The High Court has recently overridden the terms of an “all sums due guarantee” on the basis of oral evidence of the guarantors. A limited recourse guarantee was given by the guarantors for the obligations of one of their companies in respect of a loan made for a particular project. The guarantee was also expressed to include the “future liabilities of the principal debtor”. When the Bank sought to call in the guarantee, the guarantors argued that it had always been their understanding that the guarantee was solely in respect of one particular project. Charleton J accepted the evidence of the guarantors and held that the guarantee had been extinguished on the repayment of the initial loan in full in respect of that project.

Contributed by Ross Forde.

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