Promontoria (Chestnut) Ltd v Simpson & Anor

An all-monies guarantee is not confined to a particular facility or facility letter unless its terms impose that limitation. In a claim against guarantors, an alleged defect in the assignment of the underlying borrowing is immaterial where the guarantees were themselves assigned and cover the liability claimed. A broadly drafted assignment may include related facility agreements, variations, extensions and renewals. Where clear notice of an absolute assignment is given, a debtor cannot normally withhold payment merely because the scope of the assignment is disputed. Contractual indemnity costs may be awarded under the guarantee and Civil Procedure Rules 1998, Part 44.5, but indemnity costs under Part 44.3 require litigation conduct outside the norm.

Promontoria (Chestnut) Ltd claimed £300,000 plus interest from Scott and Tracy Simpson under personal guarantees given to Clydesdale Bank in relation to borrowing by Property For Sale or Let Ltd. The defendants disputed whether the relevant overdraft facility had been assigned and whether the deed of assignment covered the guarantees and the March 2013 facility.

The court also considered whether a July 2013 letter constituted an extension or renewal of the March facility, whether it had been accepted by conduct, and the appropriate costs basis.

1. Liability under the guarantees. The claim was pleaded solely under the guarantees. The guarantees were all-monies guarantees, limited by amount rather than by reference to a particular facility or liability. They therefore covered the customer’s liability under the March 2013 facility. Any defect in the assignment of the underlying facility was irrelevant to the guarantors’ liability because the guarantees had plainly been assigned and covered the amount claimed.
2. Construction of the assignment. Clause 2.1 assigned all rights, benefits and interests in the relevant documents relating to each specified loan asset. The definition of relevant document was wide and non-exclusive. It included facility or credit agreements and written amendments, supplements, consents, accessions, waivers and variations. The March and July 2013 facilities were part of the same bundle of relevant documents and passed under the deed.
3. Effect of notice. The notices expressly identified the customer’s liability under both the March and July facilities and referred to the relevant account. Applying the approach explained by Henderson LJ in Hancock v Promontoria (Chestnut) Ltd [2020] EWCA Civ 907, clear notice requires the debtor only to know that a legally effective absolute assignment has occurred. The debtor cannot ordinarily refuse liability merely because the precise scope of the assignment is disputed.
4. July facility. The July letter commercially offered continued overdraft accommodation on specified terms. The customer accepted it by using the facility and by later correspondence referring to the temporary overdraft without objection. The bank was entitled to waive any requirement for written acceptance. The July facility was an extension, renewal or variation of the March facility and was assigned with it.
5. Disposition and costs. Judgment was entered for the claimant for £415,075.12, inclusive of interest. The defendants were liable for contractual indemnity costs under the guarantees and under Part 44.5 of the Civil Procedure Rules 1998. Their conduct did not take the litigation outside the norm for the purposes of Part 44.3. The claimant was awarded £200,000 on account of costs.