Signed as a deed

[pobrm]

Re: Signed as a deed

I appreciate the posts and the help here. Quite a lot of information being banded about. I want to respond to 1st Credit in the next couple of weeks and would be grateful for a steer in the right direction as to what might get them to drop this.

[R0b]

Re: Signed as a deed

Just to confirm page 3 is the only page with terms and conditions? there's no other pages?

Defences:

1. The deed is defective as it does not comply with the Law of Property Act 1925 insofar as both parties have not signed the agreement. This therefore becomes a simple contract and so any claim is statute barred as the limitation period is 6 years for simple contracts.

2. The liabilities of the guarantor were discharged when the company dissolved - There is clause 4.1 which says the guarantor will indemnify where the bank cannot recover the sums whatsoever. This could be argued as an unfair contract term as it is too wide ins cope. There is no clause that I can see which says the obligations of the guarantor continue upon dissolution.

3. The agreement cannot be enforced, it was a defective deed and there was no consideration given. Therefore a Promisee cannot enforce a promise unless there has been something given in return for it.

4. On the face of the agreement, it does not indicate that it is a deed but a contract of guarantee.

5. the deed was not delivered and therefore the deed is invalid

6. If the deed is valid, the deed was entered into under undue influence (Barlcays v O'brien 1994, Royal bank of Scotland v Etridge 2002). House of Lords in Etridge stated that the bank should insist that the guarantor attend a private meeting and be told of their rights and liabilities or alternatively, communicate directly with the guarantor to seek independent legal advice and receive written confirmation from the solicitor that it has been informed of its rights and liabilities.

The bank did neither of the above and so the bank was fixed with a notice of presumed undue influence.



Point 6 may is not relevant if you did have a private meeting or you sought independent legal advice and your solicitor confirmed you understood your liabilities. The above defences are some general points to argue against the agreement.

[pobrm]

Re: Signed as a deed

That's the whole document. Thanks for the feedback, very informative. Do you think these are the points I should raise in a letter of reply?

[R0b]

Re: Signed as a deed

First of all, has the alleged debt been properly assigned to 1st Credit or are they acting on behalf of Lloyds? Have you received a notice of assignment from Lloyds or 1st Credit at all?

I personally wouldn't raise all of the defences in the letter and would go with point 1 to start with. The deed is defective, there is no signature on the agreement from the bank and it was not properly witnessed. Therefore the debt is statute barred.

Keep it short and simple, no need to waffle, it will be up to them to prove that it was properly executed.

[charitynjw]

Re: Signed as a deed

The O'Brien case makes reference to Bank of Credit & Commerce International SA-v-Aboody (1998) (1992) 4 ER 955.

This sets out classes of undue influence, actual & presumed, & also, once it is demonstrated that there was a relationship of trust & confidence between the 'complainant' (the surety), & the 'wrongdoer' (the bank), it then falls to the 'wrongdoer' to prove that there was no such undue influence.

[R0b]

Re: Signed as a deed

The O'Brien case makes reference to Bank of Credit & Commerce International SA-v-Aboody (1998) (1992) 4 ER 955.

This sets out classes of undue influence, actual & presumed, & also, once it is demonstrated that there was a relationship of trust & confidence between the 'complainant' (the surety), & the 'wrongdoer' (the bank), it then falls to the 'wrongdoer' to prove that there was no such undue influence.

The Etridge principles are the leading point on this as the House of Lords considered all previous authorities and restated some of the principles laid down (note that the O'Brien case is also a House of Lords case).

The difference between the O'brien case and the Etridge case is that in O'Brien, the HoL held that a bank will be "put on inquiry" when the wife offered to stand as surety for the husband.

The HoL in Etridge said that the bank will be "put on inquiry" if the relationship between the guarantor and the debtor is non-commercial. Therefore cases are not confided to just husband and wife cases as O'brien had initially stated.

If you read the judgment the decision does go on to say that the bank should be put on inquiry even where an individual director or shareholder is giving a guarantee.

[charitynjw]

Re: Signed as a deed

Thanks for that [MENTION=71570]R0b[/MENTION]

Reading through the thread, I can't see (or may have missed) whether [MENTION=83846]pobrm[/MENTION] was in fact a working director.

[pobrm]

Re: Signed as a deed

The debt has been purchased by 1st Credit who sent notice on 21st Jan.
How has the document not been properly witnessed?
I will write to them stating what you mention in point 1 and see how they respond.
I was a working director of the company at the time.

