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DeeJayTee

Is Personal Guarantee now invalid?

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I started an estate agency and mortgage broker business as a Ltd Co with a friend in early 2004. He had another business, and was to become the estate agent, whilst I was the mortgage broker within the business. He did not give sufficient time to our business and I was becoming the estate agent, which was not the original plan. During all of 2004, I worked 6 days a week and was paid just £6500 from this business, which obviously was not enough to make a living.

 

The business arranged a business loan of £35,000 from his bank, with whom I’d never had any relationship with before. The bank required that we both give a Personal Guarantee (PG) and obtain legal advice, which we did, using his nominated solicitor, which I’d never dealt with before. The terms of the business loan were that repayments were £800 over 5 years. As the business did not generate enough income to support me, I gave him notice that I would leave at the end of December 2004, which I did. In February 2005, I resigned my Directorship and transferred my 50% shareholding back to him, as the sole remaining Director.

 

I wrote to the bank and property landlord to tell them that I had resigned my position, and had nothing further to do with the business. I asked the bank to release me from the PG as I had now left the company. The bank wrote back to me stating that they would not release me from the PG unless I had an agreement with the co-director to take over the whole PG in agreement. I believe this was an indication of the relationship the remaining Director had with his bank, of which he had been a customer for over 20 years, and managed to convince the bank manager not to release me from the bank loan, as he wanted an investment of £15,000 he expected me to make at the commencement of our business.

 

I was unable to make the £15,000 investment due to not being able to sell my marital home during my divorce, which started in June 2003 and ended in August 2005, when the marital home eventually sold. Basically, until the marital home sold, I just did not have the funds, and it sold 9 months after I left the business, and therefore was not inclined to ‘invest’ in a business I had already left. There was never any Partnership Agreement in place during our time together within this business.

 

Having now left the business, I spoke to the bank manager and asked him to inform me if anything changed within the running of the business loan that would be detrimental to me, to which he verbally agreed. The bank manager wrote to me within a week me stating that they would not release me from the PG unless I had an agreement with the co-director to take over the whole PG in agreement. I never received any form of further communication from the bank, such as bank statements, or other letters again regarding this aspect of my request.

 

Soon after leaving, it later became apparent (3 years later) that the remaining Director requested a change of terms to the repayment schedule of the business loan. It was reduced from £800 to £200 a month, and 27 months of repayments were made at this level. I was not informed of these changes to the terms, by either the Director nor the Bank. The reduction in these payments were obviously a material change to the original terms I had agreed to. I was not made aware of any of these material changes in any shape or form from the bank.

In August 2007, some two and a half years later, I received a letter from the Bank requesting a meeting to discuss the situation of the business loan account. I attended this meeting with my brother, who happens to be an ex-bank manager of a commercial lending bank, and is extremely experienced in banking matters, far greater than myself.

 

At this meeting, the bank manager (who was new to the role, and not the original bank manager who set up the facility to the Ltd Co.) informed us that the balance, after 3 years of having the account in place (remember, it was a 5 year term, at £800 a month) now stood at £34,000. To say I was amazed is an understatement. After this period of time, I expected the balance to be around £10,000, as it was three fifths of the way through the term. Also bearing in mind that at no time during the previous 3 years had the bank informed me of anything to suggest that the account was not being run satisfactorily, and that I had never received any statements or letters to inform me that my exposure to the business loan was at the same level as it was 3 years earlier. As my involvement in the Ltd Co had ceased 3 years earlier, and I was never informed of any detrimental changes at this late stage, to my understanding, I believe this means that the bank have broken their own Code of Banking regulation terms. I’m not sure if the ‘ Unfair Terms in Consumer Contracts Regulations 1999 4(1)’ applies to my case either, as the bank is chasing me as an individual, and not a business/ Company Director. Clarification would be appreciated.

 

The new bank manager did state that they had agreed to a repayment arrangement from the remaining Director, and that they were seeking for me to repay “the other 50%”. We argued the toss about the way the account had been conducted and at that stage the 50% level should be £10,000, not £34,080. We also strongly mentioned that the bank had not conducted itself properly as they had not kept me informed to the account conduct, which clearly now compromises my position and potential debt liability to the bank. We left it that the bank would write to me and outline it’s demands and summarize our meeting.

