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In what circumstances can a guarantor avoid a call on the guarantee by the lender on the ground of misrepresentation? Joseph Curl, barrister at 9 Stone Buildings, reviews the appellate decision in Gaind v Dunbar Assets plc in which he acted for the lender.
Gaind v Dunbar Assets plc  EWHC 3187 (Ch),  All ER (D) 89 (Dec)
The Chancery Division dismissed the applicant's appeal against the finding of a district judge dismissing his application to set aside a statutory demand made by the respondent company. The applicant had made a personal guarantee in the process of funding a third party company. The court held that the applicant could not rely on the words of an employee of the respondent to the effect that the relevant bank never called in personal guarantees.
Although the form of argument encountered in this case—'don't worry about the personal guarantee, we don't call them in'—is routinely raised at county court level, there is a lack of High Court authority dealing with it. This may well be because the argument seldom succeeds and debtors who raise it lack the resources to pursue it on appeal. Gaind shows why the argument (in its actionable misrepresentation form) tends not to succeed.
In 2006, the appellant had granted the lender a personal guarantee for £1.1m for the debts of a Guernsey registered company under his control to fund a development. The lender advanced just under £9m to the principal debtor. All the lending was repayable on demand. With the economic downturn, the lender stopped funding the development, which was unable to proceed. The lender made demand in 2013 on the principal debtor for repayment of what was by then a debt of about £10m and, shortly afterwards, made demand on the appellant under the guarantee for payment of £1.1m. No payment was made and the lender served a
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Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.
Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.
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