Business Account -chasing Me For Guarantee

[nicklea]

Here's some more about the case. The case itself concerned a lease, but this has now been extended to all guarantees:-

In Holme v Brunskill (187 3 QBD 495 the court confirmed that a guarantor's covenant may be wholly released where the lease is varied without that guarantor's consent. Release will occur unless the variation is "self-evidently insubstantial or non-prejudicial". The courts have emphasised they will not enquire whether actual detriment has occurred. Only if it can be shown that there is no possibility of detriment will the guarantor remain on the hook.

[nicklea]

Aah!! is 8 )

[nicklea]

and a bit more for you:-

The latter part of last year saw considerable
comment about the Court of Appeal decision
in Triodos Bank NV v Dobbs Triodos Bank NV v Dobbs [2005] EWCA Civ 630. Such
comment focused on the risk of inadvertent
discharge of a guarantee where a creditor and
principal debtor agree to amend their original
loan agreement.

Current Practice
The basic rule regarding the impact of
contractual amendments on guarantees is set
out in Holme v Brunskill (187: a guarantor is
released from liability under a guarantee where
the creditor and principal debtor have varied
the contractual position between them to the
disadvantage of the guarantor without his prior
consent, unless it is self-evident that the
variation is beneficial to the guarantor or that it
does not substantially affect the risk borne by
the guarantor.

It has therefore become established practice
to incorporate “creditor protection language”
into guarantees, designed to displace the
rule in Holme v Brunskill. A term is included
whereby the guarantor consents in advance to
any subsequent amendments or variations
to the guaranteed contract, without the need
to obtain the guarantor’s separate consent
at the time of an amendment. Such a term is
essential given that facilities made available
to borrowers are often the subject of repeated
restructuring.

However, the decision in Triodos means that
a creditor and debtor cannot simply obtain
a guarantor’s consent in advance, and later
vary their contract as they wish. Unless they
get the express consent of the guarantor to
the variation, then any changes they make
must be either minor or, if more significant,
have been expressly provided for in the original
agreement.

[dhoom]

Thanks nicklea

I wasn't the company director, and the guarantee was to be signed by the company director to the best of my knowledge.

[dhoom]

to the best of my knowledge the Company is treated as a separate entity to an individual and any correspondence that relates to this facility should be addressed to the company as well as the guarantor. They only ever wrote to me about this at the beginning and whenever any extension or variation took place I was not informed personally

[nicklea]

Hi,

I think that i can add something around this to your defence. I'll think about it tonight (sad - I know!) and post something tomorrow.

By the way, the Statutory Demand that you've received - does it state Optima or the bank as the actual claimant?

[dhoom]

Originally Posted by nicklea

Hi,

I think that i can add something around this to your defence. I'll think about it tonight (sad - I know!) and post something tomorrow.

Thanks.

Originally Posted by nicklea

By the way, the Statutory Demand that you've received - does it state Optima or the bank as the actual claimant?

Its actually a county court claim form and the Claimant is Barclays

[slick132]

Hi Dhoom,

Please confirm your relationship with the Ltd Co if you weren't a director.

[dhoom]

co. secretary

[nicklea]

ok, here you go dhoom. This is just my suggestions, I am in no way legally qualified, I'm just an ordinary person in a similar position to yourself that's done a bit of reading. I strongly suggest you get proper legal advice but I understand that you need to get some sort of defence in by Monday.

I would suggest that you send this in and then speak to some one properly qualified as I have asked for permission to amend the defence.

I have suggested you refer to set-off rather than a counter claim because if you make a counter claim you have to pay a large fee when you send the form in - but here you're using the set-off just as a defence.

I've played around a bit with your defence, see what you think

[nicklea]

Background

1.??? To be honest I would really question the need for this Defendant neither denies nor admits the claim, LTD CO. operated a current account a/c no.22222222 sort code 123456 with the Claimant from around November 2005
.
2. I am a Litigant in Person in this case. During all material times I was not a director of [] Ltd and was not a party to any negotiations or agreements made between the claimant and [] Ltd. When [] ltd first agreed an overdraft with the claimant for a period of x months I agreed to act as guarantor in the amount of £x. [instead of the following]The defendant was guarantor for various amount for the facilities offered by the Claimant this was detailed in a form of a facility letter totalling £xx,000.

3. During the period in which the Account was operating the Claimant debited numerous charges to the Account in respect of purported breaches of contract on the part of LTD. CO. and also charged interest on the charges once applied. i understand that the Claimant contends that the charges were debited in accordance with the terms of the contract between itself and the LTD. CO.

