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You are here: BAILII >> Databases >> English and Welsh Courts - Miscellaneous >> Downing LLP v Maindonald (Re Evan Lauretz Maindonald - Insolvency Act 1986) [2024] EW Misc 16 (CC) (23 April 2024) URL: https://www.bailii.org/ew/cases/Misc/2024/16.html Cite as: [2024] EW Misc 16 (CC) |
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BUSINSS AND PROPERTY WORK
IN THE MATTER OF EVAN LAURETZ MAINDONALD
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
2 Redcliff Street, Bristol, BS1 6GR |
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B e f o r e :
____________________
DOWNING LLP |
Petitioner |
|
- and - |
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EVAN LAURETZ MAINDONALD |
Respondent |
____________________
John Churchill (instructed by Keystone Law) for the Respondent
Hearing dates: 15 April 2024
____________________
Crown Copyright ©
HHJ Paul Matthews :
Introduction
"2.1 Guarantee and Indemnity – General
In consideration of the Lender providing time and credit facilities to the Principal and granting the Facility to the Principal, the Guarantor irrevocably and unconditionally:
(a) guarantees to the Security Trustee punctual payment and performance by the Principal of all monies and all obligations and liabilities now or hereafter due, owing or incurred by the Principal to the Security Trustee and/or the other Secured Parties (or any of them) or any respective assignee or successor whether express or implied, present, future or contingent, joint or several, incurred as principal or surety, originally owing to the Security Trustee and/or the other Secured Parties (or any of them) or any respective assignee or successor or otherwise acquired by the Security Trustee and/or the other Secured Parties (or any of them) or any respective assignee or successor …
(b) undertakes with the Security Trustee that whenever the Principal does not pay any amount when due under or in connection with any Finance Document the Guarantor shall immediately on demand pay that amount as if it was the principal obligor …
[ … ]
2.3. Continuing Guarantee
This Guarantee is a continuing guarantee and will extend to the ultimate balance of the Guaranteed Obligations, regardless of any intermediate payment or discharge in whole or in part."
Procedure
The facility letter and its three amendments
First amendment
Second amendment
Third amendment
"4. RESERVATION OF RIGHTS
4.1. Pursuant to Clause 6.1.2 of the Facility Letter, the Borrower was required to repay £400,000 to the Lender on or before 5 PM on 31 August 2021.
4.2. The Borrower has failed to comply with clause 6.1.2 of the Facility Letter and therefore, the Loan is in default. This constitutes an Event of Default under clause 15 of the Facility Letter entitling the Lender to:
4.2.1. Cancel the Facility, at which time they shall immediately be cancelled; and/or
4.2.2. Declare that all or part of the Loans, together with accrued interest, and all other amounts accrued under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable; and/or
4.2.3. Declare that all or part of the Loans be payable on demand, at which time it shall immediately become payable on demand,
and at any time thereafter the Security Trustee may, without prejudice to its rights under the Security Documents, enforce any or all of the Security Documents.
4.3. Notwithstanding the above, the Lender and the Security Trustee agree, save as set out below, to delay any enforcement action."
Bankruptcy law
"22. As with summary judgment applications, the court should not conduct a mini-trial of the issues; on the other hand, the judge is likely to have to decide on the credibility of the factual assertions, and is entitled to 'grasp the nettle' and determine short points of law or construction where 'the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument'; and a case does not need to go to trial simply because 'something may turn up' which would have a bearing on the question of construction … "
The construction of the second amendment
"When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to 'what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean', to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd … And it does so by focussing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. … "
Was there an Event of Default?
Discharge of the guarantee?
