Irish Bank Resolution Corporation Ltd & Anor v Kempin [2012] EWHC 2564 (Ch)

[2012] EWHC 2564 (Ch)Case No HC 11 C 00163
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate Thursday, 12th July 2012
London EC4A 1NL
Before
MR. D. DONALDSON QC(Sitting as a Deputy Judge of the Chancery Division)
Between
(1) IRISH BANK RESOLUTION CORPORATION LIMITEDClaimants(2) ANGLO IRISH ASSET FINANCE PLCClaimantNATHAN PAUL KEMPINDefendant
Digital Transcription by Marten Walsh Cherer Ltd.,1st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HPTelephone: 020 7067 2900 Fax: 020 7831 6864 DX: 410 LDEEmail: info@martenwalshcherer.comWebsite: www.martenwalshcherer.com
MR. PETER DE VERNEUIL SMITH (instructed by Messrs. Taylor Wessing LLP) for ClaimantMR. ANDREW AYERS (instructed by Messrs. Evans Dodd LLP) for Defendant
JUDGMENT

MR. D. DONALDSON QC:

[1]This case was previously before me some months ago. I then delivered a judgment in which I set out the nature of the dispute between the parties and the history of the dispute in the litigation to date. I do not, therefore, propose to repeat that again today. I just record briefly that the defendant is sued as the guarantor of borrowings of a company which I shall refer to shortly as “Cathco” of which he was, put shortly, the alter ego.[2]The proceedings commenced in January 2011. The defence and counterclaim were served in May 2011 and the reply to defence and counterclaim in August 2011. Application for summary judgment and/or to strike out the defence and counterclaim was made in November 2011. The defendant sought and obtained an adjournment of that application from the Master. Despite that, when the case came before me at the end of March 2012, the defendant was seeking a further adjournment till “the next court term” to permit new solicitors to “get on top of the case”.[3]In the event, I decided that the application for summary judgment must be refused. This was because the claimants had chosen to rely on the provision of the guarantee which, for the purpose of the application for summary judgment, they conceded required them to make a demand as a pre-condition of liability and I determined that I could not, without a trial, decide whether or not the claimants had effectively served such a demand.[4]However, as I pointed out at the hearing and in the judgment, that result was rather academic since:(a) it appeared that the particulars of claim could be amended to permit the claimants to rely on another provision of the guarantee which did not appear to be dependent on service of the demand; and/or(b) the claimants could not serve a fresh demand and bring parallel proceedings based thereon. I directed that if parallel proceedings were issued the existing defence should stand and count as the defence in those proceedings as well. On that basis I adjourned the strike out application to the first open date after 15th May 2012 ordering that any additional evidence should be served by the defendant by 20th April 2012. I anticipated that on that adjourned date I was likely to be asked also to deal with a renewed application for summary judgment on the basis of an amendment to the proceedings to rely on the alternative provision and/or on the basis of parallel proceedings based on a fresh demand.[5]In the event, the claimants opted for both belt and braces. They have issued parallel proceedings based on the subsequent demand and, as a result of my previous order, the defendant‟s existing defence is deemed to have been served as the defence in those proceedings without the need for service of a fresh document. The claimants have also applied for permission to amend the original proceedings to rely on the provision which, in the claimants‟ submission, requires no demand. That submission is contested by the defendant and permission for the amendment opposed on that ground.[6]So far as the parallel proceedings are concerned, they were issued on the 14th May 2012 and the effectiveness of the demand, the fresh demand which is pleaded in those parallel proceedings, is not contested by the defendant. The claimants made an application dated 31st May 2012 for summary judgment in those parallel proceedings. They also applied for summary judgment on the basis of the original proceedings on the basis of the proposed amendment. All that is in addition to the outstanding application to strike out the defence and counterclaim which I adjourned at the earlier hearing.[7]Finally, in early June 2012, the parties agreed and obtained a consent order consolidating the two actions, the order doing little more, as I understand it, than rubber-stamping the agreement of the parties.[8]I begin with the new claim commenced in the parallel proceedings. As I indicated earlier, it is identical terms save for a minor detail relating to quantification to the earlier claim apart from reliance on the new demand. Counsel for the defendant suggested that the consolidation required the case to be entirely repleaded on both sides with a composite claim and defence and that until this was done no application for summary judgment could properly be lodged. For this proposition he produced neither authority nor pragmatic justification. Moreover, it appears to me to be at variance with what occurred in the well known case of Lewis v. The Daily Telegraph which was cited to me. The submission is, in my view, simply wrong.