Starrs v Commonwealth Bank of Australia

The appeal concerned a dispute between Dr and Mrs Starrs (the appellants) and the Commonwealth Bank of Australia (the respondent) regarding guarantees provided by the appellants for a credit facility. The central issue revolved around the validity and enforceability of these guarantees in light of the bank's failure to register a mortgage over a property located at Jeffcott Street. The matter was heard by the Full Court of the Supreme Court of South Australia, comprising Kourakis CJ, Kelly and Stanley JJ.

The court was required to determine whether the overdraft facility was validly made available under the credit contract that the appellants had guaranteed, notwithstanding the bank's failure to register the Jeffcott Street mortgage. Further, the court had to consider whether a specific clause within the guarantees, which stated that the guarantors' liabilities would not be affected by the bank's failure to register any security or to effectively secure any other guarantee, applied to the unregistered Jeffcott Street mortgage. Ultimately, the court had to decide if this failure to register the mortgage excused the appellants from their obligations under the guarantees.

The court reasoned that the appellants had not expressly pleaded that the advance was not made pursuant to the guaranteed credit contract. Instead, their argument focused on the failure to register the mortgage meaning the guarantees did not "attach" and were "not binding". The court found that the express wording of the guarantees, which included a clause protecting the bank from the consequences of failing to register security, encompassed the situation with the Jeffcott Street mortgage. Consequently, the failure to register the mortgage did not operate to discharge the appellants from their liabilities under the guarantees.

The appeal was dismissed, with the court ordering that the appellants were not excused from their obligations under the guarantees. The parties were to be heard as to costs.