Liu v Gu [2020] NSWSC 1469

Liu v Gu [2020] NSWSC 1469

The settlement agreement did not effect an immediate release of the first and second defendants or the principal debtor, but was conditional and structured as a covenant not to sue pending payment, and was not binding on the third defendant who was not a party. Thus, the third defendant's liability as co-guarantor was preserved and judgment should be entered against her for the guaranteed sum plus interest.

Parties
Plaintiff: Liyun Liu; First Defendant: Menghong Gu; Second Defendant: Zhouxiang Huang; Third Defendant: Xiaolu Li
Jurisdiction
Australia
Judgment Date
28 October 2020
Procedural Posture
Guarantee Enforcement Commercial Dispute / Principal Judgment After Hearing on Liability of Third Defendant
Outcome
Judgment for the plaintiff against the third defendant.
Legal Topics
Guarantee and Indemnity, Construction of Settlement Agreements, Release and Covenant Not to Sue, Judgment Enforcement, Co Guarantor Liability
Contract Law Commercial Law Equity Guarantee and Indemnity Construction of Settlement Agreements Release and Covenant Not to Sue Judgment Enforcement Co Guarantor Liability

Case Brief

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Parties

Liyun Liu

Plaintiff

Menghong Gu

First Defendant

Zhouxiang Huang

Second Defendant

Xiaolu Li

Third Defendant

Procedural Posture

Guarantee Enforcement Commercial Dispute / Principal Judgment After Hearing on Liability of Third Defendant

Legal Issues

  1. 1 Whether the settlement agreement with co-guarantors operated as a release or a covenant not to sue and whether the third defendant remained liable under the guarantee
  2. 2 Whether the guarantee contained a reservation of rights clause or operated as an indemnity
  3. 3 Whether any implied term was breached affecting the right of contribution

Ratio Decidendi

The settlement agreement did not effect an immediate release of the first and second defendants or the principal debtor, but was conditional and structured as a covenant not to sue pending payment, and was not binding on the third defendant who was not a party. Thus, the third defendant's liability as co-guarantor was preserved and judgment should be entered against her for the guaranteed sum plus interest.

Court Disposition

Judgment for the plaintiff against the third defendant.

Orders

  • Judgment for the plaintiff against the third defendant in the amount of $1,055,131.49.
  • The plaintiff's costs of the proceedings are to be paid by the third defendant on an indemnity basis, as agreed or assessed.