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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> National Westminster Bank Plc v Binney [2011] EWHC 694 (QB) (23 March 2011) URL: https://www.bailii.org/ew/cases/EWHC/QB/2011/694.html Cite as: [2011] EWHC 694 (QB) |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
NATIONAL WESTMINSTER BANK PLC |
Claimant |
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- and - |
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DAVID BINNEY |
Defendant |
____________________
Andrew Spencer (instructed by Mercers Solicitors) for the Defendant
Hearing dates: 16, 17 February and 7 March 2011
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Crown Copyright ©
Mr Justice Eder:
Introduction
"This deed shall be a continuing security notwithstanding the death or disability of the Guarantor until the expiry of one month from the date of receipt by the Bank of written notice to the Bank by the Guarantor or his personal representatives to discontinue this deed."
It is common ground that Mr Binney signed the Guarantee on 17 November 2006 and that, pursuant to the Guarantee, the Bank demanded payment of the sum of £100,000 from Mr Binney on 20 May 2008. However, Mr Binney denies any liability to the Bank. In particular, he says that prior to the signing of the Guarantee on 17 November 2006, he had a meeting with Mr Ian Thomson who was employed by the Bank as a Relationship Manager and that Mr Thomson and he (i.e. Mr Binney) agreed at that meeting that the Guarantee would be in place only until (a) matching funds were deposited in KMC or (b) formal security was provided and that the Bank would then "tear up" the Guarantee. I take that summary from paragraph 6 of Mr Binney's Defence. Further, Mr Binney says that in accordance with this agreement he did (at least in effect) deposit sums totalling £100,000 with KMC.
Mr Binney's case
The Bank's case
Inadmissibility/irrelevance of alleged oral agreement/representation?
a) Where the court is satisfied that the terms of the parties' agreement are wholly contained in a written document then the parol evidence rule applies so that oral evidence adding to or qualifying the written contract is not admissible: see Chitty on Contracts, Vol 1 paras 12-095 to 12-105.
b) Here, the court should be satisfied that the parties intended their agreement to be wholly contained in the written guarantee for the following reasons:
i) There is a strong presumption that where parties arrive at a definite written contract, they intend that contract to contain all the terms of their agreement: Gillespie Bros & Co v Cheney, Eggar & Co [1896] 2 QB 59.
ii) The parties chose to make the Guarantee by deed which is a form of contract that can only be in writing.
iii) Section 4 of the Statute of Frauds 1677 prevents a guarantee from being enforceable unless it is in writing or unless there is a written memorandum or note of the agreement.
iv) Both parties intended the Guarantee to be enforceable. In particular, this was the intention of Mr Binney because should it have transpired that the Guarantee was unenforceable then the Bank's continued support for the business was likely to have been vitiated, which was contrary to Mr Binney's objectives.
c) Moreover, the alleged oral agreement should not be permitted to override the clear terms of the Guarantee for the following reasons:
i) The alleged agreement contradicts the clear words of the Guarantee which provide for it to be a "continuing security" (clause 3.1) and was apparently antecedent to the signing of the Guarantee: Henderson v Arthur [1907] 1 KB 10.
ii) The parties chose to make the Guarantee by deed which is a formal contract that requires a greater degree of formality than other written contracts and should not therefore be lightly overridden.
"…that there is no rule of law that evidence is rendered inadmissible or is to be ignored soley because a document exists which looks like a complete contract. Whether it is a complete contract depends upon the intention of the parties, objectively judged, and not on any rule of law"
The editors of Chitty agree with that conclusion: see Chitty on Contracts Vol 1 para 12-099. Having regard to this conclusion of the Law Commission, it is, in my judgment, difficult if not impossible to decide the points raised by the Bank as a matter of principle in the abstract and, in the circumstances of the present case, it seems both unnecessary and undesirable to do so. Even on the Bank's case, any analysis depends, at least in part, on the precise facts. The Bank did not suggest that I should strike out any part of Mr Binney's case; nor that I should not hear the evidence. In those circumstances, it seems to me that the best course is to consider the evidence and to state my conclusions with regard thereto. I will then revert, if necessary, to address any points of principle on the Bank's case.