[R0b]

Re: Signed as a deed

The debt has been purchased by 1st Credit who sent notice on 21st Jan.
How has the document not been properly witnessed?
I will write to them stating what you mention in point 1 and see how they respond.
I was a working director of the company at the time.

Did the witness sign at the same time as both directors?

[Openlaw15]

Re: Signed as a deed

@Openlaw15 I haven't managed to look at the guarantee yet but the gist of your post there is basically that any company who who enters into a guarantee whether it is a personal guarantee or even a parent company guarantee, is no longer enforceable when a company is dissolved? Is that what you are saying?"

Rob I have explained this law so that a child could understand it. I could not have made it any simpler. Yes this is exactly what I am saying. If the bank held no security such as charges as aforesaid on the director's guarantee where it (the guarantee) affected a insolvent company then all creditors are not priority debtors and have no preferential treatment. I can't actually make it any simpler, notwithstanding it is common sense notwithstanding an excellent point of law for any directors in this very position.

"Why is the defence that of a defective deed a foolhardy one? Given your relevant posts on wills and probate you should know the requirements of a deed so I'm a bit surprised as to why you sugges that it is a poor argument. "

The deed of assignment is against the third party debt collector. But my argument is against the nature of the 'guarantee' as the so-called security which in my view and in any decent commercial lawyer's view it is not adequate security. If the primary obligor (the Op) is not liable to the bank as his company became insolvent it also destroys any claims the third party assignee has whether or not the assignment was dealt with formally, ie the deed. If and only if the commercial paris passu defence fails and in my view it will take a rather good debt collection to have specialist knowledge about pari passu principle, only then should the deed error argument be an argument but as a contingency and certainly not the primary defence.

"Let's say for example, the DLC brings a claim against the director personally for the recovery of sums outstanding. Why would pari passu be a good defence to plead? Surely if the company is dissolved and the guarantee is ineffective then the defence pleaded should be that the DLC has no standing against the director because it was the Ltd Co who took out the loan not the director."

It would be an excellent defence because if the bank (the main creditor) did not have adequate security to defeat an insolvency pari passu then the secondary creditor cannot have any better title to claim the debt (receivable). Paris passu affects primary creditors and secondary debt collectors. A guarantee is merely a piece of paper that only guarantees the interest where the company is not insolvent. A bank has no special priority in insolvency law unless it (the bank) has adequate security to withstand insolvency.

I am also curious about your credentials so Id be grateful if you could enlighten me as to how long ago you did your law degree? Also what are your sources that you use to back up your claims? Are these the same books when you did the degree or something else? Do you have any experience working in practice?

It is non sequitur to the OP's situation to enquire of credentials. Let's instead argue points of law. I do not ever say to the other Legalbeagles what qualifications do you have as I am more interested in their ability to reason and to rely on point of law. The only thing that is relevant in proportionate to the Op's situation is whether I have studied commercial transactions' law in practice as in my view this is a commercial practice enquiry as it appertains to a former director of an insolvent company and a commercial transaction, ie a business loan in exchange for written guarantee. Were you to look at the documents you would be alert to its nature and content.

"I have to be honest some of your answers are very dubious and contain a lot of waffle it looks like your taking it straight out of a textbook verbatim - not to mention your legalese!

I talk like lawyer because I am essentially a lawyer albeit I am not a qualified lawyer. I do not communicate like lay person owing to the facts I am not a lay person. I am educated to communicate, think, and convey ideas as though I were a lawyer. I explain the law in principle and then apply it to the Ops facts. I do this on all occasions; I do not simply at random dive straight in with half hearted answers. On the contrary, i am trained to explain the relevant law out of all the broad law possible and narrowly confine to the Ops' fact in proportion. I write concisely, I do not as you say waffle, I rather stick to the op's facts like glue just as I did when I completed the law assignments whether it be consideration and estoppel essays, or a problem question on ending a trust by adults and dependent beneficiaries, or a commercial tractions problem question. It is also non sequitur to enquire when I completed the law degree. Law is not about when you last studied law as is law is current, is alive, its affective and in effect until that law is removed either by new case law ratios (common law principles), or statute is either amended or repealed. Notwithstanding, my sources are irrelevant to you, as I largely make points of law based on relevant legal authorities. I do not make guesses on anecdotal experiences I instead research thoroughly in fact.

