Promontoria (Chestnut) Ltd v Scott Simpson

Approved Judgment

This is my judgment given on day 4 of the trial on the claimant's claim. I have already yesterday, on day 3, given judgment on the defendants' application to amend the defence and to stay, which I rejected for the reasons given in that judgment. It is common ground between the parties that this is a claim against the defendants under two guarantees which they gave to the Clydesdale Bank in the cumulative amount of £300,000, together with interest, and it is common ground on the evidence that subject to the defences raised, the amount due under those guarantees in terms of arithmetic is, indeed, £300,000, together with interest, which as at today's date amounts to £415,075.12.

It is also common ground that as a result of the defendants' unsuccessful application to amend to plead further positive defences and as a result of the defendants' deletion of existing parts of their defence, there is only one substantive issue left over for determination and that is the non-admissions pleaded in paragraphs 15.4 and 15.5 of the existing defence in its amended form.

In paragraph 15.4, it is not admitted that loan asset ID 12874066 was the overdraft facility that was offered to PFSOL (the customer) by the bank by way of the bank's letter of 20 March 2013, nor is it admitted that the overdraft facility was transferred to the claimant by the bank under any other loan ID reference. Then, in paragraph 15.5, it is not admitted that the deed of assignment assigned the overdraft facility and/or the personal guarantees without restrictions, limitations, or impediments.

To understand those non-admissions and to address a further point which has arisen in argument today, it is necessary for me to refer to the particulars of claim. Paragraphs 1, 2, and 3 refer to the parties, paragraph 1 making it clear that the claimant, Promontoria (Chestnut) Limited, claims to be the assignee of various rights of Clydesdale Bank PLC trading as Yorkshire Bank. Paragraph 2 confirms, as is not disputed, that the first and second defendants, Mr and Mrs Simpson, are husband and wife and were respectively the director and company secretary of Property For Sale or Let Limited (PFSOL) which is a company which was a customer of the bank and was placed into administration on 24 February 2016. Paragraph 4 goes on to plead that an overdraft facility was made available by the bank to the customer in the amount of £2.365 million pursuant to the terms of a facility letter dated 20 March 2013. That is defined as “the facility letter” and the facility is described as “the overdraft facility”.

Having pleaded in paragraph 5 various express terms of that facility, and paragraph 6 that there was a director's resolution to enter into the facility, in paragraph 7 it is pleaded, and again this is not in dispute, that the defendants both executed personal guarantees in respect of the liabilities of the customer to the bank in the global amount of £300,000. Paragraph 8 pleads various terms of the guarantees to which I shall refer and paragraph 9 pleads that by a deed of assignment dated 5 June 2015, the claimant acquired the bank's rights under the facility letter and the guarantees and that the customer and the defendants were each given notice of the aforesaid assignment by letters dated 8 June 2015 and 1 March 2016 respectively. I pause there to note that this is an express pleading that the deed of assignment was effective to assign the bank's rights under the facility letter and the guarantees. Paragraph 10 pleads that on or around 5 February 2016, the claimant made a demand of the customer for the sums then due and owing under the overdraft facility in the amount of £2.7 million odd and that the customer did not comply with the demand. Paragraph 11 pleads accordingly, on or around 1 March 2016, the claimant made demands of each of the defendants under the guarantees in the total sum of £300,000, together with interest and cost, which it is pleaded wrongfully and in breach of contract the defendants failed to pay. Then finally, the claim is pleaded on the basis of the amount then outstanding under the guarantees. There is no doubt, therefore, that it is a claim pleaded under the guarantees and that there is no separate or other claim pleaded either against the customer or against the defendants on any other basis than the guarantees.

Mr Pugh has taken a point about the proper construction of the deed of assignment which, at first blush it appears, might be a good point because what he has pointed to is the fact that in the schedule to the deed of assignment the relevant details relating to this particular lending and liability are set out by reference to the connection identity, the borrower identity, the borrower name, and the loan asset identity. The borrower name is Property For Sale or Let Limited and the loan asset identification is simply a number. There are then set out a number of individual documents, or contracts, or securities. The first one under the heading “Facility agreement” reads:

“English law facility agreement dated 18 July 2013 between Clydesdale Bank PLC and the borrower [the customer].”

Then below that, under the heading “Guarantee”, the two guarantees to which I have referred are also separately set out. Then below that is a list under the heading “Security” of the various legal mortgages and other security provided by the customer to the bank and a legal charge provided by the defendants to the bank.

Mr Pugh submits that on that basis, if it is right, as he says it is, that the only relevant applicable and enforceable facility agreement is that of March 2013, how could that have been assigned, he asks rhetorically, under this deed of assignment?

Mr Riley has four answers to that point. The first answer is to say that on a true construction of the deed of assignment, the reference to the facility agreement of 18 July 2013 is not exclusive or exhaustive and that, on a proper analysis, what was assigned includes the rights under the March 2013 facility agreement insofar as there is a difference. Secondly, he submits that, in any event, if one looks at the relevant documentation from March and July 2013, it is clear that the July 2013 facility agreement is simply a renewal or extension of the March 2013 facility agreement anyway. So there is no difference between them on a proper analysis. Thirdly, that even if that is not right as between the claimant and the defendants, the effect of section 136 of the Law of Property Act 1925 means that this is not a defence open to the defendants in circumstances where there is no suggestion that the bank has ever contended that any further separate or other liability under the March 2013 facility agreement was not assigned. Fourthly and finally, in any event, all of this is completely irrelevant because what, on any view, was assigned was the benefit of the two guarantees as to which there can be no dispute and nor can there be any dispute that the liability under those guarantees, whether it arises under the March 2013 facility or the July 2013 facility, or any other facility, is covered by the guarantee and is properly claimed as pleaded.

Having had the benefit of extremely impressive submissions from both counsel on this point, I can say straightaway that I have no doubt that I prefer and accept the claimant's submissions. That is essentially for the following reasons. Firstly, and foremost, the point about the guarantee. For the reasons I have given, it is absolutely clear that the claimant's pleaded case always has been that the claim was under the guarantee and that the guarantee covered the liabilities of the customer to the bank, specifically the March 2013 facility agreement. If Mr Pugh is right in his analysis then, in my judgment, it follows as night follows day that the liability under the guarantee is covered. It relates to that March 2013 facility agreement and it is pleaded as such.

In the circumstances, whatever the force of the point about the disconnect between the March 2013 facility agreement and the July 2013 agreement, it is completely irrelevant to this case. If the bank had been suing the customer in this litigation, that might have been a point which might have been available to be taken by the customer, but it is not. It is a claim under the guarantees where the only relevant question is whether or not the amount claimed by the bank is covered by the guarantees and, having been taken to the terms of the guarantee, it is clear that they are, unsurprisingly. That is because if one goes to...