4. A list of the charges ("the Charges") applied is attached to this defence [ maybe leave out reference to counterclaim – see below where I refer to set-off] and Counterclaim. The total [forget interest for the moment just give the total amount of charges] including interest is believed to be £xxxx. [are you sure about this – have you got ALL the statements? What other information did you request from their solicitors in point 7 below?]

5. Due to the amounts the claimants debited in unlawful charges the lLTD. CO. had used up its entire OD to service this and had to seek extra facilities from the bank. In the interim around the late 2006/early 2007 the Claimant called upon the OD facilities which left the LTD. CO. with no option but to cease trading.6. around early 2007, the Claimant called in the guarantee from myself.

7. On xx FEB 2008 I made a request to the claimant’s solicitors under Civil Procedure Rules Part 18 to provide all relevent information in respect of the account and this claim. To date the claimant has ignored my request under the CPR and I have not received any such documentation requested. As a result it has proven difficult to compose this defence without disclosure of the information requested, especially given that I am Litigant in Person.

8 I respectfully request that the Claimant be ordered to disclose the requested documents and that following sight of them I will seek the permission of the court to amend this defence and present a more fully particularised defence.

Defence

The Guarantee

9 This guarantee imposes a secondary obligation on me:-

“in a contract of guarantee the surety assumes a secondary liability to answer for the debtor who remains primary liable;” (Chitty on Contracts (29th Ed) Vol 2 para 44.013)

As a result, I have all the defences available to the debtor and I am discharged automatically (under the rule in Holme v Brunskill (1878 ) 3 QBD 495) if there is any variation of the arrangements with the principal debtor without my consent which might prejudice my interests. (Marubeni Hong Kong v Government of Mongolia [2005] EWCA Civ 395 per Carnworth LJ).

10 It was confirmed in Triodos Bank NV v Dobbs [2005] EWCA Civ 630 that, despite any language incorporated into the guarantee designed to displace the rule in Holme v Brunskill, the express consent of the guarantor must be obtained unless the changes are minor or expressly provided for in the original agreement.

11 You need to put a bit in here about how you were told that the agreement was just for 3 months and that would be all. Mention what the changes were to the agreement and that you also were not notified of any changes. Follow this with this sentence.:- I submit that these variations are substantial and were not expressly provided for in the original agreement and therefore the rule in Holme v Brunskill applies and I should be automatically discharged.

12 Further, or alternatively, it was represented to me by [the bank ? – it would be really good for your case if you could say the bank otherwise you can’t really use this defence] that the contract would last for [put in here about it just being 3 months or whatever]. I submit that this was a misrepresentation of the true facts and it did induce me to sign the contract of guarantee. I submit that this was a negligent misrepresentation under s2(1) Misrepresentation Act 1967 and I claim damages pursuant to this, the amount being at the discretion of the court. I refer also to the authority of Millett v Stanley Works Ltd [1997] EWCA Civ 2469.

13. [not too sure how helpful this is?] The Defendant contends that the balance of the overdraft associated with the Account remaining when the LTD. CO. defaulted is incorrect as the Charges are contract penalties unlawful at Common Law and the Claimant also levied interest on the Charges.

14. I also contend that as a direct result of the claimant the LTD. CO. had no choice but to stop trading resulting in defaulting over the OD facilities.

Counterclaim [maybe replace this title with:- Set-Off see my comments above for the reasons why]

15. The Claimant is claiming for money owed by LTD CO. which was opened around Nov'2005 and I don't know whether this is still open or closed. Neither has the claimant provided a statement detailing the exact amount owed.

16. During the period in which the Account was operating the Claimant debited numerous charges to the Account in respect of purported breaches of contract on the part of the LTD CO. and also charged interest on the charges once applied. I understand that the Claimant contends that the charges were debited in accordance with the terms of the contract between the LTD. CO. and itself.

