Levin v Tannenbaum

On an application for reverse summary judgment, the court must decide whether the claimant has a real, rather than fanciful, prospect of success. It must avoid a mini-trial but may determine a short point of construction where the evidence is sufficient.

A guarantee expressed to impose primary-obligor liability may ordinarily accrue without demand where it is simply payable on demand. However, clear wording requiring payment within a specified period after written demand gives that demand contractual effect. Such wording cannot be treated as surplusage or rewritten as requiring payment by reference to the date when the underlying debt fell due.

The claimant sued on five guarantees relating to loans made to the defendant’s brother. The guarantees purported to be deeds, but the defendant and the attesting witness denied signing them. The defendant applied for reverse summary judgment, relying principally on limitation and on the absence of any enforceable guarantee.

The underlying loan debts fell due in January 2007. Written demands were made on 12 May 2009 and the claim form was issued on 13 March 2013. The central issue was whether the guarantees’ limitation periods began when the underlying debts fell due or only after written demand and the contractual 14-day payment period.

1. Application of Part 24. The claimant had to show a real prospect of succeeding. The court should not conduct a mini-trial, but could decide a short construction issue if it had the necessary evidence and the parties had a proper opportunity to address it. The evidence could be considered critically, while allowing for evidence reasonably expected to be available at trial.
2. Construction of the guarantees. The primary-obligor clause did not override the specific wording of clause 2.2. That clause guaranteed payment within 14 days of receipt of written demand. Its commercial and linguistic effect was to give the guarantor 14 days to pay after demand. It was not an option for the creditor and could not be read as meaning 14 days after the underlying debt became due.
3. Effect of the authorities. MS Fashions v BCCI [1993] Ch 425 supported the general proposition that a primary-obligor provision may prevent “on demand” wording from making liability contingent. It did not justify disregarding the materially different wording used here. In Re Rutherford [1814] Ch Div 687 and Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833 supported the conclusion that a promise payable a specified time after demand does not accrue until demand and expiry of that period.
4. Result. Time began to run no earlier than 26 May 2009. The claims were therefore not statute-barred, and the claimant had at least a reasonable prospect of defeating the limitation defence. The court declined to determine the remaining arguments and refused the defendant’s reverse summary judgment application.