King v Stewart

In *King v Stewart and Ors* [1994] NSWCA 164, the New South Wales Court of Appeal considered a dispute concerning the enforceability of a guarantee. The appellant, Mr. King, sought to enforce a guarantee provided by the respondents in favour of a company, of which Mr. King was a director. The respondents argued that the guarantee was invalid due to a lack of consideration and that they had been induced to enter into it by misleading and deceptive conduct.

The Court of Appeal was required to determine whether there was sufficient consideration to support the guarantee, and whether the respondents had been victims of misleading or deceptive conduct in contravention of the then-applicable Trade Practices Act 1974 (Cth) and the Contracts Review Act 1980 (NSW). Specifically, the court had to assess whether the respondents' understanding of the guarantee's effect, and the circumstances under which it was signed, vitiated its enforceability.

The Court found that there was valid consideration for the guarantee, as the company had provided financial accommodation to a related entity in reliance on the guarantee being in place. Regarding the claims of misleading and deceptive conduct, the Court analysed the evidence presented by the respondents concerning representations made to them about the nature and extent of their liability. The Court ultimately concluded that while some representations may have been inaccurate, they did not amount to misleading or deceptive conduct that would render the guarantee unenforceable, nor did they establish grounds for relief under the Contracts Review Act.

The appeal was allowed, and the orders of the primary judge were set aside. The Court of Appeal ordered that the respondents were liable under the guarantee.