Natwest Personal Guarantee on Liquidated Company Loan

[j-dog]

I am not sure if anyone can give me any advice on how I can defend a personal guarantee claim from Natwest?

 

 

In 2006 the ltd company for which I was a director took out a bridging loan from Natwest for 2 months whilst we waited for funds from a secured loan with a different asset management company.

 

 

The loan came through within 2 months and the Natwest loan was fully repaid. The asset loan has also since been repaid.

 

 

However, the guarantee said it exists for perpetuity until the director dies and the bank referred to it as security in a subsequent overdraft facility. It is only cancelled when notice is given. The company then went into difficulty in 2010 and the bank forced the directors to convert this to a repayment loan for the same amount with much higher interest. The bank said they would force the company into liquidation if the directors did not comply. Again they referred to the security of the old guarantee.

 

 

The company finally went into liquidation in 2013 and the loan went unpaid. The bank is now pursuing me for full payment of the loan. The company assets (including those covered by the original loan) were sold off to pay liquidation fees so the company is well and truly gone.

 

 

Would a letter to or from the bank stating that the funds had paid off the original loan in 2006 be strong enough to infer we were notifying them that the liability under the original guarantee was being repaid and therefore should be taken as notice of the guarantee?

 

 

Can I argue that the intent of the original guarantee as delivered as a deed was only for the purpose of securing the original bridging loan even though the guarantee itself was open?

 

 

Can I argue anything to do with surety?

 

 

The guarantee was accompanied by papers signing that I was an empowered director to remove a claim that I am a consumer in order to go for unfair contract terms - could I still claim this as they are chasing me personally now and not as a director? The terms are definitively grossly unfair.

 

 

It was also accompanied by papers saying I waived legal advice. This was the case for the original guarantee but we had no option for the subsequent facilities.

 

 

Could the fact that the directors were forced into converting the overdraft to a loan somehow invalidate the guarantee? We even wrote to the bank complaining about the bullying at the time as we were disgusted by their behaviour.

 

 

I am at risk of losing my property as it was mentioned in the subsequent loan that the guarantee was "supported" by the property.

 

 

I want to defend this but not to run up unnecessary debts in the process. I also don't want to respond hastily and jeopardise any defence I may have had.

 

 

Please help.

[BRIGADIER2JCS]

Hi Welcome to CAG,

Were you made aware of the "perpetuity" clause at the time of signing the guarantee document?

Do you believe that this not explained enough for you to be able to make a considered judgement

regarding the term of the guarantee?

 

 

I'm guessing that you did not formally cancel the guarantee as son as the bridging loan was paid off?

[j-dog]

I wasn't aware of the perpetuity clause but the time they made us sign a form to say we did not want to have legal advice and that we were signing as fully empowered directors involved in the business. We needed that bridging loan quickly so we didn't take as much care as we should have.

 

 

No - we didn't formally cancel the guarantee as soon as the loan was paid off. I have some correspondence from the bank acknowledging the loan was being paid off but nothing relating anything back to the PG. Stupid.

 

 

They seem to have made us sign all the right forms to give them absolute power for life - I just need to know if there is anything we can do in terms of if that is legally right. Does a deed not need to be clearer or can it really be open ended?

[j-dog]

Thinking more about your question - at the time we didn't know about the perpetuity clause and didn't cancel the guarantee formally when we should have as we assumed that paying off the loan would automatically also cancel the guarantee. Naïve.

[BRIGADIER2JCS]

Thinking more about your question - at the time we didn't know about the perpetuity clause and didn't cancel the guarantee formally when we should have as we assumed that paying off the loan would automatically also cancel the guarantee. Naïve.

 

 

Hi, I would not say naïve, personally I think there has been some degree of deception by the bank as such an important as this clearly is most definitely should have been brought specifically to the notice of all the signatories and should have has the consequences of it explained in full detail.

 

 

It may be that making a Formal Complaint (at Director Level) to the bank regarding its failure to explain what you were signing.

 

 

This would oblige the bank to fully investigate and respond to your concerns.

[j-dog]

I will do that. What do you mean by "at Director level"? Is that to a named director rather than just through the customer service route?

[BRIGADIER2JCS]

I will do that. What do you mean by "at Director level"? Is that to a named director rather than just through the customer service route?

Ye indeed customer (dis ) services departments have nothing but a company "script" to spout e.g., "computer says" etc., go to the top to get action!

[j-dog]

Great - thanks for your help. I will keep you posted.

[steampowered]

I think the perpetuity clause might be a bit of a red herring. The question is whether the original guarantee applies to subsequent loans, rather than its duration.

 

What we really need to know is the definition of 'Guaranteed Obligations' or statement of what the guarantee covers. Does it say something like 'all monies, debts and liabilities of whatever nature due from time to time'?

 

Unfair contract terms regulations is a non-starter, since you do not fall within the statutory definition of a consumer. You might want to research undue influence and the duty to disclose (London General Omnibus Co Ltd v Holloway [1912] 2 KB 72). To be honest these are difficult arguments to run if it is clear from the face of the guarantee that it applies to any money lent by the bank, but maybe worth looking into.

[j-dog]

"All of the debtor's liabilities to the Bank of any kind and in any currency (whether present or future, actual or contingent)...."

 

 

They also have "The bank may without consent of or notice to the guarantor, and without releasing or reducing the liability to he Bank of the Guarantor under this deed :-" and then list a load of arrangements they can make with the debtor to increase their liability, without us needing to know about it.

 

 

The guarantee is a Limited Guarantee by Individual - does this not make me a consumer as it is a personal guarantee? BTW - the limit is the amount of the original bridging loan, which is much higher than the outstanding loan.

[j-dog]

Having read up a bit, the undue influence might be an angle. There are 2 elements to this. We were rushed when we first arranged the bridging loan as we needed it in place quickly and we had to sign the guarantee in its unlimited state before they would agree it. We trusted the bank that this was necessary in respect of the bridging loan but did not consider the future impact as we knew that would be paid off quickly.

 

 

The second was that the guarantee was used as security for a loan that was only put in place under protest, knowing full well we were fully disadvantaged by it but that we had no choice.

 

 

Are these too weak?

 

 

I am just cautious as they will add any expenses in me fighting this on to the debt plus interest so I need to at least now I have a chance.

[j-dog]

Is it possible to argue that the loan agreement was void as it was put in place through undue influence by the bank, rather than trying to set aside the guarantee itself? I found the following definition that would apply:

 

 

"Where the transaction is obviously not to the benefit of the vulnerable party but confers a great advantage to the party in a fiduciary position, the law will raise a presumption that the transaction was entered as a result of some sort of abuse of the relationship. This requirement used to be expressed in terms of manifest disadvantage. "