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Pursued for funds I didn't personally guarantee

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  • Pursued for funds I didn't personally guarantee



    Hi all,
    I'm wondering if you can advise... I'm currently acting as a litigant in person, but have found myself at a bit of a crossroads where I'm unsure on how to progress with the legal case put before me. Unfortunately, although this is a commercial legal matter, I've found myself in this position as a 25 year old young professional with very limited funds.

    A while ago my ex (the Second Defendant) was opening a bar and needed me to help him out due to my preferable credit rating, so I (the Third Defendant) served as Director to the company (the First Defendant) to facilitate establishing the business. During the process of opening the bar, he sought funds from a number of breweries, one of which is the Claimant.

    While acquiring funds, there was a lot of paperwork passed back and forth, two of which were a Personal Guarantee and a Promissory Note. Since I was a) not prepared to personally guarantee anything and b) not in a position to, I refused to sign the personal guarantee. I did, however, sign the promissory note, as I assumed that this merely showed an intention to pay. I figured that this was the case since there would be no point in a Personal Guarantee if the Promissory Note assigned the same responsibility. That said, within the Promissory Note was the phrase jointly and severally, which has since become a problem.

    Since then, the business has ceased trading and the claimant has begun pursuit of funds. It seems that they are disregarding the fact that I did not sign a personal guarantee, and are focusing solely on the promissory note, insisting that I am henceforth liable for the full sum of money. It's also worth noting that there was a chattels mortgage in place, entitling the Claimant to the full fixtures and fittings of the bar. This has not been acted upon at all, and all of the fixtures and fittings have been scrapped.

    Throughout this whole charade I have acted as a litigant in person. I'm only 25 years old, and I'm really in no position to fork out substantial amounts of money in a legal aid. In addition, since it's a commercial matter, seeking legal advice for free has proved a little tricky.

    I do firmly believe that I have a strong case. For me, it's pretty black and white that the personal guarantee legally binds somebody to personally guarantee something, I didn't sign one on those grounds, meaning I should not be held personally liable for payment. That said, this promissory note is presenting a grey area, which is becoming quite a burden. I do not have the legal backing of a corporate giant, or any legal backing for that matter, so I'm genuinely scared for the outcome.

    I've since been ordered to attend a CMCC in a few weeks to discuss costs. I have none, since I'm representing myself, but I'm unsure what I'm getting myself into. I was planning to turn up and represent myself at the conference, but I don't know whether this is a good idea or not. I appreciate that legal aid won't do me any harm, but I'm not entirely sure I can afford it.

    I'm also considering a strike out application on the basis that there is no reasonable grounds for bringing or defending the claim, but I don't know how best to progress.

    Additional information:

    - The CMCC is listed for an actual hearing, unfortunately. So I'll be required to be there in person.

    - Regrettably, since the conversations re. the personal guarantee were conducted over the phone, I don't have any paper chain relating to my stance on it. (Believe me, I've beaten myself up relentlessly over this point).

    - I have submitted a defence to the initial claim, and I believe it was fairly strong. The claimant has made significant oversights which I highlighted in this document and they also failed to acknowledge that I was the third claimant and responsible only in the alternative. In the event the claimant successfully enforces against the First and Second Defendant then the claim against me becomes entirely redundant.

    - In terms of assets, I have none. I'm only in the first couple of years of my career and I'm living in Central London, so naturally I'm not exactly rolling in it - for want of a better phrase.

    - The Second Defendant has failed to respond to any of the letters or correspondence, and has since moved address without providing any notice of this to the courts. I'm no longer in contact with this individual, so I cannot speak on their behalf. I have recently learnt, after searching the national register, that the Second Defendant has been made bankrupt. I'm assuming that the claimant may have therefore been informed of this and will no longer be able to make contact, leaving me to pick up the pieces...

    - All the Promissory Note says is: "On demand, we (the Third Defendant) and (the Second Defendant), jointly and severally promise to pay (the Claimant) the sum of £40,000 for value received." It is then signed.

    - It's also worth noting that I never received any financial gain from the loan, or took any sort of salary from the business. The sums were paid into the business account and I also resigned as Director not long after signing and prior to the business commencing trading. I informed the Claimant of my resignation immediately.


    Thanks
    Tags: None

  • #2
    Originally posted by Davidg92 View Post

    Hi all,
    I'm wondering if you can advise... I'm currently acting as a litigant in person, but have found myself at a bit of a crossroads where I'm unsure on how to progress with the legal case put before me. Unfortunately, although this is a commercial legal matter, I've found myself in this position as a 25 year old young professional with very limited funds.

