WILLIAMS v McFarlane

In *Williams v McFarlane* [1996] NSWCA 559, the New South Wales Court of Appeal considered a dispute between the appellant, Williams, and the respondent, McFarlane, concerning the enforceability of a guarantee. The core of the disagreement revolved around whether the guarantee, which was intended to secure a loan provided by McFarlane to a company, was valid and binding on Williams.

The Court of Appeal was required to determine whether the guarantee was vitiated by a failure to comply with the requirements of the *Credit Act 1984* (NSW) and, if so, what the consequences of that failure would be for the enforceability of the guarantee. A further issue was whether, even if the guarantee was unenforceable, McFarlane was entitled to recover the moneys advanced on some other basis, such as a claim for money had and received.

The Court held that the guarantee was a "credit contract" or "credit sale contract" within the meaning of the *Credit Act 1984* (NSW) and that it had not been properly executed in accordance with the Act's requirements, specifically concerning the provision of a written statement to the guarantor. Consequently, the guarantee was unenforceable against Williams. However, the Court also found that McFarlane was entitled to recover the moneys advanced to the company on the basis of a claim for money had and received, as the company had received the benefit of the loan and it would be unconscionable for it to retain that benefit without repayment.

The Court of Appeal ordered that the appeal be dismissed, upholding the primary judge's decision that while the guarantee was unenforceable, McFarlane was entitled to recover the principal sum advanced, together with interest.