McKinnon & Anor v Commonwealth Bank of Australia

In *McKinnon & Anor v Commonwealth Bank of Australia*, the High Court of Australia considered a dispute between the McKinnons and the Commonwealth Bank of Australia concerning the enforceability of a guarantee. The McKinnons had guaranteed the debts of a company, and the Bank sought to enforce this guarantee.

The central legal issue before the High Court was whether the Bank had breached its duty of care to the McKinnons by failing to advise them of the company's precarious financial position before they executed the guarantee. Specifically, the court had to determine if the Bank owed a duty to warn its customers, who were also guarantors, about the risks associated with the guarantee, particularly in circumstances where the Bank was aware of the company's deteriorating financial health.

The High Court held that the Bank did not owe a duty to warn the McKinnons of the company's financial position. Their Honours reasoned that the relationship between a bank and a customer, even where the customer is a guarantor, does not ordinarily give rise to a duty to provide financial advice or to warn about the risks of a transaction. The court emphasised that the McKinnons were sophisticated parties who had received independent legal advice. The Bank's role was to lend money and take security, not to act as a financial advisor to its borrowers or their guarantors. The principles of contract law and the nature of a guarantee were paramount, and there was no basis to impose a duty of care that would extend to advising on the wisdom of entering into the guarantee.

The appeal was dismissed.