Travis Perkins Brandon Hire and Buildbase - Personal Guarantee Problems

[Teebos]

Hello all, I've only just joined the forum as need advice regarding the legality of a personal guarantee. I'll try to keep it brief!

 

I unknowingly signed a personal guarantee that was incorporated into a credit application from in June 2010 with a building supplier. I was company secretary and a shareholder.

 

The guarantee says it may be completed by the owner/director/co. sec but the wording of the guarantee says "In consideration of your agreeing to supply goods to the applicant company on credit, we the undersigned being owner/director/directors of the applicant company jointly and severally guarantee payment of all the financial obligations...." No mention of company secretary or shareholder.

 

The company went into liquidation in May 2011 and I got threatened with a statutory demand which I managed to have put aside but am still threatened with legal action over the debt (£4k) owed to this company. Both me and the wife are still out of work and expecting number 2 in a week's time so this is rather daunting and stressful!

 

So my questions are am I considered owner by having shares in the company?

Can a personal guarantee be incorporated in a credit application form just as a separate paragraph, making it easy to sign in error? Its existence was never confirmed on any correspondence following the setting up of the credit account.

 

I have had much correspondence with the company in question and it has been dragged out as they have twice taken over a month to reply to me.

 

Any advice much appreciated!

[rebel11]

Hi am

 

Welcome to CAG

 

The guys will be happy to advise as soon as they are available.

[Gaston Grimsdyke]

The answer to both your questions is yes. If you are a shareholder you are a business owner. Also, there are no strict formalities about the form of a guarantee so it can be incorporated into the credit agreement itself. Similarly there are no strict formalities about the credit agreement either, since it is not regulated by the Consumer Credit Act.

[Teebos]

That is as I feared though the fact the guarantee is incorporated into the application form in such a way encourages a guarantee to be signed without realising exactly what you are signing. If the guarantee is a legal contract, should it not be confirmed to ensure consent?

I've read that an essential requirement for a valid guarantee is mutual consent: both the creditor and the guarantor intended there be a guarantee. That is, when you sign the document, it must be clear you intended to give a guarantee. I can prove that I signed the form not knowing there was a guarantee incorporated (Different handwriting as secretary completed form, fact that during last 2 months of struggling to pay suppliers did not prioritise this one) but would that be strong enough to let my case go to court?

[toddle2u]

I have had two of these and both have withdrawn their claim prior to it getting to trial. Can you let me know who the supplier is and when the application form containing the guarantee was signed. If it is a few years old you have more of a chance as they have recently changed the style of the credit account application forms to make them more watertight if they need to enforce them.

[Teebos]

The supplier is Travis Perkins and the form was signed in June 2010 unfortunately

[toddle2u]

Ok is the document headed 'Trade Account Application Form'? On the section where the PG was signed was it headed 'Agreement' or 'Guarantee'?

 

I've just had a look at their form and I am guessing you have signed the one headed 'Credit Account Application Form' and the subsection of the guarantee headed 'Credit Guarantee'?

Edited September 13, 2011 by toddle2u

[Teebos]

Thanks for taking time to help with this!

 

Yes, the form I signed was headed Credit account application and within part one there is a credit guarantee which I signed without reading as our secretary completed the form and I just signed - none of our other trade accounts requested any credit guarantee.

[toddle2u]

Ok this significantly weakens the arguements that I used which was based on not being given fair notice of the terms of the guarantee as there was no heading on my form that specifically said guarantee. If you had accounts with Brandon Hire and Buildbase I would check those as well as they also tend to include PG's. I will have a look at my defence again and see if there are any points that can be manipulated to help your case

[Teebos]

Thanks again. As it happens, the director (my Step father) signed the Brandon hire form and the guarantee and received a writ yesterday having had no previous correspondence from them.

[toddle2u]

Was the Brandon Hire one signed at around the same time?

[Teebos]

The Brandon one was signed July 2009 and there is a section E headed guarantee, though again easy to sign in error/haste as it's the last box to sign so easy to assume it's just a standard declaration if not expecting a guarantee to form part of the credit application.

[toddle2u]

The trouble on the Brandon one is that section E is headed and in bold 'Guarantee' so it is difficult to argue that you weren't given fair notice on this.

 

Have a look at this case http://www.scotcourts.gov.uk/opinions/2010CSIH76.html involving Brandon and you will see the difficulties you are faced with in defending this.

