(Victoria) By a mortgage executed in favour of the bank Mrs Zyngier covenanted to pay to the bank any sums which might be owed to it either by herself or by a named company, including any amounts for or in respect of any bills of exchange on which the company might be liable ‘either primarily or only in the event of any other person failing to duly pay the same’. Lord Brightman: ‘ The fundamental question in the present case, therefore, is whether upon the true construction of the bargain between the bank and Mrs Zyngier, Mrs Zyngier placed herself, as regards bills of exchange accepted by Zinaldi and thereafter dishonoured, in the position of a co-surety alongside the drawer or indorser; or whether, upon the true construction of the bargain, her liability to the bank upon a bill was intended to be limited to a case of default by the parties liable upon the bill. If it were the true meaning of the mortgage that the bank was required to call upon the parties to the bill before it called upon Mrs Zyngier to make good her default, then ex hypothesi no injustice ensued to the drawer upon the bank’s adoption of that course and no case for the intervention of a court of equity could arise. If a third party (in the instant case Mrs Zyngier) guarantees a bill of exchange for the benefit of a bank which discounts it, the normal understanding will be that the surety guarantees that payment will be made by one or other of the parties to the bill who are liable upon it, whether as acceptor or drawer or indorser. It will not be the normal understanding that the surety intends to place himself on a level with the drawer, so as to be answerable equally with the drawer if the acceptor defaults. There is no reason why he should. There is no reason to suppose that, in a contract between the bank and the surety, the surety desires to confer a benefit on the drawer and to share with him the responsibility for a dishonoured acceptance. Nor is there any reason why the bank should wish to call upon the surety for payment until the parties to the bill have defaulted.’ and ‘Contribution is founded on the principle that equality is equity, and there is no room for the application of this doctrine unless the surety against whom contribution is claimed has placed himself on the same level of liability as the surety who claims contribution from him. It would be possible for a bank guarantee to be so worded that the surety deliberately places himself upon an equal footing with the drawer or indorser of the bill discounted by the bank, but it would produce an irrational result. It is not a construction to be adopted unless the intention is clear, because there is no reason why the bank and the third party who gives the guarantee to the bank should have such an intention.’
Judges:
Lord Brightman
Citations:
[1986] AC 562, [1985] UKPC 31, [1985] 3 All ER 105, [1986] FLR 1, [1985] 3 WLR 953
Links:
Jurisdiction:
Australia
Cited by:
Cited – Caledonian North Sea Ltd v London Bridge Engineering Ltd and Others HL 7-Feb-2002
Substantial personal injury claims had been settled following the Piper Alpha disaster. Where a contractual indemnity had been provided under a contract, and insurance had also been taken out, but the insurance had not been a contractual . .
Cited – Day v Shaw and Another ChD 17-Jan-2014
Mr and Mrs Shaw had granted a second charge over their jointly-owned matrimonial home to secure the personal guarantee given by their daughter and by Mr Shaw in respect of a bank loan to a company (Avon). Their daughter and Mr Shaw were the . .
Lists of cited by and citing cases may be incomplete.
Banking, Equity
Updated: 08 June 2022; Ref: scu.191163