Counsel: A.R. Matebalavu for Appellant
H.M. Patel for Reor Respondent
JUDGMENT OF THE COURT
The sole issue raised on this appeal from the judgment of the Court of Appeal delivered on 25 November 1993 is whether demand upon
the guarantor was necessary before he became liable to the bank for his company's debt. As a matter of interpretation of the deed
of guarantee, in which the words 'on demand' appear in several contexts, we are satisfied that the Court of Appeal were right in
holding in accordance with an established line of authority that demand was an essential condition precedent to the liability alleged.
In this Court Mr Matebalavu argued that the guarantor's effective identification with the company and his full knowledge of its affairs,
including the position as between it and the bank, justifies a conclusion that demand is unnecessary. Such facts cannot, however,
eliminate the requirement 'on demand' from the deed.
In Esso Petroleum Co. Ltd v. Alstonbridge Properties Ltd [1975] 1 W.L.R. 1474, 1483, Walton J. after citing In re Brown's Estate, Brown v. Brown [1893] UKLawRpCh 44; [1893] 2 Ch. 300 said:
That same case shows, of course, that where the character in which payment is required is that of surety, a demand is, in general,
necessary: but I assume for present purposes (without finding it necessary so to decide) that the provisions of clause 5 of the mortgage,
equating the liability of the sureties to that of principal debtor, is effective to obviate the necessity for a demand merely on
this ground.
That assumption - it was no more - was made with reference to clause 5 of the mortgage in that case, a clause of a familiar type containing
the following generally worded provision, as appears from p.1478 of the report:
It is hereby agreed and declared that although as between the company and the sureties the sureties are only sureties for the company
yet as between the sureties and the lenders the sureties shall be considered as principal debtors for all the principal and other
moneys and/or interest hereby secured...
There is no similar clause in the instant deed of guarantee. Counsel for the bank points to clause 10:
10. As a separate and independent stipulation the Guarantor hereby agrees and declares that all or any sums of money which may not
be recoverable from the Guarantor on the footing of a guarantee whether by reason of any legal limitation disability or incapacity
on or of the Debtor or any other fact or circumstance and whether known to the Bank or not shall nevertheless be recoverable from
the Guarantor as sole or principal debtor in respect thereof and shall be paid by the Guarantor on demand together with interest
at the rate or rates aforesaid from the date of demand until payment.
It is to be noted that clause 10 itself contains the condition 'on demand'. In these circumstances any suggestion that might be extracted
from the Esso case is of no assistance to the bank.
The appeal must be dismissed with costs.
Sir Robin Cooke
Sir Anthony Mason
Sir Maurice Casey
Solicitors:
Esesimarm & Co, Suva, for Appellant
H.M. Patel & Co., Suva, for Respondent
Cbv0001u.94s
