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Successful Judgment for Jonathan Lester

Jonathan Lester

Jonathan Lester has succeeded in overturning a District Judge’s decision dismissing his client’s claim against a guarantor. The claim centred on an “all moneys” clause in the guarantee that sought to hold the guarantor liable for sums owing under any subsequent contract between the creditor and the principal debtor and not just under the specific contract in contemplation when the guarantee was given. The guarantor had given a guarantee in 2012 in consideration of a leasing agreement entered into between Jonathan’s client and the guarantor’s company on the same day The 2012 leasing agreement had run its course, and a new agreement was entered into between the same parties in 2017. There was no new guarantee given in 2017, but the claimant argued that the “all money’s” clause in the 2012 guarantee applied to cover the 2017 leasing agreement.

At the trial in the County Court, the District Judge dismissed the claim on the grounds that the guarantee for debts arising in 2017 was unsupported by consideration and that the guarantee did not comply with the requirements of the Statute of Frauds 1677. In a full appeal hearing before a Circuit Judge, Jonathan was successful in arguing that the Judge had been wrong on both these points. The District Judge had cavilled at the idea that a guarantee could be given for contingent future liabilities in an “all moneys” form which meant that the guarantor would remain liable indefinitely for contracts entered into by the company even after the guarantor might have left the company altogether. The answer to this problem lay in the fact that such a guarantee can be unliterally revoked on reasonable notice, but the guarantor never argued that he had done so. The District Judge also held that the “all moneys” clause was so vague as to be meaningless (and therefore was void for uncertainty) but the Circuit Judge agreed there is difference between an expression’s being wide and being vague. 

As often happens, the consideration given by the creditor for the guarantee was the entering into of the principal contract to which the guarantee relates. The District Judge reasoned that the entering into of the 2012 leasing agreement could not act as consideration for a guarantee for debts arising under any future agreement, such as the 2017 one, because it would be past consideration.  Jonathan was successful in demonstrating that this was a failure of logic. For the purposes of the timing of consideration, what matters is when the guarantee is given and not when the guaranteed obligations arise. The law therefore has no difficulty with a guarantee that secures future liabilities yet to exist, so long as that guarantee is supported by consideration when it is given.  

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