Westpac Banking Corporation v Schwerdtfeger

In the matter of Westpac Banking Corporation v Schwerdtfeger, the plaintiff, a banking corporation, pursued the defendants, who had acted as guarantors in a business finance agreement (BFA), for the recovery of a debt owed under the agreement. The dispute arose from the contention that the guarantors' obligations under the guarantee were discharged by subsequent variations to the BFA, which the guarantors had consented to.

The central legal issue for the court was whether the guarantors' consent to variations of the BFA and the guarantee discharged their obligations under the guarantee. The court had to determine whether the guarantors' consent to the variations effectively nullified any potential discharge of their liability under the guarantee.

The court found that the guarantors' consent to the variations of the BFA and the guarantee was decisive. Citing the decision in Holme v Brunskill, the court held that if a surety consents to an alteration of the contract guaranteed, they remain liable under the guarantee. The court applied this principle to conclude that since the defendants had consented to the variations, they were not discharged from their obligations. Additionally, the court dismissed the defendants' argument that the availability of certain funds was a condition precedent to their obligation to repay the loans, finding that this was not supported by the evidence.

The court ordered the defendants to pay the sum of $8,580,000 owed under the guarantee and further directed that unless the defendants filed written submissions on costs within 14 days, they would be liable for the plaintiff's costs on the standard basis.