CHALLENGE BANK LTD v MAILMAN [1993] NSWCA 54

CHALLENGE BANK LTD v MAILMAN [1993] NSWCA 54

On the proper construction of the guarantee, the Mailmans as partial guarantors are entitled, upon payment of their proportionate obligation, to an interest in the proceeds of the sale of security held by the creditor even though the debt then remains partly unpaid, and a corresponding declaration may be made to resolve their rights.

Parties
Appellant: Challenge Bank Ltd; Respondent: Gregory Robert Mailman; Respondent: Kerry Louise Mailman; Borrower: Prime Property Corporation Pty Ltd; Guarantor: Louise Developments Pty Ltd; Guarantor: Namliam Pty Ltd; Guarantor: Marloss Twenty Pty Ltd; Guarantor: Graham Burns; Guarantor: Sarah Burns; Guarantor: Seven Hills Investments Pty Ltd; Guarantor: Airlie Beach Investments Pty Ltd
Jurisdiction
Australia
Judgment Date
14 May 1993
Procedural Posture
Appeal / Decision on Appeal
Outcome
Appeal dismissed (majority); Cross-appeal dismissed; Parties to speak to the final form of declaration and orders within 21 days.
Legal Topics
Guarantee, Declaratory Relief, Limitation of Liability, Subrogation
Contract Equity Banking Law Guarantee Declaratory Relief Limitation of Liability Subrogation

Case Brief

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Parties

Challenge Bank Ltd

Appellant

Gregory Robert Mailman

Respondent

Kerry Louise Mailman

Respondent

Prime Property Corporation Pty Ltd

Borrower

Louise Developments Pty Ltd

Guarantor

Namliam Pty Ltd

Guarantor

Marloss Twenty Pty Ltd

Guarantor

Graham Burns

Guarantor

Sarah Burns

Guarantor

Seven Hills Investments Pty Ltd

Guarantor

Airlie Beach Investments Pty Ltd

Guarantor

Procedural Posture

Appeal / Decision on Appeal

Legal Issues

  1. 1 Proper construction of the Agreement of Guarantee and Indemnity
  2. 2 Whether declaratory relief is available and appropriate
  3. 3 Consequences of limited liability provisions for partial guarantors and entitlement to benefit of securities

Ratio Decidendi

On the proper construction of the guarantee, the Mailmans as partial guarantors are entitled, upon payment of their proportionate obligation, to an interest in the proceeds of the sale of security held by the creditor even though the debt then remains partly unpaid, and a corresponding declaration may be made to resolve their rights.

Court Disposition

Appeal dismissed (majority); Cross-appeal dismissed; Parties to speak to the final form of declaration and orders within 21 days.

Orders

  • Upon payment by the Mailmans to the Bank of 25% of the Debt as defined in the Guarantee and Indemnity dated 4 March 1988, the Bank holds Mortgage registered number X436471 on trust as to 25% for the Mailmans and as to 75% for the Bank.
  • Upon payment by the Mailmans of 25% of the Debt, the Bank to pay to the Mailmans 25% of the net proceeds of sale of 2 Help Street, Chatswood as and when received.