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It’s not often that bank customers emerge victorious in litigation, especially after failing at first instance. So you have to admire Mr Chol Young Lee, a Korean national who persuaded the Queensland Court of Appeal to tear up his guarantee to the ANZ Bank.
Mr Lee had guaranteed the debts of companies in which he had a 50% shareholding. After he sold his shares and resigned as a director he had meetings with the bank about releasing him from his guarantee. At the time of the meetings the debts had been repaid. The Court of Appeal found that at these meetings he instructed the bank to cancel the guarantees, as allowed by the Code of Banking Practice, which was incorporated into the guarantee.
The problem for Mr Lee was that he had maintained in earlier proceedings against his fellow shareholder that he was indebted to the bank under these guarantees. The Bank maintained he was bound by this election. The Court of Appeal disagreed, holding that the doctrine of election, and its sub-species, the doctrine of approbation and reprobation did not apply. The reasons were:
(1) Mr Lee had obtained no benefit from the earlier proceeding, only a decree for specific performance that was liable to be set aside due to subsequent events and;
(2) the earlier proceeding did not involve the Bank.
The Court of Appeal also found Mr Lee was not subject to any Anshun estoppel, because he had not acted unreasonably in not joining the Bank to the earlier proceeding.