The English High Court in Bank and Clients Plc v King and Brown considered guarantor liability in circumstances where the guarantors, Messrs King and Brown, alleged representations had been made by the Bank that would relieve them of their liability.

In early 2016, Ve Interactive Ltd (Ve), a software company, rose to prominence as a 'unicorn' company with a perceived valuation exceeding £1b.  Mr Brown was the CEO and Mr King a director of the company.  Later in the year with Ve facing funding issues, King and Brown attended a meeting with the Bank to agree a loan of £2.15m.  The loan was to be secured among other things by personal guarantees from both King and Brown.  In April 2017, Ve entered administration and was sold for £1.49m.  The Bank sought payment under the guarantees.  Payment was not forthcoming and the Bank issued summary judgment proceedings.

As a defence, King and Brown alleged that the Bank representative had made oral representations to them in the lift lobby immediately after meeting with the Bank including that the Bank would seek payment from Ve and/or enforce other securities before seeking payment from the guarantors.

The Court was not persuaded and, in disregarding the alleged representations, noted the following:

  • The guarantees were signed by both King and Brown and were clear in defining the obligations
  • The evidence put forward to support the representations was contradicted by more reliable contemporary evidence
  • The evidence for the representations was also incoherent, vague and lacked precision
  • The alleged representations were raised at a late stage in the proceeding
  • King and Brown were both intelligent, experienced and sophisticated businessmen.

The Court therefore entered summary judgment against the guarantors.

See the full judgment here.