the discharge of debts and liabilities extended to releasing a third-party guarantor.

The High Court held that the DOCA did not release Gujarat from its obligations under the guarantee. Their Honours reasoned that a DOCA, while capable of releasing a company from its debts, does not automatically release a third-party guarantor unless the deed expressly provides for such a release. In this instance, the DOCA did not contain any language that could be construed as releasing Gujarat from its separate and independent obligation as guarantor. The Court applied the principle that guarantees are generally construed strictly and that a guarantor's liability is not discharged by the insolvency or restructuring of the principal debtor unless the terms of the guarantee or the relevant restructuring instrument clearly indicate an intention to do so.

The High Court therefore dismissed Gujarat's appeal, upholding the decision of the lower courts that Gujarat remained liable under the guarantee.