WATT v STATE BANK OF NEW SOUTH WALES [1994] NSWCA 339

WATT v STATE BANK OF NEW SOUTH WALES

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CLARKE, SHELLER and POWELL JJA 9 March 1994, 17 March 1994

[1994] NSWCA 339

GUARANTEE — drawdown, construction of facility agreement; whether the exercise of the bank's discretion thereunder frees guarantors from their obligation

The appellant and P A Page (who did not appeal) agreed to guarantee loans made to Wysdo Pty Ltd (Wysdo) by the respondent for the purpose of purchasing and developing certain land. The appellant's argument centred on a construction of cl6.1(g) and cl6.1(h) of a facility agreement between Wysdo and the respondent which, the appellant argued, obligated the respondent to withhold the agreed drawdown facility until exchanged contracts of sale and deposit moneys for residential units being constructed on the land were received by the company and deposited with the bank. The appellant submitted that as a consequence of the respondent's failure to receive such documentation as was required in cl6.1(g) and cl6.1(h) of the facility agreement before permitting a drawdown, the appellant's obligation under the separate guarantee to pay the respondent was discharged.

Held: The meaning of cl6.1(g) and cl6.1(h) was tolerably clear. The documentation was to be received by the respondent in form and substance satisfactory to it "prior to the first or subsequent drawdown at the Lender's discretion". Thus if the material or some of it was not received before the first drawdown, the respondent might, in its discretion, make an amount available although not obliged to do so. The obligation and discretion remained the same as each drawdown was requested.

The decision of the trial judge was upheld and the appeal was dismissed with costs.

Clarke JA I agree with Sheller JA.

Sheller JA Oswald Gilchrist Watt appeals from a decision of Cole J of 27 October 1993. His Honour gave judgment that the appellant and Peter Armstrong Page (P A Page), the first defendant, pay the respondent, State Bank of New South Wales, $2 million and adjudged that the respondent have possession of land known as 53 Hunter Street, Hornsby of which the appellant was registered proprietor. P A Page has not appealed.