[9]Turning to considerations of substance, it is accepted by counsel for the defendant that there is no defence available relating to the demand in the parallel proceedings, that is to say, the fresh demand. That, therefore, requires me to scrutinise whether there is any other available defence. When I say “other available defence” that is shorthand for any other available defence which has a realistic prospect of success if the matter proceeded to trial. The materials for this purpose are twofold. First, the defence and counterclaim supported by the statement of truth of the defendant served in the first proceedings and which are deemed to have been served in the new proceedings as a result of my order. In view of certain exchanges at the previous hearing and observations in my earlier judgment that, with the advent of a new legal team and, in particular, counsel, an attempt might have been made to reformulate the defence and counterclaim. This has not been done. Moreover, no attempt was made in the skeleton argument of counsel for the defendant to justify any of the grounds of defence advanced in the defence and counterclaim. I do not say that by way of criticism: I have no doubt that it was an absolutely proper position for counsel for the defendant to take. Secondly, the defendant has served – only at the last moment – some additional evidence, though restricted, or mainly so, to only one aspect of the case. He has also indicated that he seeks a yet further adjournment in the hope of being able to produce some further evidence.[10]With that somewhat lengthy preamble, I turn to the defence and counterclaim, which, I repeat, was served in the previous proceedings but counts as the defence in the present proceedings. No attempt has been made to serve a defence supplanting or supplementing it. I start at paragraphs 3 to 5 of the pleading. Paragraph 3 says:
“The defendant and his companies had enjoyed a commercial banking relationship with the claimants since approximately 1997. Over the preceding 14 years the claimants had developed a close working relationship with the defendant and the claimants were, at all material times, aware that: 3.1 The defendant looked to and expected the claimants to act with such reasonable care and skill as would be expected of a bank with professed commercial banking expertise; and/or 3.2 The defendant looked to and expected the claimants to act in good faith in its commercial dealings with the defendant and his companies.” companies.”
[11]Paragraph 4.1 says (and I summarise the effect) that the claimants encouraged and fostered the expectations of the defendant and continued reliance on the claimants by the defendant and his companies, that they “4.2 … encouraged the defendant to keep his business and that of his companies … by indicating that they would support the defendant and his companies in both good and bad economic climates; “4.3 The claimants knew or ought to have known that the defendant could suffer personal financial loss and damage if the defendant failed to act with reasonable care and skill or acted otherwise in good faith in their dealings with the defendant and his companies in that:4.3.1 The defendant had or was likely to provide personal guarantees for the financial liabilities incurred by Cathco Group and/or Cathco Holdings to either to the claimants themselves or other funds or providers of services [and adds that] the defendant provided a number of different personal guarantees [in the course of his dealings with the claimants] in connection with particular developments and sites;4.3.2 The defendant also provided funding to Cathco Group … by way of unsecured loans of up to £5 million to provide for necessary cash flow.4.3.3 As the sole shareholder the defendant would suffer a great financial loss in terms of the diminution of the value of his shareholding in Cathco Group in so far as any failure by the claimants to act with reasonable care and skill and/or in good faith damage the business of Cathco Holdings and/or Cathco Group. 5. Accordingly the claimants and each of them owed a duty to exercise reasonable care and skill (in addition to such duties that the claimants may have owed to the companies within the Cathco Group) in providing the financial services upon which those companies relied.”[12]That duty or suggested duty as alleged in paragraph 5 is said to have been breached by the matters set out in paragraph 49 which under the rubric “Negligence” says:
