'All monies' guarantee remains enforceable where the underlying contracts are amended
By Brian Cain
The Court of Appeal has confirmed that an ‘all monies’ guarantee will be enforceable against the guarantor where the underlying contracts between the beneficiary and the principal debtor are amended or extended and no consent is obtained from the guarantor.
Two director shareholders of CTF B and M had given a guarantee of ‘all sums that are now or may hereafter become owing to [the beneficiary] by CTF’. At the time the guarantee was given in 2002, approximately £200,000 was owed to the beneficiary by CTF. This fact was known to B and M. Between 2002 and 2006, the indebtedness of CTF to the beneficiary rose to more than £400,000. In late 2006, M resigned as a director of CTF and sold his shares to B. M did nothing about his guarantee. During the next couple of years, CTF’s account with the beneficiary went up to £700,000 partly as a result of CTF allowing a new associated company formed by B to use its credit facility with the beneficiary. When CTF went into liquidation, there was £330,000 outstanding and both B and M received demands under the ‘all monies’ guarantee they had given.
M disputed liability. He argued that when there is an existing contract between the creditor and the principal debtor, the terms of which are known to a guarantor who has given a guarantee whose terms are not limited to the securing of liability for the obligations under that contract, a variation of those terms without the guarantor’s consent will discharge the guarantor from his guarantee. Here M had given the guarantee on the basis CTF had a £200,000 credit limit (albeit that was extended to £400,000 with M’s consent later). The change in arrangements between CTF and the beneficiary to uplift CTF’s credit limit to £700,000 and CTF’s purchases on behalf of a new company formed by B after M had left the business, M argued, amounted to a variation of the contract between beneficiary and principal debtor that released M from the guarantee…
If you are registered and logged in to the site, click on the link below to read the rest of the Taylor Wessing briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Taylor Wessing
News from The Lawyer
Briefings from Taylor Wessing
For the tax year from 6 April 2014, the standard lifetime allowance has reduced from £1.5m to £1.25m.
One of the areas highlighted last year by the Regulator was the regulation of workplace DC pension schemes.
Analysis from The Lawyer
As the equity capital markets rocketed back into favour and global M&A saw at least a partial return to form, there have been some rich pickings for The Lawyer’s Corporate Team of the Year award shortlisted firms in 2014.
The city-state is working hard to become a global wealth management hub, and law firms are gearing up for a prosperous new world