Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Lee v ATL (Australia) Pty Ltd [2023] NSWCA 327 Hearing dates: 9 November 2023 Date of orders: 21 December 2023 Decision date: 21 December 2023 Before: Meagher JA at [1]
Gleeson JA at [2]
Griffiths AJA at [109]Decision: (1) Appeal allowed.
(2) Orders (1) and (2) made by Fagan J on 6 April 2023 be set aside.
(3) In lieu thereof, order that:
(a) the plaintiff’s claim against the second defendant be dismissed; and
(b) the plaintiff to pay the second defendant’s costs of the proceedings below.
(4) The respondent to pay the appellant’s costs of the appeal.
Catchwords: GUARANTEE AND INDEMNITY — Scope of liability of guarantor — Construction — Where guaranteed loan agreement provided for interest accrual on drawdown — Where side letter agreed between borrower and lender provided for pre-drawdown interest — Where guarantor did not consent to side letter — Whether side letter altered borrower’s obligations under loan agreement pursuant to which funds were advanced
GUARANTEE AND INDEMNITY — Discharge of guarantor — Where draft principal contract altered between borrower and lender prior to contract of guarantee — Whether rule discharging guarantee where principal contract varied without guarantor’s consent applied — Rule in Holme v Brunskill (1877) 3 QBD 495
GUARANTEE AND INDEMNITY — Contract of guarantee — Construction — Whether guarantee obligation properly characterised as indemnity — Where guarantee expressed to be principal obligation
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited: Abby National Building Society v Cann [1991] 1 AC 56
ABM Amro Commercial Finance Plc v McGinn [2014] EWHC 1674 (Comm); [2014] 2 Lloyd’s Rep 333
Adisan Pty Ltd v Irwin [2015] NSWCA 217
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15
Associated British Ports v Ferryways NV [2009] EWCA Civ 189; [2009] 1 Lloyd’s Rep 595
ATL (Australia) Pty Ltd v Cui [2023] NSWSC 336
Bank of Adelaide v Lorden (1970) 127 CLR 185; [1970] HCA 59
Bank of New Zealand v Baker [1926] NZLR 462
Bridgestone Australia Ltd v GAH Engineering Pty Ltd [1997] 2 Qd R 145
Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152
Caltex Australia Petroleum Pty Ltd v Troost [2015] NSWCA 64
Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309
CIMC Raffles Offshore (Singapore) Ltd v Schahin Holding SA [2013] EWCA Civ 644; [2013] 2 Lloyd’s Rep 575
Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703
Corumo Holdings Pty Ltd v C Itoh Ltd; BNY Australia Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370
Egbert v National Crown Bank [1918] AC 903
Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53
Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235; [2008] Aust Contract R 90-274
Geelong Building Society (in liq) v Encel [1996] 1 VR 594
GPP Big Field LLP v Solar EPC Solutions SL [2018] EWHC…
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- Case
- [2023] NSWCA 327
- Decision Date
CaseChat Overview and Summary
The central legal issues before the Court of Appeal were whether a side letter, agreed between the borrower and the lender, constituted a variation of the principal loan agreement that altered the borrower's obligations in a way that discharged the guarantor. Specifically, the court had to determine if the side letter, which provided for pre-drawdown interest, altered the terms of the loan agreement under which funds were advanced, and if so, whether this variation released Mr. Lee from his guarantee obligations. The court also considered the application of the rule in *Holme v Brunskill* regarding the discharge of a guarantor where the principal contract is varied without their consent.
The Court of Appeal allowed the appeal, finding that the side letter did not alter the borrower's obligations under the loan agreement in a manner that would discharge the guarantor. The court reasoned that the side letter was a separate agreement that did not modify the terms of the loan agreement itself, but rather addressed a specific aspect of interest accrual. Consequently, the rule in *Holme v Brunskill* was not engaged in a way that would release Mr. Lee from his guarantee. The court set aside the orders made by the primary judge and dismissed the plaintiff's claim against the second defendant, ordering the plaintiff to pay the second defendant's costs of the proceedings below and the appellant's costs of the appeal.
Orders
Orders of the court
(1) Appeal allowed.
(2) Orders (1) and (2) made by Fagan J on 6 April 2023 be set aside.
(3) In lieu thereof, order that:
(a) the plaintiff’s claim against the second defendant be dismissed; and
(b) the plaintiff to pay the second defendant’s costs of the proceedings below.
(4) The respondent to pay the appellant’s costs of the appeal.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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