Pugwall Pty Ltd v Arthur McKenzie Investments Pty Ltd

Pugwall Pty Ltd initiated legal proceedings against Arthur McKenzie Investments Pty Ltd, contesting a guarantee given by a director of the latter. The dispute was heard by the Supreme Court of Victoria. The central issue before the court was whether the director's intention to be personally liable under the guarantee was objectively ascertainable. Additionally, the court had to determine if the guarantee was unenforceable under section 126 of the Instruments Act 1958. The case drew on precedents including TW Timber Treatment Pty Ltd v Giddings, Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd, Alonso v SRS Investments (WA) Pty Ltd, Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd, and Padstow Corporation v Fleming (No 2). The court's analysis hinged on discerning the objective intention of the director to be bound personally by the guarantee. It was noted that a clear and unequivocal intention to be personally liable is required for enforceability under the Act. The court concluded that the director's intention was not objectively ascertainable, thereby rendering the guarantee unenforceable. The decision was influenced by the requirement for an unequivocal expression of personal liability, as established in the cited cases. Consequently, the court allowed the appeal and granted leave for an appeal to a higher court.