Personal Guarantees – When Blue Turns To Grey

It's not often we reflect on cases we lost. However, a recent case on personal guarantees has reminded us of the risks that financiers face when a Court is asked to decide between the evidence of the financier who believes he has a valid and enforceable guarantee, and the evidence of the guarantor who believes he either never signed a guarantee or if he did it is in any event unenforceable.

Our case, which came before the Court in 2012, involved a claim against a guarantor whose defence was that the personal guarantee he had signed was unenforceable by reason of his never having intended to be bound by it. In other words, although he did not deny having signed the guarantee he didn't expect it to be relied upon until he had agreed final terms on the proposed facility with the financier. The financier was unable to satisfy the Court that final terms had ever been agreed in relation to the proposed facility despite the fact advances had subsequently been made under