Guthrie v Herbert

The High Court of Australia heard an appeal in *Guthrie v Herbert*. The dispute concerned the interpretation of a clause within a deed of settlement, specifically whether it imposed a personal obligation on the respondent, Mr. Herbert, to pay a sum of money to the appellant, Mr. Guthrie, or if it merely created a charge over certain property.

The central legal issue before the Court was whether the wording of the settlement deed created a personal covenant by Mr. Herbert to pay the sum of £10,000, or if it merely established a charge over the shares in a company, with payment contingent on the sale of those shares. The Court was required to determine the true nature of the obligation undertaken by Mr. Herbert under the deed.

The High Court, in allowing the appeal, reasoned that the language of the deed, particularly the phrase "shall pay," indicated a clear intention to create a personal covenant. The Court distinguished between a covenant to pay and a charge, noting that while a charge might be created over property, the deed's wording imposed a direct and personal obligation on Mr. Herbert to make the payment. The principles of contractual interpretation favoured giving effect to the plain meaning of the words used, which in this instance pointed to a personal undertaking. The Court found that the subsequent provisions regarding the shares did not detract from the primary personal obligation to pay.

Consequently, the High Court ordered that Mr. Herbert was personally liable to pay the sum of £10,000 to Mr. Guthrie.