“Further or alternatively the claimants were negligent in their dealings with the defendant: 49.1 From the summer of 2008” – which I think is just before the conclusion of the Loan Agreement on which the claimants are suing – “the claimants encouraged the defendant to believe that the claimants would continue to be able to provide on-going financial support and banking services to the defendant when in fact the claimants knew or ought to have known that they may well not be able to do so given their internal financial difficulties. If the claimants have given proper and appropriate advice to the defendant he would have been able to take proper and effective steps to transfer his business banking requirements to alternative lenders in an orderly manner. 49.2 Failure to properly consider the need for and consequences of the appointment of the Administrators” – I just interject that Administrators were in fact appointed much later than 2008, I think in 2010 – “and to make proper and appropriate plans for the realisation of the security held by the claimants in respect of the indebtedness of Cathco Holding. The absence of activity on behalf of the claimants and the Administrators in this respect is inexplicable.” 49.1 From the summer of 2008” – which I think is just before the conclusion of the Loan Agreement on which the claimants are suing – “the claimants encouraged the defendant to believe that the claimants would continue to be able to provide on-going financial support and banking services to the defendant when in fact the claimants knew or ought to have known that they may well not be able to do so given their internal financial difficulties. If the claimants have given proper and appropriate advice to the defendant he would have been able to take proper and effective steps to transfer his business banking requirements to alternative lenders in an orderly manner. 49.2 Failure to properly consider the need for and consequences of the appointment of the Administrators” – I just interject that Administrators were in fact appointed much later than 2008, I think in 2010 – “and to make proper and appropriate plans for the realisation of the security held by the claimants in respect of the indebtedness of Cathco Holding. The absence of activity on behalf of the claimants and the Administrators in this respect is inexplicable.”
[13]It is then said the consequence of negligence and indeed the absence of good faith is that the defendant is not indebted to the claimant in any sum under the Loan Agreement. Alternatively, they are estopped by reason of the same matters from claiming on the guarantee. Reference is made to paragraphs 27 and following.[14]The question is whether the matters pleaded in paragraphs 3 to 5 of the defence give rise to a legal duty owed to the defendant covering the matters in 49.1: in other words, whether the Bank assumed such a responsibility. I am not only completely unpersuaded that such is the case, but also satisfied that there is no realistic prospect of the defendant so establishing at trial. If I do not go further than that, it is because counsel for the defendant also explicitly renounced the opportunity to make any submissions in support of the existence of any such duty. Though it is unnecessary for my decision I add that my attention was also not drawn to any evidence providing reasonable support for the proposition that the claimants in fact acted negligently towards the defendant.[15]I turn then to the allegation relating to the suggested duty of good faith which is pleaded in paragraph 6 of the defence which says:
“Further or alternatively, by reason of the aforesaid, the claimants were under a duty to act in good faith in their dealings with the defendant and his companies so the claimants would not act dishonestly, capriciously or arbitrarily or for an improper purpose not associated with a genuine commercial reason. The duty arises in the context of an applied term in the Loan Agreement under which the claim by the claimants is said to arise. Such a term is to be implied as a matter of law and/or by the „officious bystander‟ test and/or to give business efficacy to the Loan Agreement.”
[16]I should record that as to the first half of the formulation of the duty counsel for the defendant did not seek to support a general duty to act in good faith, but he did suggest that there was such a duty to the extent of the second half of the sentence, that is to say, that “the claimants would not act dishonestly, capriciously or arbitrarily or for an improper purpose not associated with a genuine commercial reason”. But, as I say, he did not suggest that there was any obligation wider than that, despite the formulation of the duty pleaded by (as I pointed out on the previous occasion and I point out again) his predecessor.[17]It is then suggested in paragraph 48 that as a result of the lack of good faith in the enforcement proceedings of the claimants “… the defendant is not able to plead the actual reason and purpose for the claimants electing to(a) appoint Administrators but then take no further steps to realise the security held by the claimants when there is (or ought to be) sufficient value in that security to discharge the amount as is due from Cathco Holdings and(b) to proceed against the defendant whilst giving conflicting assurances and indications and justifying those steps by reference to allegations that the claimants know or which they ought to know are false. In taking such steps (and by reason of their conduct since the late summer of 2008 …) the claimants have contrived to create the circumstances of non-payment by Cathco Holdings upon which the claimants now rely.” by reason of their conduct since the late summer of 2008 …) the claimants have contrived to create the circumstances of non-payment by Cathco Holdings upon which the claimants now rely.”

