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The thing about personal guarantees

Contract Law News | September 2016

Forum Law represented an alleged guarantor company director a few years ago where the company director denied that he signed the guarantee document. Forum Law conducted an extensive forensic exercise on the guarantee documents and surrounding circumstances. We were able to succeed in proving to the Court that the purported signature was not the signature of the guarantor, but had been applied by another person of which the creditor company’s representative was aware at the time or should have been aware.

In the recent case of Williams Group Australia Pty Ltd v. Crocker [2016] the NSW Court of Appeal upheld a decision in favour of a company director [the defendant] where a supplier alleged that director was a guarantor for company and its debt. The defendant was a director of two related companies – let’s call them company A and company B – and had admitted to being a guarantor for company B's debts.

The defendant denied having provided his signature as guarantor for company A. Company A's staff had provided "electronic" signatures of its director guarantors to the plaintiff supplier, and the defendant claimed he did not provide his authority for his "electronic" signature on this guarantee for the debts of company A. The court was satisfied that the director had not provided his authority to act as guarantor and the supplier was not entitled to rely on the electronic signature supplied by company A to pursue that particular director for the debts of company A.

Cases of wrongful application of signatures require detailed and extensive investigation of the circumstances of how a signature has been applied to a document. Creditors or contracting parties relying of “electronic signatures” must be sure to support the authority from the author of the electronic signature with separate and compelling evidence.

Forum Law Solicitors, in Sydney’s inner west suburb of Leichhardt, advise and assist parties in preparing documents which may be relied upon in all types of business and commercial and property transactions, and also advise and assist in commencing and defending related court proceedings. Call us for a free 30-minute conversation on (02) 9560 3388 or in our friendly and professional office in Leichhardt where parking for clients is free.

Forum Law is an active member of several reputable law and industry associations. We have recently obtained ISO9001 accreditation.