Personal Garantee

[chris1296]

Hi all,

I have a question about personal guarantee.

So basically a friend of mine had a small ltd business and personal guaranteed a van through a finance company. Through no fault of his own as numerous contractors failed to pay him, his company had to shut down his business and go into liquidation. It cost him dearly and is now working for a company his friend owns full time.

So the finance company came and collected the van then sold it for £7400 which was far too cheap leaving him with another £22000 bill. Now a reasonable price second hand for the van taking into account that traders will want to turn a profit and wear and tear would have been around £12000, leaving a healthy profit margin for traders to sell on. He had no control over the sale of this vehicle and does not agree the price they got was even reasonable in the circumstances.

So the question is this. Does he stand any chance of fighting this? He is not asking for the whole debt to be cleared as he knows he signed the guarantee etc. All he is after is a reasonable price for the van in their settlement figure.

Appreciate any responses to the questions as I'm not up on financial law.

[R0b]

Re: Personal Garantee

Hello, it could be difficult to argue if the company went into liquidation. The finance company will have a duty to mitigate their losses by taken reasonable steps. The finance company should try to obtain a fair and reasonable price for the van but given the particular circumstances, it may be held to be reasonable price if the van was sold at auction and the finance company were looking to recoup their losses sooner rather than later.

There has been a recent case on mitigation of loss, perhaps similar to your friends: Lombard North Central Plc v Automobile World (UK) Ltd [2010] EWCA Civ 20
A summary of the case can be found here: http://www.lexology.com/library/deta...e-aba06f9047e0

Ultimately, it is up to your friend to prove that they failed to mitigate their losses by not taking reasonable steps.