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ARTICLE · 05 DECEMBER 2016

Careless use of the power to sell has consequences, guaranteed!

Corrs Chambers Westgarth
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The right to enforce a debt against a guarantor may be lost where the power to sell is not exercised appropriately.

AustraliaLitigation, Mediation & Arbitration
David Abernethy
David Abernethy
Jason Salman
Jason Salman
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This week's TGIF considers a recent decision in the Victorian Supreme Court in which a Guarantor was released from liability as a consequence of the Lender's inappropriate conduct in realising the security.

WHAT HAPPENED?

Background

In late 2005 the Lender advanced $120,000 to the Borrower secured against an existing mortgage over hotel/motel complex owned by the Borrower. The loan was also secured by personal guarantees given by the directors of the Borrower.

One of the directors (the Guarantor) sold his interest in the Borrower in 2007 and requested to be released from his guarantee, however, the Lender refused to do so.

By late 2010, the Borrower had defaulted and the Lender issued a notice to pay.

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