Jetobee Pty Ltd (in liquidation) v Smith & Young Pty Ltd (No 3)

Jetobee Pty Ltd, in liquidation, sued Smith & Young Pty Ltd, a separate entity, over a debt that the latter had guaranteed. The dispute centred on whether the director of Smith & Young Pty Ltd, who was also a director of Jetobee Pty Ltd, had entered into an agreement before the liquidator's appointment for Jetobee Pty Ltd to assume the principal debt of Smith & Young Pty Ltd. The matter was heard in the Supreme Court of New South Wales.

The court had to decide whether there was an enforceable agreement that obligated Smith & Young Pty Ltd to pay Jetobee Pty Ltd’s principal debt. This required examining the evidence to determine if such an agreement existed and was binding on Smith & Young Pty Ltd before Jetobee Pty Ltd's liquidation. Additionally, the court needed to consider the legal effect of the director's dual roles and whether the payment made by Jetobee Pty Ltd under the guarantee was valid and enforceable.

In its decision, the court found that there was no evidence of an agreement obligating Smith & Young Pty Ltd to pay Jetobee Pty Ltd’s principal debt prior to the liquidator's appointment. The court held that the director's dual capacity did not create a binding agreement. Therefore, Jetobee Pty Ltd's payment under the guarantee was not valid and enforceable against Smith & Young Pty Ltd. The court concluded that Jetobee Pty Ltd could not recover the amount paid out under the guarantee.

The court ordered that Jetobee Pty Ltd was not entitled to recover the amount paid under the guarantee from Smith & Young Pty Ltd. The court also noted that the liquidator could not enforce the alleged agreement as it was not established to exist prior to the appointment of the liquidator.