claimants have contrived to create the circumstances of non-payment

[18]The suggestion is that in consequence of that, on the breach of the suggested duty, the Bank is estopped from enforcing any security of right given to it by the contract whether by appointing administrators or requiring payment by guarantor or, although this is not pleaded I seem to detect the suggestion, that breach of the suggested duty might give rise to a claim in damages.[19]As I say, the breach of the duty of good faith and the matters relied upon are set out in paragraph 48. But, in addition, I must now take account of some new evidence which has been adduced by the defendant since the previous hearing and contained in a witness statement dated 13th June 2012 of the defendant. This evidence, so far as relevant to this matter, relates to the so-called Farnworth Development. The claimants had a third charge over that development to secure the borrowings of Cathco though none of the borrowings from the claimants had in fact been used for Farnworth. The defendant had, on behalf of Cathco, sought the approval of the claimants to the sale of Farnworth. The claimants‟ Credit Committee gave such approval in April 2010 on the basis that the Bank would be paid £4 million of the sale of Farnworth. The notice to complete on Farnworth was to expire on about 9th July 2010. The Bank was informed by the solicitors handling the matter for Cathco that the Bank could expect to receive only £1.2 million on completion as opposed to the £4 million. The defendant‟s contact at the Bank, a Mr. Fergal Feeney, reacted angrily and there was a telephone conversation which the defendant found highly abusive. Reference to this is made in paragraph 20 of the witness statement. The defendant there says:
“In essence, I explained to Mr. Feeney that the £1.2 million was what constituted the net proceeds of sale of the Farnworth development and that was all that was there. His response was that he was not listening to this, that he did not care (using a more abusive term) … that the £1.2 or Investec or Watkin Jones. He described me in the most abusive terms. He said that was „it‟ in terms of our relationship. He said that Cathco would go into administration and that I would know what that meant as regards my personal guarantee. Our conversation resolved nothing and it was quite clear to me that the matter had become personal and that Mr Feeney‟s motivation was directed towards me.”
[20]The defendant then describes how he involved a Mr. McGee as an intermediary to intercede with higher echelons at the Bank than Mr. Feeney. Whether or not as a result of Mr. McGee‟s intervention, the Bank decided to permit the sale against an increase in the defendant‟s undertaking relating to a property of his in the South of France. It is said that Mr. Feeney threatened the defendant that “he would get even” in respect of this override by his superiors. The witness statement goes on to suggest that the appointment of administrators in September 2010 and the decision to call the guarantee was not based on commercial realities but rather on personal motives, those being animosity of Mr. McGee.[21]In support of the first, that is to say that the guarantee was not based on commercial realities, he refers to(a) the fact that even now, 20 months later, only two of the smaller assets have been sold and(b) that the value of a development of another of Cathco‟s site has been, as the defendant puts it, “destroyed”.[22]As regards the latter suggestion, he says that the amount owed to the claimants on this other site, the Denbigh site, was around £4.9 million, that a further £2.75 million would have been required to complete the acquisition of adjoining properties necessary to complete the site, and that further construction costs were covered by a fixed price contract in place in the sum of £8.1 million giving a total outlay of £15.6 million against a value for the developed site of £33 million.[23]I leave on one side though, with some scepticism, the question of whether the suggested value of £33 million can be taken as a given. But I cannot help observing that the defendant‟s suggested scenario would have required the Bank to advance a further £2.7 million to a customer with whom it had relations which it regarded as unsatisfactory. The defendant does not suggest that he could have obtained the money from any other source.[24]The defendant argues that all this demonstrates that the administration “was not properly or lawfully motivated at the time and thus the appointment was invalid” and “absent that appointment, Cathco would not be in arrears and there would be no call on the guarantee”. I am unable to agree it establishes any of these propositions even arguably.