Triodos Bank NV v Dobbs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Neuberger,Lord Justice Chadwick |
| Judgment Date | 24 May 2005 |
| Neutral Citation | [2005] EWCA Civ 630 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: 2004 1613 A3 |
| Date | 24 May 2005 |
[2005] EWCA Civ 630
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
(His Honour Judge Havelock-Allan QC)
Lord Justice Chadwick
Lord Justice Longmore and
Lord Justice Neuberger
Case No: 2004 1613 A3
The Defendant/Appellant appeared on his own behalf
NEIL LEVY Esq (instructed by TLT Solicitors, Bristol BS99 7JZ) for the Claimant/Respondent
The main question raised by this appeal is whether and to what extent a guarantee by which it is agreed:—
(a) that the guarantor will pay money due from the principal debtor "under or pursuant" to a specific loan agreement; and
(b) that the creditor can agree to any amendment or variation of the loan agreement without reference to the guarantor
applies so as to require the guarantor to pay sums due under subsequent agreements made between the creditor and the principal debtor. It is not a question on which there is much authority.
Introduction
The appeal is from a judgment of HHJ Havelock-Allan QC given as long ago as 26th March 2002 in which he gave summary judgment for the claimant Bank pursuant to a personal guarantee executed by Mr Dobbs on 26th April 1996 whereby Mr Dobbs agreed to pay all monies due and owing to the Bank "under or pursuant" to two loan agreements made on the same date with a company of which Mr Dobbs was director called Acorn Televillages Ltd. The purpose of the loan was partly to refinance borrowing made by the Company from Allied Irish Bank and partly to complete the first stage of a project to construct what is known as a "televillage" at Upper House Farm in the Powys village of Crickhowell. As its name implies, a televillage is a development linked to the internet and enabling residents of the village to work within a congenial environment rather than having to commute to a large town. The total amount of the loan (in two separate contracts) was £900,000 and the limit of Mr Dobbs' liability under the guarantee was £50,000. Other security was taken in the form of a first mortgage over the site, a floating charge over the Company's assets and an assignment of Mr Dobb's life insurance policy.
By November 1998 the first phase of the project had been completed and the amount of the outstanding indebtedness to the Bank was about £800,000. The Bank then agreed that they would finance phase two of the project; the Bank then made two further loan agreements on 4th November 1998 agreeing to lend a total of £1,980,000 to the Company. The existing indebtedness continued but it was now covered by these 1998 loan agreements which had raised the borrowing limit to the amount mentioned. Each of these agreements says on its face that it "replaces" the earlier agreements. The period of the loan agreements was described as being until 31st October 1999 and in each case the security was described in the following terms:—
"1. Existing first legal mortgage dated 26 April 1996 over the freehold land and buildings known as Upper House Farm, Standard Street, Crickhowell, Powys, NP8 1BP registered at HM Land Registry with title Absolute No WA729178.
2. Existing floating charge over all the assets of the Borrower both present and future dated 26 April 1996 and registered at Companies House, 13 May 1996.
3. Existing guarantee of Ashley Charles Dobbs in the sum of £50,000 dated 26 April 1996.
4. Existing assignment of General Accident Life insurance policy No: 2709471LB providing cover of £610,000 and the life of Ashley Charles Dobbs Assignment dated 27 November 1995."
On 10th September 1999, the 1998 loan agreements were themselves, to use the same word, 'replaced' by a further loan agreement between the Company and the Bank which has been referred to as "the 1999 facility". Under this facility the amount of the loan was raised from the £1.98 million permitted by the 1998 loan agreements to a maximum of £2.6 million. Clause 8 of the Facility provided that the Bank should continue to have the benefit of the mortgage over the site granted on 26th April 1996, the floating charge of the same date, the collateral mortgage of the life policy over the life of Mr Dobbs and the personal guarantee given by Mr Dobbs on 26th April 1996. In addition to this security, Mr Dobbs agreed to arrange for himself and his wife to execute a second mortgage over their own house in the Televillage (No. 23) in order to secure Mr Dobbs' personal liability under the guarantee. On 19th September 1999 Mr and Mrs Dobbs did just that. When in March of 2000 Mr Dobbs and his wife moved to Polperro in Cornwall he granted a first charge on their new home replacing the earlier charge.