Summary of relevant events
"I have no recollection of the Defendant stating that he was reluctant to sign "an open-ended guarantee". All bank guarantees are "open-ended guarantees". There is no form of temporary guarantee that I have ever seen in my years of business banking. Had the Defendant informed me that he was not happy to sign the guarantee as drafted I would have informed him that such a decision would have necessitated an immediate review with CSU which may have lead the Bank to reducing or altering the facilities to the Company but that would have been a matter for him. I have had many years of experience of witnessing people's signatures on guarantee documents and I also follow the same procedure when a director comes to the Bank to sign a guarantee. I always give the guarantee and the waiver form to the signatory to read and allow them sufficient time to read it through, I always highlight the nature of the document, the company for whom the guarantor is providing security, the limit of the guarantee and it is always my standard practice to highlight the clause within the guarantee which states that notice may be given in writing to discontinue it. I always make it clear that independent legal advice should be sought by the signatory if there is any uncertainty on their part about any aspect of the legal effect of the guarantee.
I did not at any time suggest or agree with the Defendant that the Guarantee would only be in place until matching funds were deposited by the debtor or until formal security was provided. When the Guarantee was given it was anticipated that further security would be provided. But that was on the basis that the guarantee was to remain in place in any event. I reiterate that there was no express agreement between me and the Defendant in any way varying or limiting the extent of the Guarantee. I was and remain confident that the Defendant understood the Guarantee and its implications."
"1. External funder replaced or deferred and
2. 75k [Joint & Several] PG from Binney & Hayward with covering [asset & liability] statements confirming they are good and
3. [Mr Binney] remortgage monies are injected."
There was a dispute before me as to the contents of this document. Unlike other similar internal documents of the Bank which existed from time to time, there was no heading referring in the body of the document to any personal guarantee nor any specific reference to the personal guarantee from Mr Binney. This was relied upon on behalf of Mr Binney in support of his case that once the remortgage monies were injected, there was a binding agreement that the original personal guarantee provided by Mr Binney would, in effect, be torn up. I deal with this point further below. But for present purposes, it is sufficient to state that I accept the Bank's evidence that although there was no express reference to the original personal guarantee of Mr Binney in the main descriptive part of the document, nevertheless it was referred to on a separate sheet headed "Core Security Summary" which formed part of the same document. (Other internal Bank documents about this time also confirm that the Guarantee continued to be held as security by the Bank and that the Bank were awaiting the further injection of cash funds by Mr Binney. However, there is nothing in those documents to suggest that there was any agreement to release the Guarantee when those funds were injected.)
"I suspect what was envisaged at the time the guarantee was taken was that the £100k injection would reduce the overdraft substantially to c£50k, a level we were at the time more comfortable funding. Deterioration in performance has, however, meant that even with £100k injection by [David Binney] (though was this all his, excess report 24/4/07 suggests 3rd party investor money of £50k?) the debt has not reduced hence we wish the guarantee to remain in place. Appreciate this may be an issue, dependent on outcome of Serco proposal etc"
"The initial thought was to within the £100,000 level covered by your Guarantee. [sic] That said, I recall that you mentioned in an earlier meeting that you had intended the guarantee to be operative until you had completed a personal cash injection. I was not aware of that and it does emphasise the need for the Bank's security position to be clarified."
"Meanwhile, from looking through notes of meetings over the last six months I am not clear whether I sent you details of the capital that I introduced into the company. You will note from your records that it was agreed in October/November 2006 that the shareholders would introduce loans totalling £170,000; I would be introducing the sum of £100,000 and Elizabeth would be introducing £70,000. As I was about to depart for Australia and there was no possibility of raising my capital in a short time frame I provided a short term personal guarantee to cover for my share; Elizabeth put her loan into the company immediately. My capital was introduced in stages in 2007, and in August, having notified Ian by phone of the third and final stage of the transaction, the personal guarantee should have been returned to me. Details of the payments are as follows:
31/01/07 £5,000
17/07/07 £42,000
03/08/07 £53,000"
"Guarantee:
Unable to check on BO for the initial £5k but 2 credits totalling £42k were received on 17/07/07 with a credit for £53k on 03/08/07. I have tried to find correspondence that defines the agreement regarding the Guarantee but cannot find anything to support/counter this contention. Do we
i) Acknowledge his further comments and make no further remarks.
ii) Bite the bullet & lapse the guarantee
iii) Start to contest his position."