 

At this point, believing I needed professional assistance, I appointed IBAS, the Independent Banking Advisory Service, to take on my case, which they did. The first thing that IBAS did was write to the bank outlining my current position, which was very different financially to what it was in early 2004. The Bank replied regarding our meeting and summarized stating that I had agreed to repay £34,080 in full, and not the 50% that was mentioned at the meeting in early September. Basically, the bank manager lied to save his own face. Soon afterwards, the local branch manager passed the whole case over to its debt recovery section. For the next 15 months, IBAS have been in correspondence with the bank, who have stalled at each stage to supply replies to queries, and generally crawled along at a snails pace. It is now at the stage that the bank have appointed solicitors to take over the case, and although IBAS have re-iterated my case to the solicitors, and referred them to previous correspondence that should now be in their possession, they are about to start legal action against me to recover the whole of the PG, now amounting to just under £40,000 including accrued interest. Again, remember that the new bank manager said in September 2007 that he had come to an arrangement with the other Director to repay his half of the outstanding amount, and that they were looking for an offer from me for the other half remaining. The solicitors have stated that they are looking for the whole 100% from me, leaving me to wonder what happened to the 50% repayment that was meant to be forthcoming from the other Director.

 

I am slightly disappointed with IBAS as they have handled the case sufficiently well for over 15 months, and now that a Court case is possibly looming, they don’t actually come into Court with me. They have stated that they will liaise with any solicitor I employ, but solicitors cost more than I can afford.

 

As my ex-Co-Director was a client of mine (as I was his mortgage broker) before I joined him in the business venture, I know for a fact that he had £200,000 of equity in his property, and that the property was sold in September 2007, and he did not buy another property until 3 months later. I obtained this information from the Land Registry website, and obtained his new address when it appeared on a letter from the Official Receiver in a letter they wrote to me in September 2008 stating, for information purposes only, that the Ltd Co is now in liquidation. It is therefore clear that he had the means to repay the loan, used on a business that he ran for 4 years with the bank’s support, and negotiated different terms that clearly compromised my situation – once they came to light 3 years later.

 

As I mentioned, I am a mortgage broker, and as everyone knows, the mortgage business is in turmoil, and I have been affected by this market situation massively. My net profits for last year were £16,000, and this year will be £8,000! Additionally, my wife was made redundant from her senior position 2 months ago, and is now on Job-Seekers allowance. My understanding is that this should qualify me for Legal Aid, but speaking to a solicitor yesterday, he said that the Legal Aid process is 2 pronged, means testing and case merit testing.. He confirmed that on means-testing alone, I would qualify, but on case-merit testing, it has to go before the Legal Aid Board in Jarrow and that process takes 4-6 weeks, and that process cannot commence until legal papers have been served on me. Those legal papers will probably state that I have to attend Court in 14-21 days, which is insufficient time for the Legal Aid Board to assess my application for Legal Aid, which is a stupid situation. Can anyone offer any different light on this point?

 

As I cannot afford to appoint a solicitor, and Legal Aid may not be forthcoming (due to the case-merit point above), can anyone suggest a similar case reference that could be mentioned in my defence when this goes to Court? I am fully prepared to go to Court and defend myself if it comes to that point.

 

Main questions arising:

 

1)

Does the ‘ Unfair Terms in Consumer Contracts Regulations 1999 4(1)’ applies to my case ?

 

2) Has the Bank made it’s own Personal Guarantee invalid by not informing me of the material changes on the business loan? What is the name of the law it has broken?

 

3) Are there any court cases identical or similar to this case? What is the case name and reference?

 

 

Many thanks for any replies.

 

 

DeeJayTee

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I would like to update my situation regarding the question I posted to this website just over a year ago.

 

I am doing so as I want to give hope to others that may be going through what Barclays Bank put me through for over 4 years (2005-2009). I didn't previously name Barclays as the bank I was fighting against, but now I have no fear of them.

 

I previously stated what was at risk to me and that was a great deal – my home and my career ( I am in financial services and any judgement against me would have ended my 30 year career within the financial services industry). The bank would have taken it all, despite them knowing they had a flawed claim.

 

I joined IBAS (Independent Banking Advisory Service) as soon as Barclays sent me their opening gambit letter. Although it cost about £600 for an annual membership which I could really ill-afford at the time, it proved to be money well spend. This was the only fee I had to pay throught my fight against Barclays. The fact that IBAS have the knowledge and provide assistance in formulating the strategy, which was provided to me under membership and which provided the necessary case law ammunition and support (letters continually making the correct points) to prevent the bank gaining the upper hand (preventing me making offers which I wanted to make, just to get this case against me closed, and which would have destroyed any defence) - that strength of position then also enabled me to 'face off' the bank's threat (although the bank/solicitors knew their claim was flawed) and this strength of resistance then forced them to discontinue their action - this is all a matter of fact and something which IBAS should be very pleased about.

