Barclays Bank Plc v Sutton

On an application for summary judgment, the question is whether the defence has a real prospect of success, not whether a different contractual interpretation is arguable in the abstract. A written banking agreement may be read with binding oral terms, but the evidence must support a concluded agreement rather than a contingent intention or aspiration. An agreement to transfer an overdraft facility does not, without more, establish an agreement to convert the transferred debt into a fixed-term loan. Where a guarantee provides that it takes effect on signature even if other security is not provided, the creditor may rely on it despite the absence of contemplated additional security, subject to the proper construction of the related contractual obligations.

Barclays Bank Plc claimed payment under a personal guarantee given by Mr Clive Jeremy Sutton for liabilities of PFL, a company with which he traded. The bank had agreed to transfer an overdraft facility from another company, CSF, to PFL. The contemporaneous documents referred to a possible future conversion of the overdraft into a term loan, subject to further financial information and security.

After the overdraft was transferred to PFL, the bank sought payment under the guarantee. Master Eastman struck out the defence and counterclaim and entered summary judgment. Mr Sutton appealed, arguing that there was no concluded agreement supporting the transfer or, alternatively, that the guarantee formed part of a wider agreement requiring conversion into a term loan.

1. Appeal dismissed. The defendant had no real prospect of successfully defending the claim or establishing the counterclaim.
2. The court accepted that a written contract may need to be construed in the light of binding oral agreements which restrain the manner in which it is performed. The critical issue was whether the evidence disclosed a concluded agreement for a fixed-term loan, rather than a contingent aspiration.
3. The evidence established an agreement to transfer the CSF overdraft to PFL, dependent on the bank being satisfied that sufficient security was available. The personal guarantee signed in December 2012 came into effect immediately under its terms, even though the additional charge over the defendant’s home had not been executed. The bank was therefore entitled to act on the transfer agreement.
4. There was no concluded agreement requiring immediate or eventual conversion into a fixed-term loan. The August correspondence referred to looking to convert the overdraft, subject to further accounts, forecasts and security. The defendant was absent from the relevant meeting, did not contradict the contemporaneous e-mail, and had not fulfilled the remaining security requirements. His and the finance director’s reaction to the transfer, seeking additional overdraft headroom rather than alleging breach, supported the bank’s construction.
5. The guarantee could therefore be enforced against the transferred PFL debt. The order striking out the defence and counterclaim and granting summary judgment was upheld.

• High Court (Queen’s Bench Division): Master Eastman struck out the defence and counterclaim and granted summary judgment to Barclays Bank Plc. On appeal, Mr Justice Blake dismissed the appeal.