17. A list of the charges applied is attached to these particulars of claim.

18. The Claimant contends that [you are the defendant in this case!!] I contend that:

a) The charges debited to the Account are punitive in nature; are not a genuine pre-estimate of cost incurred by the Claimant; exceed any alleged actual loss to the Claimant in respect of any breaches of contract on the part of the the LTD. CO. and are not intended to represent or related to any alleged actual loss, but instead unduly enrich the Claimant which exercises the contractual term in respect of such charges with a view to profit.

b) The contractual provision that permits the Claimant to levy such charges is a disproportionate penalty and, as such,is unenforceable by virtue of the common law. The precedent for the law relating to contractual penalties was set in the case of Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co Ltd (1915) AC 79. Additionally, in the case of Murray v Leisureplay (2005) EWCA Civ 963 it was held that a contractual party may only recover damages in respect of its actual loss or liquidated losses.

c) The claimant has been unduly enriched by having this money
d) There is a right of set-off with regard to these charges and the interest paid on them.

19. Accordingly I claim the following amounts should be set-off against any claim the claimant might have against me:

a) the amounts debited in respect of charges [do you know the actual figures yet?] in the sum of £xxxx and any interest charged thereon; [maybe replace with:- the amounts debited in respect of charges the exact amount of which I will be able to detail when the Claimant complies with my CPR Part 18 request.]

b) Any interest charged by the Claimant to the Account as a result of the charges being applied, the exact amount to be detailed when the Claimant complies with my CPR 18 request;
c) I also claim compound interest at the claimant’s standard rate for overdrafts for the restitution of the time value of the charges and interest thereon on the basis that the Claimant has been unduly enriched by having the use of this money. The authority for this is Sempra Metals v Inland Revenue Anor. [2007] UKHL 34. Lord Nicholls in the leading statement said:-
“There can only be one answer on this important question of law. Nobody has suggested a good reason why, in a case like the present, an award of compound interest should be denied to a claimant. An award of compound interest is necessary to achieve full restitution and, hence, a just result. I would hold that, in the exercise of its common law restitutionary jurisdiction, the court has power to make such an award.”
d) In the alternative to c above, if the court should find that I am not entitled to compound interest, then I claim interest pursuant to s69 County Courts Act.

Indemnity Clause
20 The contract of guarantee contains a separate indemnity clause. I submit that this clause is unreasonable within the meaning of the Unfair Contract Terms Act 1977 and, as such, is unenforceable. I note that under s11(5) of this Act that it is for those claiming that a term satisfies the requirement of reasonableness to show that it does.
Costs
21 I claim all court and other costs associated with defending this claim.

[dhoom]

thanks nicklea, I will try and digest this.

[dhoom]

IN THE XXXXXXX COUNTY COURT CLAIM No: XXXXXX,

BETWEEN

BARCLAYS BANK PLC CLAIMANT

AND


DHOOM DEFENDANT

BARCLAYS BANK PLC

DEFENCE AND COUNTERCLAIM

DHOOM

Background

1. Iam the Claimant and Litigant in Person in this case. The guarantee referred to in this case is normally provided for by the Director which I am/was not, The initial negiotation that were made between Limited (company) and the claimant was to provide overdraft facilities (OD) for a period of 3 months to around end March 2006 I agreed to act as guarantor in the amount of £xxxxx in respect of the OD.

2. During the period in which the Account was operating the Claimant debited numerous charges to the Account in respect of purported breaches of contract on the part of Company and also charged interest on the charges once applied. I understand that the Claimant contends that the charges were debited in accordance with the terms of the contract between itself and the Company.

3. A list of the charges ("the Charges") applied is attached to this defenceand SET OFF. The total being £xxxxxincluding interest is believed to be£ xxxxx. The Defendant contends that this is like to increase once all the information has been obtained from the Claimant
.
4. Due to the amounts the claimants debited in unlawful charges the Copany had used up its entire OD to service this and had to seek extra facilities from the bank. In the interim around the late 2006/early 2007 the Claimant called upon the OD facilities which left the Company no option but to cease trading.

5. In early 2007, the Claimant called in the guarantee from myself.


6. On xx FEB 2008 I made a request to the claimant’s solicitors under Civil Procedure Rules Part 18 to provide all relevant information in respect of the account and this claim. To date the claimant has ignored my request under the CPR and I have not received any such documentation requested. As a result it has proven difficult to compose this defence without disclosure of the information requested, especially given that I am Litigant in Person.

7. I respectfully request that the Claimant be ordered to disclose the requested documents and that following sight of them I will seek the permission of the court to amend this defence and present a more fully particularised defence.

