Personal Guarantees, Unconscionability, and Complex Property Deals

Complex property transactions often involve layered agreements, evolving negotiations, and personal guarantees that expose directors and their spouses to significant personal liability. The Queensland Supreme Court's decision in Symx Land Developments Pty Ltd v Pugh [2025] QSC 137 provides important business law insights into how courts approach guarantees, claims of unconscionability, and contractual uncertainty.

While this case was decided in Queensland, many of its key principles are directly relevant to businesses and advisors operating in New South Wales, particularly given the similar legislative framework and the High Court authorities discussed. In this blog, we analyse the Court's reasoning and extract practical business law lessons for company directors, guarantors, property developers, and legal advisors engaged in complex commercial transactions.

Factual Background: A Complex Property Sale

At the heart of the dispute was a property located at Upper Mount Gravatt, Brisbane, owned by Symx Land Developments Pty Ltd ("Symx"). Symx sought to sell the property for over $3.8 million and, after several unsuccessful attempts, was introduced to a potential buyer: Valour Investment Group No 3 Pty Ltd ("Valour"), controlled by Mr Shane Pugh.

Mr Pugh was an experienced commercial flooring contractor with ambitions to enter property development, despite having limited experience and no available capital to fund the purchase or development. To facilitate the purchase, a complex arrangement was negotiated involving:

• An initial sale contract;

• A Deed of Variation incorporating alternative payment structures and security, including personal guarantees;

• A Deed of Gift relating to future units;

• Subsequent variations to accommodate finance delays.

Mr Pugh’s wife, Mrs Vanessa Pugh, was later appointed as a director of Valour and signed various documents providing personal guarantees and undertakings alongside her husband.

When Valour defaulted on its payment obligations, Symx sought to enforce the guarantees against both Mr and Mrs Pugh, resulting in the litigation before the Supreme Court of Queensland.

The Legal Issues Before the Court

The Court was required to consider several critical business law questions:

1. Were the guarantees valid and enforceable against the Pughs?

2. Were the Deeds of Variation void for uncertainty?

3. Could Mrs Pugh avoid liability under doctrines of unconscionable conduct or undue influence?

4. Were the formal execution requirements of the Corporations Act 2001 (Cth) satisfied?

Justice Hindman ultimately ruled in favour of Symx, holding both defendants liable under the guarantees for the sum of $2.28 million plus interest and costs.

Key Business Law Learnings

1. Guarantees Can Bind Directors and Spouses Even Without Separate Execution

The defendants argued that they were not parties to the Deed of Variation and thus were not bound by the guarantees attached as a schedule. Justice Hindman rejected this argument, finding that:

• Both Mr and Mrs Pugh initialled each page of the Deed of Variation and Guarantee.

• The parties’ conduct demonstrated a clear intention to provide the guarantees.

• A guarantee need not be executed as a standalone deed where agreement is otherwise established.

Key takeaway for business owners and directors:
Personal guarantees can arise through conduct, even where the execution formalities may not strictly follow conventional separate deed processes. Directors and spouses who initial or endorse contract schedules should be aware that they may be assuming personal liability.

2. Unconscionability Arguments Must Be Properly Pleaded and Proven

Mrs Pugh raised a defence based on unconscionability, invoking doctrines from Commercial Bank of Australia Ltd v Amadio and Yerkey v Jones, as refined in Garcia v National Australia Bank Ltd. She argued that, due to her limited experience and knowledge, it was unconscionable to enforce the guarantees against her.

However, the Court found that:

• The pleaded defence focused solely on an Amadio-type claim requiring proof of "special disadvantage" and Symx's knowledge of that disadvantage.

• Mrs Pugh’s counsel expressly disclaimed reliance on Yerkey v Jones principles during trial.

• The evidence did not establish that Symx had the requisite knowledge of any special disadvantage faced by Mrs Pugh.

As Hindman J noted, “The pleaded unconscionability defence and counterclaim fails”【5:88】.

Key takeaway for businesses and guarantors:
Unconscionability claims must be properly framed and supported by evidence. Courts will strictly hold parties to their pleaded cases, and general allegations of vulnerability or limited financial knowledge may not suffice.

3. Complex Payment Arrangements Are Not Necessarily Void for Uncertainty

The defendants sought to argue that the Deeds of Variation were void for uncertainty, pointing to multiple aspects of the payment arrangements, including:

• Use of BBX trade dollars;

• Deferred payments linked to GST refunds;

• References to “practical completion” of the proposed development.

The Court rejected these arguments, observing that:

• Commercial agreements often involve flexibility and complexity;

• Courts will strive to give commercial efficacy to agreements where possible;

• The key terms were sufficiently clear to give rise to enforceable obligations.

As Barwick CJ famously stated in Council of the Upper Hunter County District v Australia Chilling and Freezing Company Ltd (1968) 118 CLR 429, cited by Hindman J:

“As long as [a contract] is capable of a meaning, it will ultimately bear that meaning which the courts … decide is its proper construction”【5:98】.

Key takeaway for commercial parties:
Courts favour upholding commercial bargains and will not lightly set aside agreements for uncertainty if a workable meaning can be ascribed to the parties’ intentions.

4. Informal Execution May Still Bind Companies Under the Corporations Act

The defendants argued that Symx’s execution of the contract and subsequent deeds was defective because they were not signed strictly in accordance with s 127(1) of the Corporations Act 2001 (Cth).

The Court found:

• Execution under s 126 of the Corporations Act was sufficient where the company authorised the individual (here, Mr Yu) to execute documents on its behalf.

• Symx’s subsequent conduct in proceeding to settlement demonstrated ratification of Mr Yu’s execution.

Key takeaway for businesses:
While formal compliance with s 127 provides the benefit of statutory assumptions for third parties, valid corporate execution can still occur under s 126 where an authorised officer signs for the company.

5. Vendor Finance and Director Guarantees Create Significant Risk

A striking feature of this case was Mr Pugh's business model: attempting a multi-million-dollar property development with no capital, relying entirely on vendor finance, GST refunds, and complex payment deferrals. This ultimately exposed both him and his wife to personal liability when the project collapsed.

Justice Hindman was critical of Mr Pugh's overconfidence:

“He described his involvement in property development at the time he became aware of the Property as ‘none whatsoever’”【5:11】.

Key takeaway for entrepreneurs:
Entering into property development without sufficient financial capacity or proper professional advice can carry grave personal financial consequences. Directors should be acutely aware that guarantees offered to vendors can expose them—and their spouses—to personal risk if projects fail.

Practical Lessons for Business Lawyers and Advisors

For legal practitioners advising clients on property transactions, guarantees, or complex commercial arrangements, the following points emerge from this case:

• Ensure that guarantors receive independent legal advice and that such advice is properly documented.

• Take care when involving spouses in corporate structures or director roles, especially where personal guarantees are requested.

• Frame pleadings precisely when raising unconscionability defences — failure to plead material facts specific to Yerkey v Jones or Amadio will limit available arguments at trial.

• Recognise that courts will usually seek to uphold commercial agreements where the parties’ intentions are ascertainable.

Conclusion

The decision in Symx Land Developments Pty Ltd v Pugh reinforces the serious consequences of entering into guarantees and the limited scope for escaping liability based on claims of unconscionability or uncertainty. For business owners, property developers, and directors in New South Wales, it serves as a timely reminder of the need for proper due diligence, financial capacity, and independent legal advice before committing to complex transactions.