A guarantee will not be void for non-disclosure where the guarantor could reasonably be expected to know about the matters allegedly not disclosed.

In North Shore Ventures Ltd v Anstead Holdings Inc and others, the claimant entered into a loan agreement for $50 million with Anstead. The second and third defendants guaranteed Anstead's liabilities to the claimant. The monies were drawn down into a Swiss bank account. The claimant was a company associated with Boris Berezovsky and in 2003, the Swiss authorities froze the loan monies in Anstead's bank account because of that association. The account was only finally released in 2007. Anstead had repaid $57 million but $35 million remained outstanding and the claimant sought to recover it from the guarantors. The guarantors argued that the guarantee was void for non-disclosure by the claimant of the fact that Mr Berezovsky was under investigation by the Swiss authorities and that it was therefore likely that the loan sum would be frozen.

The court held the guarantee was not void for non-disclosure. A creditor need not disclose anything which a prospective guarantor could reasonably be expected to know, even if in only general terms. A risk must be material to be disclosable, i.e. one rendering the risk the guarantor is undertaking more onerous than the guarantor would otherwise expect. The non-disclosure must also be significant to the guarantor.

The court held that the claimant could have been obliged to disclose the information about the investigation into Mr Berezovsky and the possibility of the monies being frozen. However, the guarantors could reasonably be expected to have known of the investigation and the risk in general terms due to the press coverage of Mr Berezovsky's affairs and the fact that one defendant had had a previous close involvement with Mr Berezovsky's business affairs. The guarantee would not be avoided on the grounds of non-disclosure.

Things to consider

A beneficiary is not under a general duty to disclose. The onus is on the guarantor to enquire into and determine all the relevant facts. It is only where there are circumstances that might make the risk the guarantor is undertaking more onerous than the guarantor might otherwise expect that non-disclosure of those circumstances might render the guarantee void.