[25]In his skeleton counsel for the defendant presented no argument in support of the implied term of good faith even in its form restricted to absence of arbitrary, capricious etc. behaviour. After some pressure from me during the hearing leading to some legal research during the midday adjournment, he produced two authorities, at least one of which would appear to have provided the inspiration for his predecessor‟s pleading. The case of Paragon Finance which was produced to me after this last-minute research, was concerned with variable interest rate clauses in loan agreements with the borrower and the claimant mortgagee. The Court of Appeal held that the discretionary power of the mortgagee under such clauses to set interest rates from time to time was not unfettered, but was limited by an implied term which was employed to give effect to the reasonable expectation of the parties, that the discretion should not be exercised “dishonestly, for an improper purpose, capriciously or arbitrarily”. These are, of course, the very same terms used by counsel‟s predecessor in pleading paragraph 6. Counsel, Mr. Ayers, before me, as I say, expressly disavowed reliance on any more general allegation of good faith.[26]I was also referred by Mr. Ayers to the decision of Lewison J in Meretz Investments v. ACP Ltd. He there reviewed cases where the courts had held that a mortgagee was not free to use one of its powers for a purpose other than to protect or enforce its security. The point at issue was whether the exercise of the power was vitiated if the mortgagee had both proper and improper motives. Lewison J held on the basis of the earlier case law that it was not; in other words that it was sufficient that one of the motives was proper.[27]In both these cases the court was concerned only with whether a contractual power not expressly stated to be subject to any limits had, as a matter of interpretation, to be treated as limited. If those limits were exceeded the exercise of the power was ineffective. Paragraph 6 of the particulars of claim in the present case is, by contrast, attempting to set up a duty not to so act and is not tied to the exercise of a power or concerned as those earlier cases were with the implication of a non-expressed limitation on that power. For this reason I have found little assistance in the two cases cited to me which are, moreover, dealing with quite different situations.[28]Mr. Ayers did not suggest that there was any other basis on which I could properly find in favour of the suggested duty or the suggested resulting estoppel and in my judgment there is none. Furthermore, Mr. Ayers accepts, on the basis of Lewison J‟s analysis, that if Paragon or Meretz could be transposed to the present case, the defendant would need to establish that the decisions of the Bank to appoint the administrators and pull the guarantee were based solely on the personal animosity and not even in part motivated by a desire to maximise financial recovery.[29]First, this is inherently unlikely. Secondly, nothing produced by the defendant comes remotely near to establishing it. Thirdly, it runs counter to a wealth of documentary material attached to the Bank‟s original witness statement of 10th November 2011 in support of its application for summary judgment. This shows that on 12th April 2010 the Bank wrote to the defendant and Cathco referring to certain events of default which occurred under the Loan Agreement saying that in deciding whether the Bank would nonetheless continue support of the borrower beyond the 30th June 2010, it was necessary that a number of requirements should be complied with. These included, as item 4, that the Bank “must receive not later than 30th June 2010 a minimum of £4 million from the sale proceeds of the Property at Farnworth … which is charged to the [Bank].” As I have already indicated, in the event only £1.2 million was repaid out of that Development to the Bank.[30]The decision to (and I use the vernacular) pull the plug was made by the Credit Committee, which did not include Mr. Feeney, on 2nd September 2010. The Background and Timeline is set out as follows:
“29 April 2010 Following the failure of Cathco to pay March rents to the Bank [the Bank has appointed outside accountants, Begbies] to undertake an independent financial review of Cathco [and outside agents] to collect future rents.” agents] to collect future rents.”
[31]The Credit Committee document also records that only £1.2 million and not £4 million had been received. It then at page 306 of the bundle, item 3, under the rubric “Recommend the Borrower is Placed into Administration” says:
“There is no trust left between the Bank and Nathan Kempin owing to the events previously noted; [It says] Despite continued support from the Bank through providing time, facilities and allowing the borrower to retain the rental income; the borrower has failed to deliver on the majority of the agreed milestones that had been set out since the start of 2010. Of the two that were delivered [which included the sale of Farnworth] there remains outstanding arrears on the Ruthin Tranche and the Bank received £3 million less on Farnworth than what it was originally assured by the borrower.” originally assured by the borrower.”
[32]At page 307 item 4 it recommends that the defendant‟s personal guarantee is called and a claim made under his undertaking. Then also on the same page it says:
“Summary & Recommendations … the Bank‟s perceived security position has materially deteriorated (£1.2 million vs assembled site EMV of £16.5 million).”
