A Sarina real estate agent has succeeded in holding the Bank of Queensland at bay and defeated its summary judgment application to recover $5.5 mil under a personal guarantee by alleging a breach by the bank of the Code of Banking Practice.
BOQ succeeded against Paul Wright but his agent wife Faye, was deemed to have a potential defence in recognition that women can become involved in financial guarantees only because of a personal relationship with the borrower.
She, ruled the Chief Justice of Queensland’s Supreme Court, was entitled to argue a special equity defence available in some circumstances to mitigate against so called ‘sexually transmitted debt’.
Likely to be argued on her behalf at trial, is that that had BOQ allowed a full day between presentation of the security documents and requiring them to be signed – as specified in cl 31.5 of Code of Banking Practice – the guarantee may not have been given.
In doing so she will need to overcome what the court described as a “fundamental weakness of such a defence” given that she is a shareholder with her husband in the borrower company and had been involved in a series of similar earlier transactions.
Regardless that the defence may not, in the end, prove “particularly promising for her”, Mrs Wright’s argument is an important one. The issue of “relationship debt” arising under wives’ guarantees for businessman husbands, was first ruled on by the NSW Supreme Court in 1996.
Notwithstanding the property security was sufficient to meet claim and interest, the court required that she nevertheless pay $200,000 into court to the credit of the proceeding, representing the interest due in the four months leading up to the trial.
“I regard the second defendant’s right to run the defence, should come at a price,” said His Honour.
Faye Wright’s contest will likely come to trial in August.