Failure to satisfy condition precedent of extension of loan facility

In ING Bank (Australia) Ltd v Leagrove Pty Ltd & Anor; ING Bank (Australia) Ltd v Stafford & Ors [2011] QCA 131, the Queensland Court of Appeal considered the effect of ING's failure to obtain the securities listed in an agreement to extend a loan facility. The principal issue was whether this failure constituted either non-compliance with a condition precedent and/or breach of an implied term with the result being that the guarantees either did not come into effect at all, or that there were no secured moneys under the mortgages.

The court held that, on the proper construction of the relevant transaction documents and taking into account the parties' intentions, there was no condition precedent or implied term vitiating the efficacy of the mortgages and guarantees. Rather the mortgages and guarantees were held to be validly secured and immediately enforceable by ING.

This decision highlights that the courts will consider and construe relevant loan agreements and guarantees by their terms and the objective intention of the parties, according to normal contractual principles. The case also indicates that a company acting in its capacity as a trustee can validly act as guarantor for the company's own indebtedness, at least whilst acting within the terms of the trust and consistently with its fiduciary duties.