Burnes v Trade Credits Ltd

34 ALR 459

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Between: Burnes
And: Trade Credits Ltd

Court:

Judges: Lord Diplock
Lord Simon of Glaisdale
Lord Edmund-Davies
Lord Keith of Kinkel
Lord Scarman

Subject References:
Deed of guarantee
Construction of
'Advance'
'Further advance'

Hearing date: 28 January 1981
Judgment date: 4 March 1981

London

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The due date for payment of a mortgage having passed without payment being made, the respondent mortgagee, on 25 November 1975, entered into a memorandum of variation of the mortgage. This provided for an increase in the rate of interest payable under the mortgage and for an extension of the term of the mortgage for one year. The appellant (guarantor of the mortgagor's obligations) was not asked to and did not consent to this variation.

The mortgagor defaulted in payment of interest under the mortgage as varied, and on 16 June 1976 the respondent commenced proceedings against the appellant guarantor claiming payment of interest then due and unpaid.

Held: Nothing in the guarantee required the guarantors to undertake, without their specific consent, liability for such increased interest as the mortgagor and the mortgagee might subsequently agree upon. The words "further advance" in the guarantee referred to the furnishing of an additional principal sum, not the extension of time for repayment of an original advance.

Payton v Brookes (SG) & Sons Pty Ltd [1977] WAR 91 , distinguished.

Appeal

This was an appeal from the Court of Appeal of the Supreme Court of New South Wales reversing the decision of the District Court in favour of the appellant.