A lessor cannot call on a bank guarantee securing lease obligations after the limitation period has expired on the underlying debt, because the guarantee provides security for legal entitlements and the lessor must have an extant enforceable right at the time of the demand. The effect of a covenant to pay rent 'without any deductions whatsoever' on the right of equitable set-off remains an open question in Australian intermediate appellate courts. The test of absurdity as a basis for departing from the literal meaning of a contract is not easily satisfied and courts have no mandate to rewrite agreements merely to give them an operation that might make more commercial sense.
The full text is available to signed-in members, including the 63 later cases that cite this judgment.
13 of the 63 citing cases carry a classified treatment. How each court treated it is available to signed-in members.