    A while ago my ex (the Second Defendant) was opening a bar and needed me to help him out due to my preferable credit rating, so I (the Third Defendant) served as Director to the company (the First Defendant) to facilitate establishing the business. During the process of opening the bar, he sought funds from a number of breweries, one of which is the Claimant.

    While acquiring funds, there was a lot of paperwork passed back and forth, two of which were a Personal Guarantee and a Promissory Note. Since I was a) not prepared to personally guarantee anything and b) not in a position to, I refused to sign the personal guarantee. I did, however, sign the promissory note, as I assumed that this merely showed an intention to pay. I figured that this was the case since there would be no point in a Personal Guarantee if the Promissory Note assigned the same responsibility. That said, within the Promissory Note was the phrase jointly and severally, which has since become a problem.

    Since then, the business has ceased trading and the claimant has begun pursuit of funds. It seems that they are disregarding the fact that I did not sign a personal guarantee, and are focusing solely on the promissory note, insisting that I am henceforth liable for the full sum of money. It's also worth noting that there was a chattels mortgage in place, entitling the Claimant to the full fixtures and fittings of the bar. This has not been acted upon at all, and all of the fixtures and fittings have been scrapped.

    Throughout this whole charade I have acted as a litigant in person. I'm only 25 years old, and I'm really in no position to fork out substantial amounts of money in a legal aid. In addition, since it's a commercial matter, seeking legal advice for free has proved a little tricky.

    I do firmly believe that I have a strong case. For me, it's pretty black and white that the personal guarantee legally binds somebody to personally guarantee something, I didn't sign one on those grounds, meaning I should not be held personally liable for payment. That said, this promissory note is presenting a grey area, which is becoming quite a burden. I do not have the legal backing of a corporate giant, or any legal backing for that matter, so I'm genuinely scared for the outcome.

    I've since been ordered to attend a CMCC in a few weeks to discuss costs. I have none, since I'm representing myself, but I'm unsure what I'm getting myself into. I was planning to turn up and represent myself at the conference, but I don't know whether this is a good idea or not. I appreciate that legal aid won't do me any harm, but I'm not entirely sure I can afford it.

    I'm also considering a strike out application on the basis that there is no reasonable grounds for bringing or defending the claim, but I don't know how best to progress.

    Additional information:

    - The CMCC is listed for an actual hearing, unfortunately. So I'll be required to be there in person.

    - Regrettably, since the conversations re. the personal guarantee were conducted over the phone, I don't have any paper chain relating to my stance on it. (Believe me, I've beaten myself up relentlessly over this point).

    - I have submitted a defence to the initial claim, and I believe it was fairly strong. The claimant has made significant oversights which I highlighted in this document and they also failed to acknowledge that I was the third claimant and responsible only in the alternative. In the event the claimant successfully enforces against the First and Second Defendant then the claim against me becomes entirely redundant.

    - In terms of assets, I have none. I'm only in the first couple of years of my career and I'm living in Central London, so naturally I'm not exactly rolling in it - for want of a better phrase.

    - The Second Defendant has failed to respond to any of the letters or correspondence, and has since moved address without providing any notice of this to the courts. I'm no longer in contact with this individual, so I cannot speak on their behalf. I have recently learnt, after searching the national register, that the Second Defendant has been made bankrupt. I'm assuming that the claimant may have therefore been informed of this and will no longer be able to make contact, leaving me to pick up the pieces...

    - All the Promissory Note says is: "On demand, we (the Third Defendant) and (the Second Defendant), jointly and severally promise to pay (the Claimant) the sum of £40,000 for value received." It is then signed.

    - It's also worth noting that I never received any financial gain from the loan, or took any sort of salary from the business. The sums were paid into the business account and I also resigned as Director not long after signing and prior to the business commencing trading. I informed the Claimant of my resignation immediately.


    Thanks
    Id have some concerns here, first The Statute of Frauds suggests the only formalities to a guarantee are they are in writing, and they are signed, if they are contractual then there must be consideration however if they are a deed then there is no need for consideration.

    It depends on what you signed but in general terms you could be stuck here with the prom note
    I work for Wannops LLP . I give my free time available to helping other on the forum and would be happy to try and assist informally where needed. Any posts I make on LegalBeagles are for information and discussion purposes only and shouldn't be seen as legal advice. Any advice I provide is without liability.

    If you need to contact me please email me on Ptilley@wannops.com . My firms initial advice is always free.

    I have been involved in leading consumer credit and data protection cases including Harrison v Link Financial Limited (High Court), Grace v Blackhorse (Court of Appeal) and also Kotecha v Phoenix Recoveries (Court of Appeal) along with a number of other reported cases and often blog about all things consumer law orientated.

    You can also follow my blog on consumer credit here.

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