ABM Amro Commercial Finance Plc v McGinn & Ors

A contractual indemnity may impose a primary obligation, so the indemnifier cannot rely on the rule in Holme v Brunskill concerning material variations to the principal agreement. The construction turns on the deed’s terms, including provisions making company acknowledgments and certified losses binding and allowing contingent liabilities to be estimated.

A conclusive-evidence clause prevents a substantive dispute about quantum where resolving it would require a full trial. A certificate is not subject to manifest error merely because further investigation might show that additional debts could have been collected. Under a running-account factoring arrangement, loss arises when the account is finally demanded and debts thereafter prove irrecoverable. Contractual indemnities do not ordinarily give rise to a mitigation defence.

The claimant, a factor, sought summary judgment against three former directors under deeds of indemnity supporting a factoring agreement with their company. The company entered administration, disputed debts remained uncollected, and its administrators acknowledged a substantial debit balance.

The defendants argued that their liability was secondary, that material variations discharged the indemnities, that proofs of delivery were outside the contractual records obligation, and that the claimant’s collection conduct created defences as to liability or quantum. The claimant sought determination of those issues under CPR Part 24, while accepting that certain factual disputes and a possible post-24 February 2009 estoppel issue required trial.

1. Summary judgment granted. The defendants had no real prospect of succeeding on the issues pursued.
2. The deeds imposed primary, not secondary, obligations. The language of indemnification was indicative, but the decisive features were the clauses binding the defendants to company acknowledgments and judgments, and permitting a reasonable estimate of contingent liability. The rule in Holme v Brunskill was therefore unavailable, irrespective of alleged material variations.
3. Proofs of delivery were “other information pertaining to a Debt” and so fell within “Financial Records”. In any event, they were records or documents required under clause 16(3), and evidence of the performance of sale contracts. The company was required by Special Condition 12 to obtain and retain them, and could not rely on its own breach to excuse non-production.
4. The company’s breaches of clauses 16(3) and 18(3)(iv) were established. The latter warranty concerned acceptance of invoices without dispute or claim, and the extent of the disputed invoices constituted multiple breaches.
5. The conclusive-evidence clause made the administrators’ acknowledgment conclusive as to liability, subject to manifest error. The wider approach discussed in North Shore Ventures Ltd v Anstead Holdings Inc could not extend to a full trial investigating which debts might have been recovered, since that would defeat the clause’s purpose. No manifest error was shown.
6. The factoring account was a running account. Loss was suffered when the claimant demanded the debit balance and subsequently outstanding invoices proved irrecoverable, so the third defendant was not being made retrospectively liable. The claimant had discretion over collection under clause 12(1), and failure to collect did not provide either a mitigation defence or a separate causation defence under a contractual indemnity.

The precise form of order was left for determination after hearing counsel.