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COBS / BCOBS / PRIN & Personal Guarantee - Your thoughts?

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Hi, firstly as a regular viewer of the site but very rare contributor, thanks for all the information put out there (particularly by the site team and the very frequent contributors) to assist us mere mortals, it really does help to know you're not alone.


The following situation might be of some general interest in terms of the above areas and I'd welcome any comments, positive or negative.


After sadly putting our business into liquidation in 2010, I'm now being chased by the bank (no names yet, don't want to give them any warning) albeit some two and a half years later, for the personal guarantee.


No arguments that I signed a guarantee, but their entire attitude since contacting me (including now taking the matter to court despite the fact that there is a formal complaint to them still in progress) has utterly hacked me off, made me review the entire history of the 'relationship', and I'm now determined to fight them all the way, and if possible, even turn the tables somewhat using COBS / BCOBS.


My argument is that as they arbitrarily withdrew 80% of the available credit on our business credit card overnight, and additionally demanded repayment of the entire overdraft (albeit by knocking a sum off every month rather than instantly) this seriously damaged the business at a point where it was already vulnerable, and as such was a clear breach of the implied terms of contract in relation to the FCA/FSA COBS / PRIN requirements 2.1.6 and 2.1.8. I should mention that while the business was indeed struggling in the recession, we had held both forms of credit since its inception some three years earlier and had never missed a payment on either. My personal losses from the business folding were around £70k, and I think it entirely reasonable to get at least some of that back from the bank, never mind stuff the personal guarantee....... This all happened in 2009, so I believe it should be covered by COBS.


I've initiated a complaint with the FOS (yes, I know they're ineffective but it will give the bank something else to do, and it's another way to use the same argument to pursue them for 'compensation') and I've sent a warning letter to the bank that they should not pursue the legal avenue while the Ombudsman investigates (for personal reasons I could really do without the court related hassle at present). I'm also hoping when they see the substance of the FOS complaint and / or legal defence they'll rapidly back off and make me an offer.


However, if they continue with the legal action, I guess the more immediate option is to use the above 'breach of contract' argument to both get the personal guarantee rendered null and void and to counter-sue for (a proportion of) my own losses. I think it is reasonable to link the two things as without the failure of the business the personal guarantee wouldn't have become payable.


The really galling thing is that the bank already haven't lost a penny! The loan & interest repayments we made over the years while the business was operating, plus the small business loan guarantee insurance (premiums paid by us, naturally) have already more than covered the original loan and overdraft, so they are, in effect, coming after me for their profits, despite playing a major part in destroying the business......you couldn't make it up.....


I would probably have to engage professional legal help for the above, as I'm somewhat unsure about the counter-suing bit in relation to the original action, but I would very much appreciate opinions on a couple of issues;


1. Any views on my chances of success.....!?


2. When I clicked through on the very useful post from Bankfodder re COBS/BCOBS, the 11 principles which came up on the FCA website appeared to be listed under PRINS rather than COBS. Is this just as relevant in terms of a breach of implied terms of contract? (That part of the FCA website isn't entirely clear).


3. If the legal action goes ahead, am I better just to counter-sue for a nominal sum and then (assuming success) use that judgement to get a better result from the Ombudsman, rather than going for the amount I really should and risking substantial costs?


4. Would the court consider it reasonable that I'm defending the claim and counter-suing for personal losses based on the breach of contract, even though the breach occurred in relation to the accounts and agreements (with the exception of the personal guarantee) which were in the name of the (now liquidated) business? (I personally think the link is obvious, but then I don't have a legal mind......).


Thanks for your attention,





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I think initially the argument against how they treated you wouldn't form any part of a defence as the courts would only look upon legal argument and its merit, not how they treated you. How they treated you would be up to people like the ombudsmen, but then again they can only look at awarding compensation and any judgement would have any sway.


You could counter-claim, however you need to way up the risk on your argument, if you counter claimed and of course if the claim is over £5K then the whole matter starts to include costs, so a problem can become a much bigger problem (almost double with litigation costs) being award against you.


What is your specific defence against the PG, and sorry but it can't be they treated me badly

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