BLM HOLDINGS PTY LTD and ORS v BANK OF NEW ZEALAND [1994] NSWCA 28

BLM HOLDINGS PTY LTD and ORS v BANK OF NEW ZEALAND

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CLARKE, SHELLER JJA and O' KEEFE CJ

28 September 1993, 25 March 1994

The appellants had agreed to guarantee certain moneys advanced to Uptown Sydney Development Corporation Pty Ltd ("Uptown") by the respondent. The guarantee was given on the respondent's printed form of guarantee at the end of which was typed CL28. This clause was at the centre of the trial and the appeal. It provided that notwithstanding the "all moneys" clause set out in CL1 of the guarantee, the liability of the guarantor was restricted to moneys advanced to Uptown pursuant to and in accordance with the terms of the facility evidenced by a letter from the bank to Uptown dated 16 December 1988. That letter set out a list of "cross collateralized" security, receipt of which was a condition precedent to any drawing on the facility.

The moneys advanced to Uptown were not repaid and the respondent demanded payment from the appellants as guarantors. The appellants argued that as all the conditions precedent to drawing on the loan facility had not been met (certain cross collateralized security not having been received by the respondent) they were not liable for the moneys advanced to Uptown by the respondent.

Held: The language of CL28 was plain; the guarantors' liability was restricted to moneys advanced to Uptown by the bank "pursuant to and in accordance with the terms of the facility evidenced" by the letter dated 16 December 1988. Even the most generous construction of the facility could not impose upon the respondent an obligation to advance money to Uptown before receipt of the cross collateralized security; accordingly the moneys advanced to Uptown by the bank were not within the restricted ambit of moneys which the appellants had guaranteed to be repaid.