Silverburn Finance (UK) Limited v Salt & Anor

A continuing guarantee may be revoked as to the principal debtor’s future liabilities unless it provides otherwise. Revocation does not affect liabilities incurred before revocation. Termination of the primary commercial relationship may amount to revocation where the parties intended that relationship to end and no further liabilities were contemplated. If the relationship later resumes, the revoked guarantee does not revive by implication. Any new guarantee must be separately agreed and satisfy the statutory requirement of writing.

Silverburn sued two directors of Nightingale Signs (Blackburn) Ltd under guarantees given in May 1992 to support recourse factoring arrangements. On 10 December 1992 Nightingale moved its factoring business to another provider. Silverburn accepted that the guarantees covered invoices received up to that date. Factoring later resumed between Nightingale and Silverburn on 8 January 1993, but the guarantees were not discussed.

After Nightingale entered administrative receivership, Silverburn claimed sums due on later unpaid invoices. The Preston County Court held that the guarantees had been revoked for future liabilities and had not been revived, and dismissed the claim. The appeal concerned the revocability of a continuing guarantee and whether its effectiveness could be impliedly reinstated when the underlying relationship resumed.

The appeal was dismissed. Lord Justice Mummery delivered the principal judgment, with which Lord Justice Rix agreed.

1. A guarantee securing indebtedness accruing from time to time is a continuing guarantee. Unless it contains an express provision prescribing how it may be terminated, the guarantor may revoke it in respect of the principal debtor’s future liabilities.
2. Revocation does not affect accrued rights. The guarantor remains liable for sums incurred by the principal debtor before revocation which fall within the guarantee.
3. The parties’ conduct on 10 December 1992 revoked the guarantees for future liabilities. The factoring relationship was terminated with immediate effect, and the parties contemplated that no further invoices would be factored by Silverburn. The relationship was extinguished rather than temporarily suspended, so the guarantees were revoked rather than merely held in abeyance.
4. The later factoring arrangement did not revive the revoked guarantees. A new guarantee would have required agreement and compliance with the statutory writing requirement. The revoked 1992 guarantees could not serve as written evidence of a guarantee which had ceased to exist.
5. Lord Justice Rix added that any argument based on implied new guarantees would have required consideration of the Statute of Frauds and relevant evidence. Silverburn had pleaded reliance on the original guarantees, not on new or revived guarantees, and it was neither necessary nor fair to determine those issues for the first time on appeal.

The Recorder therefore reached the correct decision in dismissing the claim. The appeal was dismissed with costs, and permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): On 1 March 2001, the court dismissed the appeal from the county court judgment and refused the application to appeal to the House of Lords: [2001] EWCA Civ 279.
• Preston County Court: Mr Recorder Armitage QC dismissed Silverburn’s claim on 1 October 1999.