Previous publications

Updates and background for this project (Digest)

In May 2000, the Commission released Issues Paper 17, Guaranteeing someone else’s debts. It raised questions on issues relating to third party guarantees. The Commission received 21 submissions in response to the Issues Paper. The Appendix contains a full list of individuals and organisations that made submissions. The Commission has taken account of the views expressed in submissions in formulating the recommendations in this Report.

Research Report 11

Between 2000 and 2003, the Law Reform Commission and the Faculty of Law at the University of Sydney conducted the first comprehensive Australian empirical research into the law and practices governing third party guarantees. An Australian Research Council Strategic Partnerships in Industry, Research and Training Grant funded the project.

The research was aimed at finding out more about the experiences of people who guarantee the loans of others, including why they agree to be guarantors; how they get into trouble in those transactions; and what might have assisted them in avoiding such difficulties.

The researchers sought demographic information about guarantors (for example, their sex, age and cultural backgrounds) and about their relationship with the borrower. They also obtained information relating to the formation and execution of the transaction, such as how the transaction was executed; who organised the guarantee; where it was signed; who was present, what information the guarantor had; and the guarantor’s understanding of the transaction at the time the guarantee was signed. Further, they elicited information on how guarantors discovered that there were problems with the transaction; what they did; who they sought assistance from; and what kind of dispute resolution mechanism, if any, they pursued.

The researchers gathered data primarily by interviewing guarantors. They also sought information from legal advisers who had acted for guarantors during the transaction and those who had acted for either guarantors or lenders when post-transaction difficulties arose. Further, they obtained the views of barristers and judges about the litigation phase of guarantee disputes. Finally, they surveyed judgments of litigated guarantee cases.

The results of the study were published in 2003 as Research Report 11, Darling, please sign this form: a report on the practice of third party guarantees in New South Wales. This study is referred to in this Report as “Lovric and Millbank”, after its authors.

The Lovric and Millbank study was circulated widely to relevant individuals and organisations. The Australian Bankers’ Association made a submission to the Commission in response to the Lovric and Millbank study.

The results of the study have greatly assisted the Commission in identifying specific problems relating to guarantees, as well as in formulating recommendations to address the problems. Relevant aspects of the study are discussed throughout this Report.