Non-Involved Guarantor

FACTS

C Ltd entered into a sale and purchase agreement with D Ltd to help with the Company’s cash flow difficulties. . The directors, A and B, signed the sale and purchase agreement which also incorporated a guarantee to be executed as a deed. At the relevant time, neither A or B were made aware of the fact that the guarantee was a pre requisite of lending. B was in ill health and had little to do with the management or finances of C Ltd. B was influenced into signing the agreement and guarantee by A. B was never advised to seek independent advice on her position.

OUTCOME

In view of the failure as the agreement as a deed, the economic duress exerted on both A and B, and the failure of the lender to properly communicate with the B, the insolvency proceedings were withdrawn and a greatly reduced settlement was accepted.

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