enforceability of
guarantees
The Queen's Bench Division has
given helpful guidance on the issue of personal
guarantees in the recent case of United Dominion
Trust Ltd v Dohil.
The claimant entered into a loan
agreement with Mayfield House (Moseley) Limited ("the Company") and
the defendant subsequently entered into a personal guarantee in
respect of that agreement. The guarantee was limited to the sum of
£250,000 plus interest and expenses. The claimant subsequently made
a demand to the Company for the balance of the loan and to the
defendant for the sum of £250,000. The claimant subsequently issued
proceedings to enforce the guarantee.
The Court held that:
- the claimant had been
able to demonstrate that the Company owed it money in the amount
claimed
- although the guarantee demand
had been sent to an incorrect address, being the defendant's office
address rather than his home address as specified in the guarantee,
the defendant had received the demand and therefore
the claimant was entitled to rely on it. However, there was
potential late receipt of the demand and this was significant in
calculating the amount of interest which was recoverable by the
claimant
- there was no merit in the
defendant's argument or principle of law that required that to be
enforceable, a guarantee must be determinable by the guarantor as
such a principle would undermine the function of a
guarantee
- interest would only run from
the date that the guarantee demand was received by the
defendant
- the defendant had no right of
set off.