 

With regards to TP you could try the following;

 

1) Misrepresentation - the document is headed 'Credit Account Application Form' and for it to be a PG is misrepresentation by creditor

2) id not sign the Applciation Form in a personal capacity but as a Director of XXX Limited. It is further submitted that if this Application Form is found to be a guarantee it has an unreasonable indemnity clause within the meaning of the Unfair Contract Terms Act 1977 (”the 1977 Act”). The form that is the subject of this guarantee was between the Claimant and XXX Ltd. My involvement as a guarantor was purely a personal matter between myself and XXX Ltd

3) My trade or profession is not that of guarantor and I did not provide this guarantee in return for a fee or commission. It is therefore submitted that I was ”dealing as a consumer” within the meaning of section 12 of the 1977 Act (R & B Customs Brokers Company Ltd v United Dominions Trust Ltd [1987] EWCA Civ 3).

4) As a result of the above case, the guarantee must be reasonable and it is submitted that the guarantee does not meet the reasonableness test of section 11 of the UCTA1977 Act and it is noted that by subsection (5) that it is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.

5) It is my belief that the guarantee does not meet the reasonableness test for the following reasons.

6) I had no intention of entering into a personal guarantee

7) What is purporting to be a personal liability is incorporated in the body of a document which is clearly designed to impose liability on XXX Limited and not myself personally.

8) It has been shown above that I am a consumer in this case. Under the Unfair Terms (Consumer Contract) Regulations 1999 (regulation 8) an unfair term is not binding on the consumer and therefore I cannot be held liable for the XXX Ltd debt.

9) Under regulation 5(1) of the UTCCR a contractual term that is not individually negotiated will be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer. The Application Form was clearly pre-printed and was a standard form of the Claimant and therefore cannot have been individually negotiated. By trying to pass the liability of a third party to myself, without my knowledge, there has clearly been a imbalance in the parties rights and is to the detriment of myself financially.

 

This does not contain all or the crucial arguments I was able to use as the forms you have signed are more stringent and clearly defined with regards to bring the PG to the attention of the person signing.

[Teebos]

Wow, thanks for all of the advice/info. I'll let you know the (hopefully positive) outcome.

[Teebos]

Regarding the Brandon Hire problem my father has:

 

If the guarantee is valid and indisputable, do you know what the requirements are for a company to make a claim against the guarantee. They have just sent a writ without any previous correspondence. Do you know if it is incumbent on them to supply details of orders/invoices etc? Or is there a set procedure that they should adhere to?

[toddle2u]

The should have sent a letter before action prior to issuing court papers which would have given you chance to ask for further information regarding the debt. The fact that they haven't will have little impact on the outcome though i'm afraid

[onthefloor]

Hi Teebos

Can you post a update on your personal guarantee problem please. I have the same issue and am interested in how you are progressing.

 

Many thanks

 

onthefloor

[Teebos]

Hi. I sent an email containing the advice kindly received from toddle2u with a without prejudice offer of £500 to finish the matter on the 19th September and have had no reply. I am emailing again this week for a response and if there is any movement I'll update this thread.

[toddle2u]

Is that the TP or Brandon one you have made the offer on?

[Teebos]

Hi,

 

It was the TP one.

[toddle2u]

They will be more inclined to do a deal than Brandon. Good Luck let us know how you get on.

[Teebos]

Hi,

 

After a wait of nearly 2 months I have a reply! Not great but progress:-

 

We write in response to your email dated 19 September 2011 and apologise for the delay in responding.

We have reviewed the contents of your email and comment as follows on the points raised:-

 

1. Misrepresentation - The Application Form is headed Credit Account Application Form,

the Personal Guarantee contained within the Application Form is in a separate section

which is clearly headed Credit Guarantee in bold type and the wording and

consequences of signing are made clear. In order for an allegation of misrepresentation

to succeed you need to be able to demonstrate that Travis Perkins has made a false

statement with the intention of inducing you to sign the Credit Guarantee. The

Application Form was completed by you in your own time and submitted to Travis

Perkins and we cannot therefore accept your allegations of misrepresentation.

 

2. You completed the Application Form and the Credit Guarantee contained therein in

your capacity as Company Secretary. You held yourself out as being somebody with

authority to bind the Company and as a result of completing and submitting the

Application Form to Travis Perkins, Travis Perkins agreed to grant a credit facility to

the Company reliant on the Personal Guarantee provided by you. We note you refer to

the Unfair Contract Terms Act 1977 however you have contracted with Travis Perkins

in a business capacity not as a consumer and therefore the Act does not apply.