Apparently taking the view that the development was not a financial success, the Bank on 7th August 2000 made a formal demand on the Company for the repayment of the Company borrowing. The Bank appointed administrative receivers over the Company's assets on 20th October. In due course the site was sold for £2,100,000 leaving a shortfall on the indebtedness of £80,622.79. The Bank decided to call on Mr Dobbs to pay under the guarantee he had signed on 26th April 1996. They made a demand on 25th June 2001 and started proceedings in the Bristol Mercantile Court on 31st July 2001. On 26th May 2002 the judge gave summary judgment in their favour declaring:—
(1) that the guarantee extended to the borrowing under the facility agreement of 10th September 1999; and also
(2) that Mr Dobbs was estopped from denying that the guarantee so extended.
He did not at that stage give judgment for any monetary sum because Mr Dobbs asserted that the Bank and the administrative receivers had mismanaged the receivership and that the Company's assets had been sold at an undervalue. Mr Dobbs also asserted that the Bank was in breach of its contractual obligations by withdrawing or terminating the loan facility in 2000. Those allegations were, in due course, exhaustively considered by Lewison J who on 19th April 2004 delivered a 303 paragraph judgment dismissing all Mr Dobbs' allegations save for two breaches of contract which led to nominal damages only. Mr Dobbs application for permission to appeal was dismissed by Chadwick LJ on 17th December 2004. HHJ Havelock-Allen had, however, given Mr Dobbs permission to appeal against the declarations made by him but had stayed the future conduct of such appeal to await the outcome of the proceedings which later took place before Lewison J. That is the reason why this appeal was heard on 15th April 2005 more than 3 years after the judge's judgment.
The essence of Mr Dobbs' argument before the judge and before us has been that his guarantee of 26th April 1996 only applied to sums due "under or pursuant" to the loan agreements of 1996 and that once those agreements were replaced by the 1998 agreements and then by the 1999 Facility Agreement, there could be no further liability under the guarantee despite the fact that the guarantee was expressly referred to in the later agreements as being security for these loans.
The Documentation
In order to understand this argument I need to set out the terms of the guarantee in a little more detail. The preamble to the guarantee provided:—
"WHEREAS
(A) Triodosbank N.V. has agreed to lend the respective sums of £400,000 and a sum not exceeding £500,000 to Acorn Televillages Limited (Limited company No 2786103), ("the Company") on the terms and conditions set out in two loan agreements numbered 96/782 and 96/783 ("the Loan Agreement") (which expression means both loan agreements together or either loan agreement as the context can permit) both dated … April 1996.
(B) The Guarantor, as required by the terms of the Loan Agreement, has now agreed to guarantee the liabilities of the Company under the Loan Agreement on the terms hereinafter appearing."
The guarantee itself was then contained in clause 2 of the guarantee document, the material parts of which were in these terms:—
"2.1 The guarantor irrevocably and unconditionally guarantees to the Bank that it will on demand pay to the Bank and discharge all monies and liabilities whether of principal, interest or otherwise, which now are or may at any time hereafter (and whether before, on or at any time after such demand) be due, owing or incurred by the Company to the Bank under or pursuant to the Loan Agreement, provided that the liability of the Guarantor under this Guarantee shall not exceed £50,000 plus such interest, charges and expenses as may be incurred by the Bank in connection with the Loan Agreement as from the date of demand being made of the Guarantor and as may be incurred by the Bank in enforcing this Guarantee."
Clauses 2.3 and 2.4 then provided:—
"2.3 The Guarantor's liability under clause 2.1 is not affected by an arrangement which the Bank may make with the company or with another person which (but for this clause 2.3) might operate to diminish or discharge the liability of or otherwise provide a defence to a surety.
2.4 The Bank may at any time as it thinks fit and without reference to the Guarantor:
2.4.1 grant time for payment or grant any other indulgence or agree to any amendment, variation, waiver or release in respect of an obligation of the Company under the Loan Agreement;
2.4.4 compound with, accept compositions from and make other arrangements with the Company or a person or persons liable on other securities or guarantees held or to be held by the Bank."
The two initial 1996 loan agreements (96/782 and 96/783) themselves contained two...
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