Four Marketing Ltd v Bradshaw

A guarantee covering present and future liabilities may extend to advances made before its execution where the operative wording clearly includes existing liabilities. It may also extend to later advances where they remain loans repayable on demand and no new, concluded agreement changes their character.

A non-binding term sheet does not discharge a guarantee merely because the parties act consistently with its proposed transaction. Discharge may depend on completion of specified formal documents. Waiver or estoppel requires clear and unequivocal evidence; detriment alone is insufficient. A demand for repayment may be valid even when expressed in conciliatory language, provided it clearly indicates that payment is required.

Four Marketing Ltd sought to enforce a personal guarantee given by David Bradshaw in respect of sums advanced to Urbohemia Ltd. The claimed sum was £302,980.11.

The issues were whether the guarantee covered advances made before its execution and after 25 April 2014; whether it was discharged by a term sheet signed on 9 June 2014 or subsequently by agreement, waiver or estoppel; and whether a valid demand had been made on Urbohemia.

1. Construction of the guarantee. The guarantee covered advances made before 5 February 2014. Its definition of Guaranteed Obligations referred to all present and future payment obligations and liabilities. The preamble could not qualify that clear operative wording. The advances were repayable on demand and were therefore within the defined On-demand Loan Facility.
2. The guarantee also covered advances made after 25 April 2014. No concluded replacement loan agreement or agreed repayment terms had been established. References to a revolving loan and to future shareholder loan documents described an intended arrangement only. Until a different agreement was completed, the advances remained repayable on demand.
3. Effect of the term sheet. Applying RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co [2010] 1 WLR 753, the question was objective and depended on the words and conduct communicated between the parties. The term sheet expressly stated that it was not binding, contemplated formal transaction documents, and provided that the guarantee would be extinguished when the loans were capitalised as part of that formal transaction. The later issue of shares did not satisfy that condition. The guarantee was not discharged on 9 June 2014.
4. There was no subsequent agreement or waiver. Although clauses requiring writing did not prevent oral variation or waiver, the evidence did not establish an unequivocal agreement. Nor was there an estoppel: alleged detriment by Mr Bradshaw did not identify conduct by FML unequivocally representing that the guarantee had ceased.
5. A valid demand had been made. FML’s communications clearly indicated that repayment of the outstanding debt was required, despite their conciliatory language. Clause 3.3.3 did not dispense with the need for an underlying debt due following an unmet demand on Urbohemia.

Judgment was entered for FML in the sum of £302,980.11.