Then it says:
“Further all trust has been lost with [the defendant] and further concerns over the borrower‟s management team‟s resources to deliver maximum value and repay the Bank‟s debt in full. Therefore the appropriate measure is to recommend the borrower is placed in administration and [the defendant‟s] personal guarantee is called.”
That is signed by Mr. Philip Symonds who is Assistant Manager and Mr. Alex Cuppage who is the Manager.[33]I see no realistic prospect that if this matter were allowed to proceed to trial a court would be persuaded that in reaching the decision to appoint the Administrators and call the guarantee the Bank was not at least in part motivated by its own commercial interest rather than solely by any personal animosity. Moreover, the only personal animosity which the evidence speaks to is the abusive conversation with Mr. Feeney and I see no basis to suggest that any of his colleagues, let alone the two who signed the document I have just been quoting from, were in any way affected by that.[34]I also, although it is unnecessary for my decision, consider paragraph 48 is an entirely inadequate and inappropriate way to plead absence of good faith, simply saying that:
“Prior to disclosure and the provision of further information by the claimants the defendant is not able to plead the actual reason and purpose for the claimants electing to (a) appoint … to proceed against the defendant …”
It does not condescend to even the remotest particulars as to the basis on which it is to be inferred.[35]The pleading does not allege that breach of the duty gave rise to damage. In case, however, it should be suggested that this was a mere oversight on the part of the pleading, I draw attention to the following. Clause 25.3 of the Loan Agreement says:
“No set-off by the borrower All payments to be made by any obligor [which is defined to include the guarantor, that is the defendant] shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.”
So even if there were in the cross-claim a pleading of damages as result of the suggested breach or the suggested duty of good faith this clause would preclude it from being invoked as a defence to the guarantee.[36]I turn now to paragraph 14 of the pleading which says:
“In the course of these discussions [this in 2008] the claimants clearly and unequivocally represented, by implication, to the defendant that the claimants were able to continue to support the financial requirements of the defendant and his companies going forward.”
As I observed in the course of the previous hearing, this comes close to being a classic oxymoron if it is not in fact actually one, in its suggestion that there could be a clear and unequivocal representation when one had to resort to implication to establish it. This is yet another area in which one might have anticipated that there would have been a re-drafting of the defence and counterclaim but it has not occurred.[37]It is also unclear what it is that is said to have been represented, however clearly or implicitly. The pleader may well have been trying to avoid pleading a representation as to the future which he would have been well aware would not be legally actionable. If one excludes futurity, the suggested representation in paragraph 14 can only be that the Bank was in a position to lend the money which it was in any way promising to do in the Loan Agreement, so adding nothing to the contractual obligation in the contract. And, of course, as one knows as a matter of history, the Bank did in fact lend the money.[38]If, however, paragraph 14 is intended to suggest that the Bank that it either was now or would in the future be able to advance moneys other than the loan moneys, that is so vague as to be meaningless and preclude foreseeable or reasonable reliance on it.[39]Paragraph 15 then says:
“That implied representation was false as the claimants are to be taken to have known or ought to have known and/or was made negligently with the intent to induce the defendant to keep his business with the claimants.”
To say that this is a legal “dog‟s breakfast” would be an understatement. Again, no attempt has been made to turn it into fare more palatable to humans. At the very least also, it behoves the pleader to make clear the respect in which the representation was false, not least because he then proceeds to allege that the Bank must have known or ought to have known or was negligent, none of which is particularised as to the basis on which the court is asked to make that inference either in the pleading or in outside evidence, and all this when such weaknesses in the pleading were flagged and indeed criticised in the course of the previous hearing.[40]The suggested consequence of the alleged misrepresentation is a claim that the defendant is entitled to avoid any liability upon the guarantee in the Loan Agreement. That is pleaded later in the pleading in paragraph 51. In effect, it is being said that the defendant is entitled to rescind the guarantee in the Loan Agreement. This ignores that it is now impossible for any form of even approximate restitutio in integrum to take place: the quid pro quo for the guarantee was the moneys advanced to the guarantor‟s company which it is now incapable of repaying. Again, it does not appear to be alleged that the alleged misrepresentation gives rise to a cross-claim in damages but the objection that a set-off of any such claim is excluded by clause 25.3 of the Loan Agreement applies here also.[41]I therefore conclude there must be summary judgment on the new claim. There may be some minor point on quantum on which I will, if necessary, hear counsel. Alternatively, it could be dealt with by written submissions following this judgment.[42]As regards the other applications before me, it follows from what I have said so far that the defence and counterclaim in the first proceedings should be struck out although it is only as regards the counterclaim that it is of any practical importance.[43]Secondly, I grant permission to amend the first claim to rely on clause 16.1(a) of the Loan Agreement. That reads:
“Each guarantor subject to any limitation of liability contained within this clause irrevocably and unconditionally: (a) guarantees to the lender the punctual performance by the borrower of the borrower‟s obligations under the finance documents.”
