Travis Perkins Trading Company Limited v Harjit Bambhra

A guarantee of a company’s financial obligations is construed objectively, by reference to the contract as a whole, its commercial purpose and the relevant factual matrix. Wording referring to a credit-limit increase following review of the debtor’s account did not impose an obligation to refuse an increase where the account was in arrears. It required the creditor to decide whether to increase the limit after reviewing the account.

Unless the guarantee expressly limits liability, an “all financial obligations” guarantee extends to indebtedness exceeding the stated credit limit. A creditor is not generally under a duty to protect a surety from the debtor’s obligations. Defences lacking a reasonable basis or real prospect of success may be struck out or summarily determined, and permission to amend may be refused where amendment would not cure the defects.

The claimant sought payment under a credit guarantee given by the defendant, a director of the debtor company, after the company entered administration and failed to pay its indebtedness. The defendant applied to amend his defence and add a counterclaim. The claimant applied to strike out pleaded defences and for summary judgment.

The proposed defences alleged material changes in the company’s trading, contractual limits on increases to the credit limit, a creditor’s duty to protect the defendant, exclusion of goods delivered after administration, and a consequential right of set-off. The central issues were whether those defences disclosed a reasonable basis or real prospect of success and whether any defect could be cured by amendment.

1. Applications and applicable thresholds. The applications were heard together because amendment was subject to similar thresholds and the court should consider whether amendment could cure a pleading defect. The relevant pleaded defences were struck out and summary judgment was entered where they disclosed no reasonable grounds or had no real prospect of success. Permission to amend and to add the counterclaim was refused.
2. Construction of the guarantee. The guarantee covered all financial obligations, including obligations arising from increases in the credit limit. The phrase “following review of the applicant company’s account” meant that the claimant was to decide whether to increase the limit after reviewing the account. It did not require the claimant to refuse an increase whenever the company was in arrears. That interpretation was consistent with the contract’s wording, object and commercial common sense.
3. The adjacent credit-application and guarantee boxes formed part of the relevant factual matrix, but did not support the defendant’s construction. The payment provisions gave the claimant discretion to impose sanctions and did not create an obligation to do so. The contra proferentem rule had no application because the wording was not materially ambiguous. The guarantee was not capped at the last stated credit limit.
4. Surety protections and remaining defences. A creditor was not bound to act with a duty of care to protect a surety. The alleged failure to review the account therefore could not found a laches defence, damages claim or set-off. The goods-delivered-after-administration defence had no reasonable basis because the claimed balance was admitted as outstanding by 4 June 2015, before administration.
5. The court declined to give a further opportunity to amend. The defendant had already had two opportunities, represented by solicitors and experienced counsel, and further proceedings would incur unnecessary costs. The parties were directed to attempt to agree the judgment sum and resolve the identified discrepancy.