AUSTRALIAN GUARANTEE CORPORATION LTD v BENSON [1991] NSWCA 8

AUSTRALIAN GUARANTEE CORPORATION LTD v BENSON SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

SAMUELS AP, MAHONEY and PRIESTLY JJA 4 October 1991, 12 December 1991

[1991] NSWCA 8

Transactions set up at trial involving sale of chattels from A to B, from B to C, and lease back from C to A — Performance of leases Guaranteed by defendants

APPEAL from Commercial Division — Transactions set up at trial involving sale of chattels from A to B, from B to C, and lease back from C to A — Performance of leases guaranteed by defendants — Held (1) no evidence that B had in fact taken part in transactions with A or C, therefore the leases guaranteed were not valid so as to bind the guarantors; (2) Guarantors were not estopped from denying the validity of the leases or the guarantees, by reason of the way in which the proceeding was conducted.

Samuels JA I agree with Mahoney JA.

Mahoney JA Australian Guarantee Corporation Limited ("AGC") has sued the defendants claiming that they guaranteed the performance of two leases of machinery by AGC to Central Drum Services Pty Limited ("Central Drum'). The defendants contended that there were no such leases and accordingly that they were not liable as guarantors. Rogers CJ CommD found for the defendants and dismissed the plaintiff's claim. AGC has appealed to this Court against his Honour's judgment.

The basic facts are not now in dispute and I shall state them in summary form. Central Drum carried on a business involving the reconditioning of drums. It had for the purpose two pieces of machinery. Towards the end of 1985, it desired to borrow money and for that purpose approached Westpac Banking Corporation ("Westpac"). Mr Fleck, the manager of the relevant Westpac branch, decided that the security which could be given for a loan to Central Drum was such that it was not an appropriate transaction for Westpac. He thought it was an appropriate transaction for AGC, a wholly owned subsidiary of Westpac, and he therefore suggested that Central Drum seek financial assistance from AGC.