[44]That contains no limitation relating to demand. The consequence of such a guarantee is that once the borrower does not perform such obligations punctually, in this case by default on its repayment obligations, the guarantor is automatically liable in damages effectively for breach of the warranty of the guarantee constituting in effect a warranty that such payment will be made punctually and that claim in damages is plainly a liquidated claim.[45]Mr. Ayers‟ objection to the amendment was on the basis that, as he submits, clause 16.1(a) does not apply to monetary obligations and that these are covered exclusively by 16.1(b), which was the provision originally relied upon and which reads that:
“Each guarantor … (b) undertakes with the lender that whenever the borrower does not pay any amount … the guarantor shall immediately on demand pay that amount ...”
I see no reason to qualify the clear words of clause 16.1(a). Counsel for the defendant argues that there is surplusage in that the matter can be covered provided the demand is made under 16.1(b) and that I consequence one should not permit 16.1(a) to cover, even in part, the same ground. But in my judgment that argument of surplusage (such arguments varying in their attraction according to the contract with which the court has to deal in any particular case) must yield to the clear general words of clause (a). In any event, given that the same moneys are recovered under the parallel proceedings based on the second demand, this is academic.[46]Finally, as I indicated earlier, I was asked to adjourn this hearing, the latest in a long line of applications for an adjournment. I set out the timetable earlier in this judgment and for further details reference can be made to my earlier judgment. Proceedings were commenced 16 months ago. The defendant was able to serve a lengthy defence and counterclaim. The application for summary judgment was made six months ago. In February there was an adjournment from the Master on the basis that moneys were forthcoming for rapid instruction of new solicitors. That did not stop an application being made before me on the previous occasion for an adjournment to “the next court term”. The effect of my decision and, in particular, my decision to adjourn the strike out, was that the defendant got the benefit of further time far beyond what he had asked for. The defendant has had more than ample time to respond to this application and the time has come to call a halt.[47]I formally refuse the adjournment today having indicated that I would take a final decision in this judgment. My decision to do so is reinforced by the fact that the only area in which it is suggested that further evidence might be available relates to the records of Cathco which it is said might support the case that the Bank did not act in good faith in relation to the appointment of the administrators. This cannot, however, avail the defendant unless it can show the existence of the implied term suggested in paragraph 6. But in any event I would have refused the adjournment simply because of the past history of the matter. MR. DE VERNEUIL SMITH: My Lord, I think the only consequential matter that you have not dealt with is that I also applied for summary judgment on the amended claim in the first hearing. DEPUTY JUDGE : I thought I had just dealt with that. MR. DE VERNEUIL SMITH: You said it was academic. Are you finding summary judgment on the amended claim? You grant permission to amend? DEPUTY JUDGE : I said I would but it is completely academic, is it not? MR. DE VERNEUIL SMITH: Well, my Lord --- DEPUTY JUDGE: It may not be academic. Is there a difference in quantum? MR. DE VERNEUIL SMITH: No, there is no difference in terms of the quantum. It may not matter. DEPUTY JUDGE : All I will say is that since it is academic I will not make a formal order but I would have granted leave and I would have granted summary judgment. MR. DE VERNEUIL SMITH: I believe that judgment then disposes of the applications which were before you at the last hearing. DEPUTY JUDGE : I think that disposes of everything. MR. DE VERNEUIL SMITH: My Lord, it is only quantum. JUDGE DONALDSON: What is the point on quantum? (Discussion followed)