Ostabridge Pty. Ltd. (In Liquidation)(Receiver & Manager Appointed) v Stafford

Ostabridge Pty. Ltd. (In Liquidation) (Receiver & Manager Appointed) appealed to the Court of Appeal of New South Wales against a decision of the Supreme Court. The dispute concerned the effect of a settlement agreement between a bank and guarantors of a loan, and the subsequent assignment of the bank's debt to one of those guarantors.

The primary legal issues before the Court of Appeal were whether the assignee guarantor took the assigned debt subject to a covenant by the bank not to take further steps against the guarantors, and whether the settlement agreement, which included a provision for judgment for a greater sum if the settlement terms were not complied with, constituted a confirmation of a cause of action for that greater sum, thereby potentially reviving a statute-barred claim.

The Court of Appeal reasoned that the covenant by the bank was a personal undertaking and did not run with the debt so as to bind a subsequent assignee. Regarding the limitation of actions issue, the Court held that the settlement agreement did not confirm a cause of action for the greater sum. Instead, the provision for a greater sum was a penalty or a liquidated damages clause, contingent on the non-performance of the settlement terms. As the settlement terms were complied with, the cause of action for the greater sum never accrued, and therefore, there was no cause of action to confirm or revive.

The appeal was dismissed with costs.