The bank`s case was not aided by the fact that it had given the surety a form of consent that had been refused and that it therefore had to argue that the consent it needed as a precondition for the amendment was not necessary. The Bank submitted that a guarantee for the purposes of the facility, as originally documented, had been extended to the “revised and revised” facility agreement that came into force following a default when the global financial crisis hit. Much on the interpretation of the documents to the ease and the guarantee itself, although the case is both interesting for financiers, lawyers and guarantors, since it was a standard guarantee used by one of the big four banks and the situation is common in practice. The decision will surprise many financiers and lawyers, who would generally view an “amendment and recovery” as a continuation of the existing facility agreement, rather than as a new agreement that terminated the old one. The distinction can have radically different consequences, as has been the case here. The other member of the Court found that there had indeed been an amendment that did not null and for the previous agreement and therefore did not require the agreement of the surety on his face. However, his tribute was paid in favour of the guarantor, on the grounds that “variation” requires the consent of the guarantor, since the carve-outs based on the Ankar principle apply in this case. The terms of a commercial financing facility can be subject to a large number of changes over its duration. They are sometimes contained in a brief change document that covers only the various changes. There may be a number of cases, and for more complex and longer transactions, it is customary for the original agreement to be “modified and revised” with its amendments – in other words, consolidated and contained in a single document.
It`s as much for the lightness of reading as anything else. In Manasseh, two of the three members of the Court held that the “modification and recovery” would replace (and thus terminate) the old facility agreement to which the guarantee relates. As the guarantor of the replacement body did not give its consent, its guarantee did not extend to it. Overall, and to me, the outcome depended on whether the rules documented in “modification and recovery” were properly considered: In the decision of the Court of Appeal of Western Australia in Australia and the New Zealand Banking Group Limited/. Manasseh (March 10, 2016) was the central theme of the legal nature and the effect of an amendment and reassessment. In the case, this was a request from the Bank as part of a guarantee granted at the time of the initial grant of the facility. The result was a victory for the guarantor, who successfully argued that the guarantee granted at the beginning of the facility would not be extended to amended investment agreements that were “modified and amended” at a later date. In its decision, the Court reaffirmed the recognized principle that an agreement to “modify” an existing agreement can either modify the existing agreement without affecting its existence or denounce and replace the existing agreement.
This question is determined by the objective intentions of the parties. In reasonable practice, if safeguards are to be extended to amended agreements (regardless of documentation), the guarantors should be agreed to avoid any argument, as the terms of the guarantee themselves require.