HARLOW & HATHAWAY

Harlow & Hathaway (the plaintiffs) brought proceedings against the defendant, seeking to enforce a guarantee. The dispute concerned whether the defendant was liable under a guarantee for debts owed by a company to the plaintiffs. The matter came before Kemp J in the Supreme Court of New South Wales.

The central legal issue before the court was whether the defendant's liability under the guarantee had been discharged by the plaintiffs' conduct. Specifically, the court had to determine if the plaintiffs had, through their actions or omissions, released the defendant from their obligations under the guarantee. This involved considering whether the plaintiffs had acted in a way that prejudiced the defendant's position as a guarantor.

Kemp J reasoned that for a guarantor's liability to be discharged by the creditor's conduct, that conduct must amount to a breach of a duty owed to the guarantor. In this instance, the court found that the plaintiffs had not breached any duty owed to the defendant. The actions complained of by the defendant were found not to have prejudiced the defendant in a manner that would legally discharge their guarantee obligations. The principles applied centred on the established legal framework for the discharge of guarantees, requiring a material prejudice arising from a breach of duty by the creditor.

The court ultimately found in favour of the plaintiffs, ordering that the defendant was liable under the guarantee.