Defence

The Guarantee

8. This guarantee imposes a secondary obligation on me:-

“in a contract of guarantee the surety assumes a secondary liability to answer for the debtor who remains primary liable;” (Chitty on Contracts (29th Ed) Vol 2 para 44.013)

As a result, I have all the defences available to the debtor and I am discharged automatically (under the rule in Holme v Brunskill (1878 ) 3 QBD 495) if there is any variation of the arrangements with the principal debtor without my consent which might prejudice my interests. (Marubeni Hong Kong v Government of Mongolia [2005] EWCA Civ 395 per Carnworth LJ).

9. It was confirmed in Triodos Bank NV v Dobbs [2005] EWCA Civ 630 that, despite any language incorporated into the guarantee designed to displace the rule in Holme v Brunskill, the express consent of the guarantor must be obtained unless the changes are minor or expressly provided for in the original agreement.

10. To the best of my knowledge this guarantee was for the purpose of securing the overdraft facility for a period of 3 months which would have expired around end March 2006. It seems that there were some changes to this which I was not notified.I submit that these variations and were not expressly provided for in the original agreement and therefore the rule in Holme v Brunskill applies and I should be automatically discharged.

11 Further, or alternatively, it was represented to me by the claimant that the facility I was to guarantee would last for 3 months. I submit that this was a misrepresentation of the true facts and it did induce me to sign the contract of guarantee. I submit that this was a negligent misrepresentation under s2(1) Misrepresentation Act 1967 and I claim damages pursuant to this, the amount being at the discretion of the court. I refer also to the authority of Millett v Stanley Works Ltd [1997] EWCA Civ 2469.


12. I also contend that as a direct result of the claimant the Company, had no choice but to stop trading resulting in defaulting over the OD facilities.

Set-Off

13. The Claimant is claiming for money owed by Company. which operated an account with the Claimant which was opened around Nov'2005 and I don't know whether this is still open or closed. Neither has the claimant provided a statement detailing the exact amount owed.

14. During the period in which the Account was operating the Claimant debited numerous charges to the Account in respect of purported breaches of contract on the part of the Company. and also charged interest on the charges once applied. I understand that the Claimant contends that the charges were debited in accordance with the terms of the contract between the Company and itself.

15. A list of the charges applied is attached to these particulars of claim.

16. The Defendant contends that:

a) The charges debited to the Account are punitive in nature; are not a genuine pre-estimate of cost incurred by the Claimant; exceeds any alleged actual loss to the Claimant in respect of any breaches of contract on the part of the Company and are not intended to represent or related to any alleged actual loss, but instead unduly enrich the Claimant which exercises the contractual term in respect of such charges with a view to profit.

b) The contractual provision that permits the Claimant to levy such charges is adisproportionate penalty and as suchis unenforceable by virtue of the common law. The precedent for the law relating to contractual penalties was set in the case of Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co Ltd (1915) AC 79. Additionally, in the case of Murray v Leisureplay (2005) EWCA Civ 963 it was held that a contractual party may only recover damages in respect of its actual loss or liquidated losses.

c) The claimant has been unduly enriched by having this money


d) There is a right of set-off with regard to these charges and the interest paid on them.

17. Accordingly I claim the following amounts should be set-off against any claim the claimant might have against me:

a) The amounts debited in respect of charges in the sum of £xxxxx and any interest charged thereon.

b) Any interest charged by the Claimant to the Account as a result of the charges being applied, the exact amount to be detailed when the Claimant complies with my CPR 18 request;

c) I also claim compound interest at the claimant’s standard rate for overdrafts for the restitution of the time value of the charges and interest thereon on the basis that the Claimant has been unduly enriched by having the use of this money. The authority for this is Sempra Metals v Inland Revenue Anor. [2007] UKHL 34. Lord Nicholls in the leading statement said:-
“There can only be one answer on this important question of law. Nobody has suggested a good reason why, in a case like the present, an award of compound interest should be denied to a claimant. An award of compound interest is necessary to achieve full restitution and, hence, a just result. I would hold that, in the exercise of its common law restitutionary jurisdiction, the court has power to make such an award.”

d) In the alternative to (c) above, if the court should find that I am not entitled to compound interest, then I claim interest pursuant to s69 County Courts Act.

Indemnity Clause
18. The contract of guarantee contains a separate indemnity clause. I submit that this clause is unreasonable within the meaning of the Unfair Contract Terms Act 1977 and, as such, is unenforceable. I note that under s11(5) of this Act that it is for those claiming that a term satisfies the requirement of reasonableness to show that it does.


Costs
19. I claim all court and other costs associated with defending this claim.

[dhoom]

Made some changes after suggestion from nicklea, any further comments would be appreciated