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Causation and the Code

The recent Victoria Supreme Court decision of CBA v Wood [2016] VSC 264 demonstrates the significant role which causation plays in cases where a guarantor seeks to avoid their obligations because the lender has committed breaches of the Code of Banking Practice.

In contrast to some earlier decisions involving Code breaches, the Court found that here the Guarantor had not shown that he would have acted any differently if the breaches had not occurred.

The Court also reinforced the position that the breaches of the Code were “mere warranties” and not conditions (as advocated for by Wood). Accordingly, the breach of a provision of the Code would not mean that Wood had a right to terminate the Guarantee, only that damages were payable, if proved. 

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