The respondent's complaints
Counsel's submissions
The respondent's consent
Waiver of defences
"The obligations of the Guarantor under this Guarantee will not, be affected by any act, omission, matter or thing which, but for this clause 2.4 (Waiver of Defences), would reduce, release or prejudice any of its obligations under this Guarantee (without limitation and whether or not known to it or the Security Trustee for a period or periods) including:
[ … ]
(e) any amendment, novation, supplement, extension (whether of maturity or otherwise) or restatement (in each case, however fundamental and of whatsoever nature) or replacement of a Finance Document or any other document or security … "
"In this Guarantee (unless the context otherwise requires):
[ … ]
(r) the term 'Finance Document' includes all restatements, amendments, modifications, variations and supplements including those providing for further advances. The terms of the other Finance Documents and of any side letters between any Secured Party and any Obligor are incorporated into this Guarantee … "
"The doctrine of the purview"
"51. So what is the purview doctrine? Is it a doctrine of pure construction, albeit of particular application to contracts of guarantee? Or is it a doctrine of law, reflecting the equitable concerns of Holme v. Brunskill, however much it may be influenced by matters of interpretation? There is something for both theories in the cases cited above, and the matter has not perhaps been authoritatively resolved. Moreover, the above cases show the purview doctrine applied in two situations. In one situation, such as The Nefeli, the issue is not concerned with the discharge of a guarantee but is simply as to its scope. It either applies or does not apply to the new arrangement. In the other situation, however, the issue is not directly whether the guarantee covers the new arrangement, but whether an 'anti-discharge' provision operates to exclude the Holme v. Brunskill doctrine. That was the situation contemplated by Rowlatt and thus by Lord Atkin, and was the subject-matter of the actual decision in Triodos. In other words, it is even possible that there are two closely allied doctrines. One is a principle of pure construction, which may always arise in a guarantee, and that is the question of what the guarantee covers. The other is a principle as to the scope of an 'anti-discharge' provision, which seeks expressly to throw the cloak of present consent over future events so as to prevent those events subverting the guarantee. The latter principle, but not the former, is tied up with the doctrine of Holme v. Brunskill."
"At the stage of negotiation as to the consequences of a breach, there is everything to be said for allowing the parties to estimate their respective claims according to the contractual provisions they have themselves made, rather than for facing them with a legal complex so uncertain as the doctrine of fundamental breach must be. What, for example, would have been the position of the respondents' factory if instead of being destroyed it had been damaged, slightly or moderately or severely? At what point does the doctrine (with what logical justification I have not understood) decide, ex post facto, that the breach was (factually) fundamental before going on to ask whether legally it is to be regarded as fundamental? How is the date of 'termination' to be fixed? Is it the date of the incident causing the damage, or the date of the innocent party's election, or some other date? All these difficulties arise from the doctrine and are left unsolved by it.
At the judicial stage there is still more to be said for leaving cases to be decided straightforwardly on what the parties have bargained for rather than upon analysis, which becomes progressively more refined, of decisions in other cases leading to inevitable appeals …"
"A basic principle of the common law of contract, to which there are no exceptions that are relevant in the instant case, is that parties to a contract are free to determine for themselves what primary obligations they will accept. They may state these in express words in the contract itself and, where they do, the statement is determinative; but in practice a commercial contract never states all the primary obligations of the parties in full; many are left to be incorporated by implication of law from the legal nature of the contract into which the parties are entering. But if the parties wish to reject or modify primary obligations which would otherwise be so incorporated, they are fully at liberty to do so by express words."
The proposed counterclaim
1. The imposition by the project monitor, HBM, of additional conditions upon drawdowns.
2. The requirement by HBM that funds be spent on professional fees without the consent of the borrower.
3. HBM facilitated the embezzlement of money by approving false invoices provided by companies in which the contractor had an interest.
4. The imposition by the lender of further constraints upon drawdowns after the termination of the role of EA Construction as contractor for the works.
5. The requirement by the lender that further drawdowns under the facility agreement be made via the second charge lender, Proseed, with further information to be provided.
6. The lender's insistence that the development be completed in a single phase rather than allowing individual properties to be completed and sold.
Merits
"No set-off"
"3.3. All payments to be made by the Borrower under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set off for counterclaim".
These words clearly exclude the borrower's right to set off any counterclaim against its liability to pay. The liability of the respondent under the guarantee mirrors that of the borrower. The respondent cannot rely on any right of the borrower to set off the borrower's counterclaim to the extent that the borrower had no such right itself.
Does it matter?
Conclusion