30 October 2012

Guarantors claimed the Bank was not entitled to appoint an administrator to the borrower and that the appointment, caused the company to cease trading. That resulted in the destruction of all of the value in the company. Consequently, the value of their shares was destroyed. In compensation they sought a reduction in the amount of their liability under the guarantees.

The claim was struck out because there is a very old rule that a shareholder of a company cannot recover damages merely because the company has suffered damage, and cannot recover damages that are merely a reflection of a loss suffered by the company.

The guarantors next claim they were owed a fiduciary duty by the bank which was breached in the appointment of the administrator. The judge rejected this commenting:

The relationship between a creditor that is secured in respect of a debt and a guarantor of that debt is not one of the established categories of fiduciary relationship.

Click here to read the full judgment.

LesawebLesa Bransgrove holds a Bachelor of Laws and Bachelor of Commerce from the University of Queensland and a Master of Laws from the University of London. Lesa was admitted as a solicitor of the Queensland Supreme Court in 1996 and the UK Supreme Court in 2002 and as a barrister of the NSW Bar in 2009. After working on the Lehman's litigation Lesa left the bar and joined Bransgroves.

Read more about Lesa Bransgrove