"I write in response to your email of the 9th April, specifically with regard to the Guarantee of £100,000 given by you on 17th November 2006 in favour of KMC Management Consultants Ltd. I am addressing this letter to your home address as I am not sure whether correspondence addressed to the Company's office will reach you safely.
My response has been delayed by the need to research my records and confer with colleagues who were involved with the Company between that time and the 30th August 2007, when we first met.
I can find nothing to support your understanding that the Guarantee would be released following your injection of £100,000. I understand that the outline circumstances of the future release of the Guarantee were discussed but solely on the basis that such a request could only be considered in the light of the Company's position at the time of any subsequent discussion.
My credit sanctioning colleagues advise me that they have given no agreement to the release of the Guarantee and, furthermore, as a matter of principle would only agree to the release of a Guarantee against a commensurate reduction in the Bank's exposure."
The meeting on 17 November 2006
a) The Asset and Liability Statement dated 3 November 2006 which I have already referred to.
b) Mr Binney's attempt in cross-examination to explain his email dated 10th November 2006 where he stated: "You already have my undertaking to provide a personal guarantee";
c) Mr Binney's statements in his email dated dated 9 April 2008 (i) that he had spoken to Mr Thomson in August 2007 whereas (as Mr Binney accepted in cross-examination) this was not the case and (ii) that he had made a payment of £5000 in January 2007 whereas (again as he accepted in cross-examination) this was not a payment as such but represented in effect a waiver of one month's salary in October, November or December 2006.
d) The uncertainty he expressed in cross-examination with regard to the signing of the facility letter referred to in the email dated 21 September 2007.
e) A number of apparent errors in Mr Binney's Defence which he was unable satisfactorily to explain.
To a greater or lesser extent, I accept that these points have some force particularly with regard to the false statement made by Mr Binney in the Asset & Liability Statement for which Mr Binney had, at the very least, no satisfactory explanation whatsoever. However, in my judgment, the most troubling example (and one which goes to the heart of the main issue in this case) is Mr Binney's statement in his letter to the Bank dated 6 July 2008 that he had been assured in August 2007 that the Guarantee had been released after he put funds into KMC. In cross-examination, Mr Binney in effect accepted that this was untrue but, as he stated, he put that in the letter because he was very angry at the approach the Bank was taking. In my judgment, that is not a satisfactory explanation still less justification of what was nothing less than a blatant lie. In final submissions, Mr Spencer boldly submitted that this should not be held against Mr Binney because he (i.e. Mr Binney) was candid in accepting in cross-examination that what he had said in the email was untrue. However, that does not seem to assist in circumstances where Mr Binney had no alternative but to accept what was a blatant lie. Moreover, the thrust of the original lie was repeated in paragraph 40b of his statement dated 27th January 2010 when Mr Binney stated: "When I did inject cash as agreed into the company, the Bank confirmed that I would be released from the guarantee……". However, as Mr Binney accepted in cross-examination, the Bank had never given such confirmation and neither Mr Binney nor Ms Hicks had ever received any such confirmation. In final submissions, Mr Spencer submitted that even though the Bank had not in fact confirmed that he (i.e. Mr Binney) would be released from the Guarantee, nevertheless that is what Mr Binney thought. I do not accept that Mr Binney did think that would happen. But even if he did think that that would – or even might – happen, it provides no justification for Mr Binney saying that that is what the Bank confirmed would happen when the Bank had not do so – as Mr Binney was bound to and did accept.