In a judgment handed down on 28 July 2013 in the Supreme Court of Victoria, a guarantor contended that there was no evidence that he had executed the guarantee in question because his signature was not witnessed, and as such he was not personally liable.
In trying to get out of a guarantee that he gave as director of the borrower company, the guarantor’s defence did not involve denying that the document bore his signature or that he did not give a guarantee, but rather that the guarantee was not “properly and duly executed”. This defence did not sit well with the judge who said “whatever that means”. The judge also noted that there was no evidence that might otherwise explain what looked like a routinely executed guarantee was not what it seemed to be. By now you would have guessed the judge’s decision - that the guarantor was liable and he had to honour the guarantee.
This case dealt with a number of complex legal issues but this aspect of the case is easy to understand. The moral of the story is this – providing a guarantee is serious business. Financiers often require the directors of a company borrower (SMEs as well as big corporations) to give personal guarantees before providing finance for business purposes. It will be wise for a guarantor to seek independent legal advice (and perhaps independent financial advice too) before entering into a guarantee. And the courts are probably not going to be sympathetic to a guarantor who tries to escape his or her obligations, especially when the basis of the defence is unrelated to the authenticity of the signature but a technicality regarding the manner in which the signature was witnessed.
Contact us if you need advice on going guarantor.
In trying to get out of a guarantee that he gave as director of the borrower company, the guarantor’s defence did not involve denying that the document bore his signature or that he did not give a guarantee, but rather that the guarantee was not “properly and duly executed”. This defence did not sit well with the judge who said “whatever that means”. The judge also noted that there was no evidence that might otherwise explain what looked like a routinely executed guarantee was not what it seemed to be. By now you would have guessed the judge’s decision - that the guarantor was liable and he had to honour the guarantee.
This case dealt with a number of complex legal issues but this aspect of the case is easy to understand. The moral of the story is this – providing a guarantee is serious business. Financiers often require the directors of a company borrower (SMEs as well as big corporations) to give personal guarantees before providing finance for business purposes. It will be wise for a guarantor to seek independent legal advice (and perhaps independent financial advice too) before entering into a guarantee. And the courts are probably not going to be sympathetic to a guarantor who tries to escape his or her obligations, especially when the basis of the defence is unrelated to the authenticity of the signature but a technicality regarding the manner in which the signature was witnessed.
Contact us if you need advice on going guarantor.
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