James v Surf Road Nominees Pty Ltd

The appeal in *James v Surf Road Nominees Pty Ltd* concerned a dispute arising from a joint and several guarantee. The appellants, who were co-guarantors, sought to set aside a judgment obtained against them by the respondent, Surf Road Nominees Pty Ltd, the creditor. The core of the dispute revolved around the effect of a subsequent agreement between the respondent and one of the co-guarantors.

The Court of Appeal was required to determine whether a subsequent agreement between the respondent and one co-guarantor constituted a release of that co-guarantor, which would, in turn, discharge the other co-guarantors from their obligations under the joint and several guarantee. Additionally, the court had to consider whether the respondent had an express or implied obligation to maintain the security provided, and if so, whether a failure to do so would release the guarantors. The court also had to assess whether the trial judge erred in his assessment of the evidence of value, specifically concerning a series of inter partes transactions.

The Court of Appeal held that the subsequent agreement between the respondent and one co-guarantor was a covenant not to sue, rather than a release, and therefore did not discharge the other co-guarantors. Regarding the security, the court found that while there was an obligation to maintain it, the failure to do so did not affect the nature of the obligation guaranteed, and thus did not release the guarantors. The court also determined that the trial judge had erred in failing to accept the series of inter partes transactions as evidence of value. The court further noted that the trial judge's adoption of one party's submissions without independent reasoning was inadequate.

The Court of Appeal ordered that the parties bring in agreed Short Minutes of Order reflecting these reasons by 4 February 2005, with liberty to apply if agreement could not be reached. The respondents were ordered to pay 90% of the second appellant's costs of the appeal and were granted a certificate under the Suitors Fund Act 1951 (NSW) if entitled.