The High Court's recent Judgment in Lavin v Toppi
contains useful reminders and guidance on the liability of
co-sureties. Litigation & Insolvency Associate, Adam Khan,
looks at the broader implications of the case.
THE FACTS
Mrs Lavin and Ms Toppi guaranteed a loan advanced by a bank to a
company. Mrs Lavin and Ms Toppi were directors of the company.
After the company went into receivership, the bank sued the
guarantors. Mrs Lavin sought a declaration from the Court that the
guarantee was unenforceable, but then settled the matter by payment
of $1.35M. The settlement deed contained a covenant by the bank not
to sue Mrs Lavin for the balance of the guaranteed debt.
Ms Toppi then sold her home and the proceeds of sale were used
to pay the balance of the guaranteed debt to the bank, which was
about $2.9M. The bank then discharged the guarantors from their
obligations under the guarantee.