[Openlaw15]

Re: Signed as a deed

Hi
Looking for advice on a directors guarantee which I gave to cover a business overdraft. The business went down in 2008 and no payments made on the account since then.
The directors guarantee says 'signed as a deed' on it. Does this mean it stands for 12 years, or has it now timed out, statute barred.
The original load was with a high street bank who have allegedly sold the account to 1st credit.
Any help and advice would be greatly appreciated.

Moving away from my paris passu argument, was there a deed instrument other than what was stated on the apparent guarantee document itself.

It may be useful to check the bank's articles of association at Company Houses to see if it mentions formalities for dealing with guarantees. Is there an agreement for instance where owing to an on-going relationship (connection) with its recipient company (to whom any loans were made including company directors) the statement is sufficient without a signature. You could be opening Pandora's proverbial box if you challenge the nature of the legitimacy of this guarantee. I think the debt collection company could get out of the deed point of law, but don't think it could where the company has gone insolvent, ie pari passu. My advice is tread carefully.

[R0b]

Re: Signed as a deed

I talk like lawyer because I am essentially a lawyer albeit I am not a qualified lawyer. I do not communicate like lay person owing to the facts I am not a lay person. I am educated to communicate, think, and convey ideas as though I were a lawyer. I explain the law in principle and then apply it to the Ops facts. I do this on all occasions; I do not simply at random dive straight in with half hearted answers. On the contrary, i am trained to explain the relevant law out of all the broad law possible and narrowly confine to the Ops' fact in proportion. I write concisely, I do not as you say waffle, I rather stick to the op's facts like glue just as I did when I completed the law assignments whether it be consideration and estoppel essays, or a problem question on ending a trust by adults and dependent beneficiaries, or a commercial tractions problem question. It is also non sequitur to enquire when I completed the law degree. Law is not about when you last studied law as is law is current, is alive, its affective and in effect until that law is removed either by new case law ratios (common law principles), or statute is either amended or repealed. Notwithstanding, my sources are irrelevant to you, as I largely make points of law based on relevant legal authorities. I do not make guesses on anecdotal experiences I instead research thoroughly in fact.

Well, I appreciate your response at least.. but this is a consumer forum, wouldn't it just be easier to stop talking like a lawyer and come down a level or two and talk non-jargon all the time i.e. layman's terms?

anyway, back to the point of arguing the points of law as you say, it seems to me that you are looking at this problem purely from an insolvency point of view and you are failing to expand outside of that (maybe your commercial transactions module didn't cover guarantees?). I'm afraid any decent lawyer would disagree with you on the guarantee, your research must have been a bit of an oversight because in Re Fitzgeorge 1905, it was held that a guarantor remains liable for for the obligations of the principal obligor (the limited company) where the company is dissolved, also confirmed in the authoritative text - The Law of Guarantees.

The authors (2 QC barristers by the way) and publishers must have wasted their time and money with that book because as I understand it yourself and many decent commercial lawyers would say the bank has no recourse when a company is dissolved and cannot enforce the guarantee against the director.

[Openlaw15]

Re: Signed as a deed

Here are all the pages to the Guarantee

In 'acknowledgement' it says the bank has signed this guarantee and 'to be delivered' as a 'deed.'

[Openlaw15]

Re: Signed as a deed

Well, I appreciate your response at least.. but this is a consumer forum, wouldn't it just be easier to stop talking like a lawyer and come down a level or two and talk non-jargon all the time i.e. layman's terms?

anyway, back to the point of arguing the points of law as you say, it seems to me that you are looking at this problem purely from an insolvency point of view and you are failing to expand outside of that (maybe your commercial transactions module didn't cover guarantees?). I'm afraid any decent lawyer would disagree with you on the guarantee, your research must have been a bit of an oversight because in Re Fitzgeorge 1905, it was held that a guarantor remains liable for for the obligations of the principal obligor (the limited company) where the company is dissolved, also confirmed in the authoritative text - The Law of Guarantees.

The authors (2 QC barristers by the way) and publishers must have wasted their time and money with that book because as I understand it yourself and many decent commercial lawyers would say the bank has no recourse when a company is dissolved and cannot enforce the guarantee against the director.

