Guarantors and the Code of Banking Practice

Two cases decided in the final 2 months of 2015 — George 218 Pty Ltd v Bank of Queensland Ltd¹ (George 218) and Doggett v Commonwealth Bank of Australia² (Doggett) have provided the courts with an opportunity to consider the interaction between the 2013 Code of Banking Practice (Code) and guarantors.

In George 218, the Western Australian Supreme Court confirmed unequivocally that the Code has no operation in respect of corporate guarantors. This is in contrast to the position of corporate borrowers. There is scope for the Code to operate in a loan agreement between a bank and a "small business" corporate borrower. A "small business" as defined by the Code could include a special purpose vehicle borrower with fewer than 20 employees, thereby extending the protective regime of the Code to larger enterprises.³