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ARTICLE · 08 DECEMBER 2015

Application of the Code of Banking Practice to corporate guarantors

Corrs Chambers Westgarth
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The WA Supreme Court confirmed that a corporate guarantor could not rely on a breach of the Code of Banking Practice.

AustraliaFinance and Banking
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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The Supreme Court of Western Australia has confirmed a corporate guarantor cannot rely on a breach of the Code of Banking Practice and that more than adoption of the Code by the financier is required to incorporate it as a contractual term.

BACKGROUND

Success Assets Pty Ltd (Success) borrowed money from Statewest Credit Society Ltd (Statewest) to assist with purchase of land, on security of mortgage over that land. Other related companies guaranteed the loan and provided unlimited guarantees in favour of Statewest (Guarantors). The debt was later transferred to Bank of Queensland Ltd (BOQ). The guarantees continued to operate.

BOQ made further advances to Success and Success defaulted on the repayment of those loans. Receivers were appointed over the mortgaged property and it was sold. BOQ made demand on the Guarantors for the shortfall.

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