Rob, what date is the Insolvency Act 1986....it's 1986. What date was that case, 1905. The Insolvency Act is a statutory protection whereas a lawyer commenting on the law is not a binding authority. Rob, have you examined the relevant part of the Insolvency Act for preferential creditors? It would be so easy just via a key term search. Of course a commercial lawyer who has an interest for a bank will find and use arguments to support the bank. You have not explained to me why a bank is a preferential creditor pursuant to an insolvent company?

[Openlaw15]

Re: Signed as a deed

@Openlaw15 I haven't managed to look at the guarantee yet but the gist of your post there is basically that any company who who enters into a guarantee whether it is a personal guarantee or even a parent company guarantee, is no longer enforceable when a company is dissolved? Is that what you are saying?

Why is the defence that of a defective deed a foolhardy one? Given your relevant posts on wills and probate you should know the requirements of a deed so I'm a bit surprised as to why you sugges that it is a poor argument.

Let's say for example, the DLC brings a claim against the director personally for the recovery of sums outstanding. Why would pari passu be a good defence to plead? Surely if the company is dissolved and the guarantee is ineffective then the defence pleaded should be that the DLC has no standing against the director because it was the Ltd Co who took out the loan not the director.

I am also curious about your credentials so Id be grateful if you could enlighten me as to how long ago you did your law degree? Also what are your sources that you use to back up your claims? Are these the same books when you did the degree or something else? Do you have any experience working in practice?

I have to be honest some of your answers are very dubious and contain a lot of waffle it looks like your taking it straight out of a textbook verbatim - not to mention your legalese!

This is from my commercial transaction course book when I studied W222 with the College of Law and the Open University law Schools.

"●●
role of security in credit transactions
●●
what is ‘security’
●●
types of security commonly used in business and consumer transactions
●●
law on certain types of security interest

Key themes
After studying Part B, you should be able to:
●●
explain the role of security in credit transactions
●●
describe the types of security commonly used in business and consumer transactions
●●
explain the features of guarantees and retention of title clauses
●●
demonstrate your skills of critical judgement and evaluation, analysis and synthesis,
drafting and legal research
Learning outcomes"

"




What is the nature and purpose of security?




(allow 1 hour)



Please read Section 2 entitled ‘Security’ in
Sealy & Hooley, pp. 1077–1090, and answer the


questions below. Please do not read any of the cases or the articles referred to in this section —
you will not need to do so in order to answer the questions. Again it is worth emphasising that
you will discover a great deal of terminology which may not be immediately familiar to you.
The comments below will highlight those which you need to learn.

1 What are the two types of security identified in the article referred to in section 2(a)
and how would you describe them?
2 In relation to the second type of security identified in the same section, what are the
two types of that security that the author describes?
3 What are the five effects that taking security may have?
4 What is the main weakness of taking personal security?"

"



3
The five effects that taking security may have are:





●●
it coerces the debtor into paying the amount due since the debtor will not wish the


creditor to take the security. If you hand over a valuable watch or piece of jewellery
to a pawnbroker you will want that item back, so you will repay the loan. You do not
want your bank or building society to take possession of your house, so you make sure
that the mortgage instalments are paid every month


●●
if the debtor becomes insolvent (see Part C below where you will learn more about


insolvency) the creditor with security is usually in a better position to get paid since
the creditor can sell the security to realise the debt


●●
a creditor who has security can usually prevent other creditors taking those goods


(‘execution or diligence’ basically means this) to pay off their debts


●●
if the debtor sells property subject to security, the creditor may be owed that money


by the buyer or be able to lay claim to the money in the hands of the debtor


●●
a secured creditor has a right of ‘pursuit’; namely he or she can follow the asset which


is the subject of the security into the hands of third parties. You have already come
across this principle in relation to retention of title clauses (see Unit 4, Part B) and will
learn more about this in paragraph 3 below. A secured creditor also has a right of
‘preference’. In other words, the secured creditor is entitled to look to the proceeds of
the asset to satisfy his or her debt in priority to the claims of other creditors.


4
The main weakness of taking personal security (such as a guarantee) is that its value


depends on the continued solvency of the third party (guarantor). If the guarantor
becomes insolvent, the creditor has lost his or her security and is in the same position as
other unsecured creditors (see further Part C below).


5.
The main advantage of taking real security is that the creditor can rely on his right of


preference (i.e. his or her right to look to the proceeds of sale of the asset to repay the
debt in priority to the claims of other creditors) even though the debtor may be insolvent."