 

I understand that so many cases are lost before they start because under threats from the bank the customer provides an offer of payment - without understanding there may be a defence to the bank's claim. Having been induced to make that offer, the bank then goes for the jugular. Apparently I am one of a very small band of successful litigants, which I wouldn’t have been without IBAS behind me.

 

I was amazed when Barclays Bank's solicitor telephoned me just a few days before we were due to go into Court to say that, if I agreed to pay my own costs, then they would be prepared to drop all claims against me forthwith, completely, and without further action against me. As my only costs had been the annual IBAS fee, I had nothing else to pay!

 

I know that IBAS provided me with the necessary tools to defend against Barclays successfully.

 

Lastly, please do not ever be put off by banker’s threats. They feel because they are the ‘big boys’ that they can walk all over the ‘small boys’, even when their case is shrouded with frankly unjustifiable threats of actions that they have absolutely no right to be making. Make a stand, join IBAS (who will save you a fortune in legal fees – I was quoted between £20,000 to £25,000 in legal fees if I won or lost!) who cost me around £1,200 (I had to renew my membership as Barclays Bank were incredibly slow in replying to simple factual letters), and do not be bullied into submission when you know you are in the right.

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I would like to update my situation regarding the question I posted to this website just over a year ago.

 

I am doing so as I want to give hope to others that may be going through what Barclays Bank put me through for over 4 years (2005-2009). I didn't previously name Barclays as the bank I was fighting against, but now I have no fear of them.

 

I previously stated what was at risk to me and that was a great deal – my home and my career ( I am in financial services and any judgement against me would have ended my 30 year career within the financial services industry). The bank would have taken it all, despite them knowing they had a flawed claim.

 

I joined IBAS (Independent Banking Advisory Service) as soon as Barclays sent me their opening gambit letter. Although it cost about £600 for an annual membership which I could really ill-afford at the time, it proved to be money well spend. This was the only fee I had to pay throught my fight against Barclays. The fact that IBAS have the knowledge and provide assistance in formulating the strategy, which was provided to me under membership and which provided the necessary case law ammunition and support (letters continually making the correct points) to prevent the bank gaining the upper hand (preventing me making offers which I wanted to make, just to get this case against me closed, and which would have destroyed any defence) - that strength of position then also enabled me to 'face off' the bank's threat (although the bank/solicitors knew their claim was flawed) and this strength of resistance then forced them to discontinue their action - this is all a matter of fact and something which IBAS should be very pleased about.

 

I understand that so many cases are lost before they start because under threats from the bank the customer provides an offer of payment - without understanding there may be a defence to the bank's claim. Having been induced to make that offer, the bank then goes for the jugular. Apparently I am one of a very small band of successful litigants, which I wouldn’t have been without IBAS behind me.

 

I was amazed when Barclays Bank's solicitor telephoned me just a few days before we were due to go into Court to say that, if I agreed to pay my own costs, then they would be prepared to drop all claims against me forthwith, completely, and without further action against me. As my only costs had been the annual IBAS fee, I had nothing else to pay!

 

I know that IBAS provided me with the necessary tools to defend against Barclays successfully.

 

Lastly, please do not ever be put off by banker’s threats. They feel because they are the ‘big boys’ that they can walk all over the ‘small boys’, even when their case is shrouded with frankly unjustifiable threats of actions that they have absolutely no right to be making. Make a stand, join IBAS (who will save you a fortune in legal fees – I was quoted between £20,000 to £25,000 in legal fees if I won or lost!) who cost me around £1,200 (I had to renew my membership as Barclays Bank were incredibly slow in replying to simple factual letters), and do not be bullied into submission when you know you are in the right.

 

 

instead of being an advertisement for the above company, why dont you just share FOR FREE the 'information' that you supposedly have:-x

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Uh? Are you suggesting that the poster waited a year just to plug a company? Nobody has actually bothered to ask the OP for any more info, and nor was he actually offered any help by anyone, so pull yer neck in!

Edited by DonkeyB

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instead of being an advertisement for the above company, why dont you just share FOR FREE the 'information' that you supposedly have:-x

The Independent Banking Advisory Service. Not a company.

 

Glad things worked out well for you DeeJayTee. Are you able to share how it was all resolved?

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DJT posted ten months ago! Delayed reaction of the highest order from roko... but would be good to hear the details.

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