Summary

An ‘all monies’ guarantee was interpreted as limited to a specific facility agreement because of:

  • references to the facility agreement in the introductory recitals; and
  • the wording of a confirmation or acknowledgement that the guarantee extended to a facility agreement which replaced the earlier agreement.

Facts

An application was made to set aside a statutory demand made on the guarantor under a joint and several guarantee (referred to in the judgment as the First Guarantee) in respect of loans made by Anglo Irish Bank Corporation Plc to Danum Developments Limited. The respondent claimed the benefit of this guarantee as a result of an assignment.

The introductory recitals to the First Guarantee stated that it was required as a condition of the ‘Facility Letter’ which was defined as a facility letter dated 31 October 2006 ‘as amended from time to time’ (referred to in the judgment as the First Facility Letter).

The guarantors agreed to ‘pay on demand all and any sum or sums of money whether actual or contingent ……… which are now or shall at any time be owing to the Bank anywhere on any account whatsoever from’ Danum. The guarantee was subject to the law of Ireland but the judgment seems to have proceeded on the basis that this was the same as English law in all relevant respects.

The Bank entered into a second facility letter with Danum dated 19 November 2007 (the Second Facility Letter). Although this is not clear from the judgment, this presumably refinanced and/or extended the facilities made available under the First Facility Letter.

Attached to the Second Facility Letter was a document (described in the judgment as the Second Guarantee). This provided amongst other things that the guarantors had read the Second Facility Letter. It also acknowledged that they were guaranteeing the performance by Danum of its obligations under the Second Facility Letter. In addition, there was a prominent ‘health warning’ in the following form:

‘Warning: As a guarantor of this loan, you will have to pay off the loan, the interest and all associated charges if this Borrower does not. Before you sign this agreement you should get independent legal advice.

In relation to the warning above, the ‘loan’ means all amounts owing from the Borrower to the Bank from time to time not only amounts owing under the Agreement.’

Judgment

The statutory demand was challenged on a number of grounds one of which was that the Second Facility Letter was not within the purview of the original guarantee. The registrar found this to be strongly arguable notwithstanding the ‘all monies’ language in the guarantee and set aside the statutory demand on this and other grounds.

It appears that the registrar was persuaded by the references to the Facility Letter in the introductory recitals of the First Guarantee. Furthermore, the Bank appeared to the court to have proceeded on the basis that it needed to take a fresh guarantee in respect of the Second Facility Letter.

The respondent’s argument that the Second Guarantee was merely an ‘acknowledgement’ or ‘confirmation’ of the First Guarantee, was held to be unsustainable in the light of:

  • the clear words of warning set out above, which the registrar considered would be entirely otiose if the guarantors were already bound
  • the use of present tense wording (‘…are guaranteeing’ rather than ‘have guaranteed’)
  • the lack of any express reference to the original guarantee; and
  • the different language used in nature of the obligation created by the Second Guarantee.

The respondent did not rely on the Second Guarantee, so the registrar’s finding that the Second Facility was not within the purview of the First Guarantee would on its own have been enough to set aside the statutory demand.

Comment

It is generally thought that all monies guarantees are not vulnerable to attack on the basis of the ‘purview’ doctrine. However, the precise scope of such security is always subject to interpretation of the language used and the guarantee as a whole.

The courts have usually been reluctant to limit the scope of ‘all monies’ security by reference to knowledge of a specific facility (National Merchant Buying Society Limited v Bellamy [2013] EWCA Civ 452) or on the basis that it is expressed to be granted in consideration of a specific facility (Ashwood Enterprises Ltd v The Governor and the Company of the Bank of Ireland [2014] EWHC 2624 Ch).

In this case, the terms of the Second Guarantee seem to have tipped the balance in favour of the guarantor. Viewed as a guarantee, this is an unusual document as it appears to have contained none of the usual language protecting the bank’s position in relation to matters which may release the guarantor such as the giving of time and indulgence to the borrower.

Banks often require ‘all monies’ guarantors to acknowledge that specific facilities are secured by their guarantees out of an abundance of caution. ‘Takeaways’ from this case are to:

  • make it clear that the acknowledgement is not intended to limit the effectiveness of the original guarantee; and
  • avoid giving the impression that a new guarantee is being taken.

Where the guarantee is specific to a particular facility different considerations apply, as demonstrated in the well-known case of Triodos.

Thomas Dowling v Promontoria (Arrow) Limited [2017] EWHC B25 (Ch)