Underhill v Sherwell

The New South Wales Court of Appeal considered a dispute between Underhill and Sherwell concerning the enforceability of a guarantee. The core of the disagreement revolved around whether Sherwell was bound by a guarantee he had provided in favour of Underhill, given the circumstances surrounding its execution.

The primary legal issue before the Court of Appeal was whether Sherwell's guarantee was vitiated by duress, undue influence, or unconscionable conduct. Specifically, the court had to determine if Sherwell's will was overborne by improper pressure or if he was subjected to unconscionable conduct by Underhill, thereby rendering the guarantee unenforceable.

The Court of Appeal found that the evidence did not support a finding of duress or undue influence. It was held that Sherwell had entered into the guarantee voluntarily, understanding its nature and effect. The court applied the principles relating to the vitiating factors of duress and undue influence, emphasising the need for clear evidence of coercion or improper pressure. As the elements of these vitiating factors were not established on the facts, the guarantee was found to be valid and binding.

Consequently, the Court of Appeal allowed the appeal, setting aside the primary judge's decision and ordering that judgment be entered for Underhill against Sherwell in the terms of the guarantee.