A mortgage given by two brothers was guaranteed by a joint-venture. When the joint venture came to an end, an agreement was entered into, pursuant to which the two brothers indemnified the co-venturer, in the event that the bank enforced the guarantee. The bank sued the brothers and the guarantor.
The guarantor sought a stay of the proceedings against him on the basis that if the bank enforced against the brothers, the proceeds of sale of the property would likely satisfy the debt owing to the bank and it would not need to pursue its case against the guarantor, the costs of which would all be wasted.
The bank opposed the stay against the guarantor on the grounds:
- It interfered with the Bank’s fundamental right to pursue any of the guarantors on the basis of a procedural argument.
- It presupposed that the Bank would obtain possession of the property and would be able to sell it for a price sufficient to satisfy what was owing under the loan.
- If the brothers took steps to defend the claims against them, any stay against the guarantor would result in a multiplicity of proceedings and resulting inefficiencies and cost.
- Any agreement as to indemnity between the defendants could have no effect on the Bank’s pursuits of its rights against the guarantor.
The court noted that:
On the evidence, given the terms of the guarantees, it would seem that the property is going to be sold at a price sufficient to repay the amount which is owed under the loan.
This would allow the guarantor to apply for a stay of judgement against him under s136 of the Civil Procedure Act. However if the brother’s filed defences everything would go pear shaped. The judge concluded as follows:
If the brothers do not file defences it would appear that the Bank’s pursuit of the guarantor will involve unnecessary cost, as well as an avoidable waste of judicial and administrative resources.
That being so, it is clear, it seems to me that justice demands that a stay, on certain conditions should be granted, so that the application for default judgment against the other defendants and the ultimate sale of the property can be dealt with. That is not to deprive the Bank of the right to pursue the guarantor, but rather to defer that pursuit for a time, to ensure that costs are not unnecessarily expended and court and administrative resources.