Scheibner v National Australia Bank Limited

In *Scheibner v National Australia Bank Limited* [1994] NSWCA 279, the New South Wales Court of Appeal considered a dispute between the appellant, Scheibner, and the respondent, National Australia Bank Limited. The case concerned the enforceability of a guarantee provided by Scheibner in favour of the bank.

The primary legal issue before the Court of Appeal was whether the bank had breached its duty of care to Scheibner, the guarantor, by failing to disclose material facts to him at the time the guarantee was executed. Specifically, the court had to determine if the bank was aware of, or ought to have been aware of, circumstances that would have materially affected Scheibner's decision to provide the guarantee, and if its silence in relation to these circumstances amounted to a breach of duty.

The Court of Appeal reasoned that a bank owes a duty of care to a guarantor to disclose material facts that are not apparent or known to the guarantor, and which the bank knows or ought to know would influence the guarantor's decision. In this instance, the court found that the bank had not breached this duty. The circumstances that Scheibner alleged should have been disclosed were not such that the bank was obliged to volunteer that information, particularly as they were either known to the principal debtor or were matters of commercial risk that a guarantor would ordinarily be expected to investigate. The court applied the principles established in cases concerning the duty of disclosure owed by a creditor to a surety.

The appeal was dismissed.