Mortgagee loses priority to guarantor – drafting of guarantees not wide enough to help it

Allens Arthur Robinson

Further to the posting on 18 October in respect of Bofinger v Kingsway Group Limited [2009] HCA 44 Partner Diccon Loxton of Allens Arthur Robinson explores the decision at length and concludes in respect of lenders:

How does it affect you?

  • Lenders will need to look at the drafting of their guarantee documents, particularly the no-competition clause, the clause that is designed to stop guarantors claiming subrogation and other rights against the debtor in competition with the creditor.
  • Secured lenders who receive payments from guarantors will need to take care when distributing the proceeds of security or discharging security.

Read more of the article by Diccon Loxton, Partner of Allens Arthur Robinson.

Reproduced with permission of Diccon Loxton and accordance with their terms of use.

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