2016 - 2017
Ms V’s lease on a shop required her to provide a bank guarantee as security. The lessor gave her the necessary wording, and the bank provided a guarantee matching the supplied wording, which stipulated that the bank would pay up to $14,000 if demanded by the lessor without contacting Ms V first. This guarantee would remain in place until the lessor told the bank otherwise.
A few years later Ms V vacated the shop. A dispute arose between Ms V and the lessor, and some months later, the lessor demanded $6,500 from the bank under the guarantee. The bank paid it and told Ms V she needed to repay this sum.
Ms V considered the bank should not have paid the lessor because her lease had expired and it had not contacted her before making the payment. However, the wording of the guarantee was clear: the bank did not need to contact Ms V beforehand, and the guarantee would continue until the lessor told the bank to release it. Ms V had provided the guarantee’s wording to the bank, so she was aware of the terms and there was no evidence the bank had agreed to any other terms.
We also considered whether the bank had the right to recover the $6,500 from Ms V. A guarantor (the bank) usually has the right to reimbursement when it pays on behalf of a principal debtor (Ms V).
Ms V agreed to repay the bank $6,500.