Guarantee unlimited notwithstanding credit limit, and joint and several though not specifically stated

A guarantee of all amounts owing was found to be unlimited notwithstanding a credit limit imposed in respect of the underlying credit. In addition, although the guarantee was not specifically stated to be joint and several, it was found to be.

This case¹ arose when a supplier of goods sued a guarantor for amounts owing under a supply contract. The principals of the company that the goods were supplied to both signed as guarantors. When the company failed to pay the amounts owing, judgment was entered against one of the guarantors for the full amount outstanding.

The guarantor appealed the decision, arguing that:

• his liability was limited to one half of the amount outstanding; and
• his liability was limited to $10,000, being the extent of the credit limit imposed by the supplier.

The Court of Appeal found that while the document did not specifically record that the guarantee was joint and several, it was an "unconditional guarantee", a "continuing guarantee", a "guarantee of all amounts owing", and the guarantors acknowledged their liability as principal debtor. All of these were determining factors in the court's finding that the guarantee was joint and several.

The Court of Appeal also found that the guarantee was not limited to $10,000 because the document referred to it unconditionally guaranteeing "the due payment of all amounts owing ... from time to time at any time" and included confirmation that liability would not be affected by a "variation in terms of supply".

¹ Jack Malcolm Moulder v Checkpoint Meto Limited, High Court, Napier, CIV 2007-441-0578, 27 November 2007

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