 

3. As stated at 2 above, you were not contracting with Travis Perkins as a consumer, you

were applying for a business account with another business and therefore are not

afforded the same rights as that of a consumer.

 

4. The Unfair Contract Terms Act 1977 does state that the terms need to be reasonable

however we would expect a Court to take into account the fact that you were dealing in

a business capacity and not as a consumer and that this was a contract between

businesses not between a business and a consumer.

 

5. Your arguments in relation to "reasonableness" are rejected for the following reasons:-™6'1

a. You state that you had no intention of entering into a Personal Guarantee

however in view of the fact that the Personal Guarantee is contained within the

Application Form is clearly worded, clearly headed and is signed by you in your

own time, away from Travis Perkins premises, we cannot accept that there was

no intention to enter into a Personal Guarantee.

 

b. There is no requirement for the Personal Guarantee to be a separate document.

The fact that it is a separate section within the Application Form does not make

it unenforceable. The wording of the Credit Guarantee makes it clear that, as a

result of signing, you are agreeing to be liable for the debts of the Company in

the event that the Company is unable to pay.

 

c. You are not dealing with Travis Perkins in your capacity as a consumer you have

contracted with Travis Perkins in a business capacity.

 

d. In a business capacity you applied for a credit account with Travis Perkins. You

received a blank Application Form complete with Travis Perkins terms and

conditions. The terms of the contract were not open for negotiation and if you

did not wish to be bound by the terms contained therein you were under no

obligation to complete and submit the Form to Travis Perkins.

 

Whilst we note your comments with regard to the validity of the Personal Guarantee we maintain that the Personal Guarantee is valid and enforceable against you for all sums outstanding.

 

 

We note the issues raised in relation to pricing and goods being supplied without order numbers

however no query was raised prior to the account being referred legal and in any event these allegations are not supported by any evidence.

 

 

We note your offer of £500.00 in full and final settlement however this is rejected.

 

 

The sum of £3476.22 remains outstanding and due for payment and unless we receive your realistic proposals for settlement of all sums within the next 7 days, we will be pursuing you further in your capacity as Personal Guarantor.

 

I also received another letter same day saying my offer of £500 is reasonable and they are prepared to offer £2200 as settlement.

 

I have sent an email back asking for more time to respond, trying not to be antagonistic as they took so long to reply to me yet expect my response/cash in 7 days! (they've replied already giving me till the 28th).

 

The whole case put forward by toddle2U relies on misrepresentation which they do not accept and claim I have to demonstrate that TP have made a false statement with the intention of inducing me to sign. I don't see how this can be proven but wonder about the following:-

 

1. The wording on their form next to where you sign to apply for the account (not the PG) is larger than the PG wording and actually carries a warning to make sure you understand what you are signing whereas the PG section does not.

 

2. The only way I can see to claim misrepresentation, or at least try and show that my case will not be singular, would be to ask the court (if it comes to that) to contact all existing account holders to ask if they are aware of the existence of a PG on their account. I have hinted that this may form part of my defence but don't know if a court would go to such effort.

 

3. TP claim they only opened the credit account reliant on my PG. I have asked many times if all TP accounts must have a PG and if they still carry out a credit check or just open an account as they are covered by the PG.

 

 

Obviously I've had no reply to these questions and ask them as at the time of opening the account, our company had traded successfully for 25 yrs and had an unblemished credit history. My point being that a credit account would have been awarded without my PG.

[toddle2u]

I said in previous posts that you would probably struggle on this one as it is one of the newer account application forms that you signed that clearly says "Credit Guarantee". The main thrust of the arguement is not misrepresentation but that you signed in as a consumer and not in a business capacity. You need to go back at them with that re-stating the case law I mentioned previously

My trade or profession is not that of guarantor and I did not provide this guarantee in return for a fee or commission. It is therefore submitted that I was ”dealing as a consumer” within the meaning of section 12 of the 1977 Act (R & B Customs Brokers Company Ltd v United Dominions Trust Ltd [1987] EWCA Civ 3).

 

You then need to reiterate the reasonable test

What is purporting to be a personal liability is incorporated in the body of a document which is clearly designed to impose liability on XXX Limited and not myself personally.

 

As stated initially I always thought you'd struggle with this one but keep going back to them and offer a bit more.

[Teebos]

Well, a result has been reached.

 

They have agreed to an initial £500 with another £500 in monthly instalments of £20.

 

A pretty good result so thank you for the advice given here.

 

Still annoyed I have to pay anything but should be annoyed at myself for not reading what I was signing really!

 

Thanks again.