Perpetual Trustee Co Ltd v Hodge

In the case of Perpetual Trustee Co Ltd v Hodge, the plaintiff sought a declaration that the defendants’ guarantees and mortgage, executed in relation to a principal deed, extended to and were available as security for the indebtedness of the new company under a supplementary deed. The dispute arose after the defendants’ company was wound up, and they defaulted on the loan following the establishment of a new company that continued to make repayments. The defendants argued that their guarantees and mortgage should not extend to the new company's debt under the supplementary deed. The court was required to decide whether the guarantees and mortgage could be applied to the new company's debt and whether it would be unconscientious to permit the defendants to depart from the lender's assumption that the guarantees and mortgage would be available as collateral security for indebtedness under the supplementary deed.

The court considered the general rules of construction of instruments in commercial and business transactions. It noted that the defendants executed a deed of guarantee and indemnity and a registered mortgage as a condition precedent to the loan. The court further observed that the defendants' new company assumed the operation of the prior entity's business and continued to make repayments to the lender under the loan. The court also examined the principles of estoppel by conduct, considering whether it would be unconscientious to permit the defendants to depart from the lender's assumption that the guarantee and the mortgage would be available as collateral security for indebtedness under the supplementary deed.

The court concluded that the defendants' guarantees and mortgage were available as security for the new company's indebtedness under the supplementary deed. It found that the new company was the continuation of the business of the defendants' previous company and that it would be unconscientious to permit the defendants to depart from the lender's assumption. The court held that the defendants' guarantees and mortgage extended to and were available as security for the indebtedness of the new company under the supplementary deed. Consequently, the court made a declaration in favour of the plaintiff.

Orders:
1. Judgment for the plaintiff.
2. I will hear the parties as to the form of orders necessary to give effect to these reasons for judgment.