Substance over style: the importance of proper execution of guarantees

On 13 May 2020, the High Court provided yet another reminder of the importance of adhering to document execution requirements. 

At first glance, Go Capital Limited v Jagdeep Singh Phull [2020] confirms that, at each stage of bankruptcy proceedings, whether (i) applying to set aside a statutory demand, (ii) at the petition hearing or (iii) applying for annulment, the "substantially disputed debt" test is the same.  However, the  judgment also considers the substance and execution of the personal guarantee ("Guarantee") under which the debtor's alleged liability arose.

The debtor argued that the Guarantee had not been validly executed as a deed.  In holding that the Guarantee failed to bind the debtor, the Court commented that the debtor's alleged signature was not witnessed, nothing in the Guarantee indicated that it was intended to be a deed and it was not delivered as a deed.  As it could not be a deed, the Court considered whether it could nonetheless be binding as a contract.  The petitioning creditor also failed on this point as it was unable to advance an argument that consideration had been provided in the manner required to form a contract. 

The case reaffirms the basic proposition that correct execution remains fundamental in transactions of this nature.