A storm, a collapsed roof, and medical gear no one wanted to move
A New South Wales court has ordered a guarantor to pay more than $200,000 after her company defaulted on an equipment finance deal - and rejected her bid to make the lender share the pain.
The District Court of New South Wales entered judgment on November 4 in Flexicommercial Pty Ltd v Smith, a case that turned on a question commercial lenders know well: when a borrower folds and the collateral is sitting in a locked-up shop, whose problem is it?
The answer, according to the court: the guarantor's.
The deal
The dispute started in June 2021, when Flexirent Capital entered a finance agreement with Synergy Healthcare Services for medical imaging equipment - an x-ray system, a DEXA scanner, and ultrasound machines - used in a radiology clinic in Nambucca Heads, New South Wales. The deal called for 60 monthly payments of $5,954.58, totalling $356,554.80. The business operator personally guaranteed the obligations.
Flexirent later assigned its rights to Flexicommercial Pty Ltd. In September 2022, a variation deed extended the repayment term to 72 months with adjusted instalments during stretches of reduced cash flow.
A storm, a shutdown, and a liquidation
In October 2021, a supercell storm ripped through Nambucca Heads with hailstones up to eight centimetres in diameter. Hail piled onto the clinic roof, the roof collapsed, and the premises flooded with melting ice. The equipment had not yet been installed and was stored off-site, but the clinic's fit-out was wrecked. Access for reconstruction was not available until September 2022. The rebuild finished in February 2023 and the business reopened shortly after.
It did not last. By March 2024, the operator could not renew the medical indemnity insurance the business needed. No alternative insurer could be found. She closed the doors. Synergy's members voted to wind up the company, and a liquidator was appointed on May 28, 2024.
Flexicommercial terminated the agreement on July 8, 2024, and demanded $203,335.37 from the guarantor - the present value of the remaining monthly payments. She did not pay.
The gear in the locked-up shop
The medical equipment was still sitting in the shuttered clinic. In July 2024, Flexicommercial obtained a desktop valuation from Pickles, an auction company, which placed the equipment's worth between $35,000 and $55,000. Internal file notes showed the lender's staff tried to arrange transport in mid-2024, but hit a wall. The x-ray system was hardwired and bolted into the premises. The transport company flagged that specialist technicians would be needed for removal and that the property manager would not accept liability for damage. By late August 2024, Flexicommercial told Pickles to close the transport request.
The lender's internal file recorded that the equipment was medical gear and would "barely cover the loan."
Months later, the premises landlord's lawyers wrote asking Flexicommercial to either remove the equipment or give up its security interest. Flexicommercial asked whether anyone wanted to buy it. The landlord's lawyers replied there were no current occupants, and a potential new tenant had said the equipment was no longer Medicare-compliant - with the possible exception of the x-ray machine.
In June 2025, Flexicommercial told the landlord it would not recover the equipment because doing so was "uneconomical," but would not object to the landlord selling it at fair market value, with any surplus remitted to Flexicommercial.
The guarantor's play
The guarantor's defence drew on a long-established fairness principle in Australian law: when a lender neglects collateral and lets it lose value, the guarantor should get credit for what was lost. She argued Flexicommercial's handling of the equipment amounted to unreasonable neglect, and that the June 2025 email to the landlord effectively gave away the lender's interest in the gear without her consent - something the agreement itself required.
She also pointed to a carve-out in the indemnity clause: it does not apply where the lender's own negligence caused the security to lose value.
Why the court said no
The court rejected the defence on multiple fronts. The agreement contained three separate clauses preventing the guarantor from reducing what she owed by claiming the lender owed her something. Those clauses barred any set-off, counterclaim, or deduction until the full debt was paid. What the guarantor was really asking for, the court found, was a deduction - and the contract did not allow it.
On the broader fairness argument, the court followed well-established authority - including the Privy Council's decision in China and South Sea Bank Ltd v Tan Soon Gin - which holds that a lender is not required to sell collateral to protect a guarantor. A guarantor who is worried about declining asset values can pay the debt, step into the lender's shoes, take over the security, and sell it herself.
The court also found no evidence the equipment had been sold, no evidence the security interest had been released - it remained registered - and no implied obligation in the agreement requiring Flexicommercial to look after the equipment after default or liquidation. The guarantor had not proved the lender was negligent or guilty of wilful misconduct.
Judgment was entered for Flexicommercial for $203,335.37, plus interest from August 30, 2024, at the prescribed rate. Costs were reserved.
For equipment financiers and brokers writing guaranteed deals, the case is a useful restatement: a lender gets to choose how it recovers its money, a guarantor cannot force a fire sale of abandoned collateral, and well-drafted no-set-off clauses hold up when it matters.
