Pursued for funds I didn't personally guarantee

Discussion in 'Legal' started by DavidG92, Feb 11, 2019.

  1. DavidG92

    DavidG92 UKBF Newcomer Free Member

    12 0
    Hi everyone,
    I'm just wondering if anybody could offer some advice.

    I'll try and be brief and keep it to quite a high-level.

    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. 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 promissory note 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. That said, 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.

    Any advice would be much appreciated.

    Thanks
    David
     
    Posted: Feb 11, 2019 By: DavidG92 Member since: Feb 11, 2019
    #1
  2. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    Based on the information you have provided, your position hinges entirely on the terms of the promissory note. Without sight of the actual document it will be difficult to provide you with anything more than general guidance.

    Is the CCMC listed for an actual Hearing or has it been agreed to hold it by telephone conference?

    Do you have all of your correspondence with the Claimant clearly setting out that you would not consent to any form of personal guarantee?

    Did you submit a response or defence to the points of claim and exhibit the pre-lending correspondence?

    What assets do you have if judgment is made against you?

    Is the second defendant a better financial target for the Claimant?
     
    Posted: Feb 11, 2019 By: Blaby Loyal Member since: Jun 12, 2018
    #2
  3. DavidG92

    DavidG92 UKBF Newcomer Free Member

    12 0
    Hello,
    Thank you for coming back to me so promptly.

    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...
     
    Last edited: Feb 11, 2019
    Posted: Feb 11, 2019 By: DavidG92 Member since: Feb 11, 2019
    #3
  4. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    The company is defunct. The second defendant is bankrupt. I'm afraid that that leaves you in the direct firing line.

    What advice did you get before signing the Note?

    Please PM me if you would like an overview of your options.
     
    Posted: Feb 11, 2019 By: Blaby Loyal Member since: Jun 12, 2018
    #4
  5. DavidG92

    DavidG92 UKBF Newcomer Free Member

    12 0
    I've come to realise that this might be the case.

    Stupidly, I didn't seek any advice prior to signing. I was aware of the stipulations surrounding a Personal Guarantee, hence my reluctancy to sign. I figured that common sense would dictate that, since there was a Personal Guarantee in place, the Promissory Note would impute any personal liability on myself, so I signed it.

    All the Promissory Note says is: "On demand, we (the Second Defendant) and (the First 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.
     
    Last edited: Feb 11, 2019
    Posted: Feb 11, 2019 By: DavidG92 Member since: Feb 11, 2019
    #5
  6. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

    1,016 193
    To be frank you have no real defence.

    If you have no assets and no material surplus income each month then the Claimants really ought to withdraw to save costs and Court time.

    However, they may have to pursue the matter to judgment if they have secondary indemnity obligations to consider.
     
    Posted: Feb 11, 2019 By: Blaby Loyal Member since: Jun 12, 2018
    #6
  7. Mr D

    Mr D UKBF Legend Free Member

    14,921 1,630

    So each of you agreed to be on the hook for the entire sum if the other person could not or did not pay.

    Common sense doesn't matter so much in business, contract does.

    You resigned as director, would have been an idea at the time then to try withdrawing from the note. If you could.
     
    Posted: Feb 11, 2019 By: Mr D Member since: Feb 12, 2017
    #7
  8. DavidG92

    DavidG92 UKBF Newcomer Free Member

    12 0
    Hi Mr. D,
    Thanks for your comments, much appreciated.

    I did attempt to withdraw from the contract when I resigned and emailed the claimant on 30th June. I then chased them relentlessly and on 25th July I received an email back stating 'Hi, Good to hear from you. All went well with (the Second Defendant), and he has agreed to liability of the monies.I am unsure on the paperwork trail that is required, but as soon as I have this info I shall be back in touch.'

    I then didn't get a response to this until 24th August, replied on the 25th and chased for a response on 7th and 22nd September. I then was told by the Claimant: 'I have just been informed that we will send out some official communication to yourself and (the second defendant) next week. Please hold out until then and then we can tie this all up officially.'

    Then, on 29th September received a demand for the full sum of monies owed.
     
    Last edited: Feb 11, 2019
    Posted: Feb 11, 2019 By: DavidG92 Member since: Feb 11, 2019
    #8
  9. Newchodge

    Newchodge UKBF Big Shot Free Member

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    If you are the Third Defendant you are not named in the Promissory Note, so why did you sign it?
     
    Posted: Feb 11, 2019 By: Newchodge Member since: Nov 8, 2012
    #9
  10. DavidG92

    DavidG92 UKBF Newcomer Free Member

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    That's my mistake, sorry.

    I was paraphrasing to remove name details. It should read second defendant and third defendant
     
    Posted: Feb 11, 2019 By: DavidG92 Member since: Feb 11, 2019
    #10
  11. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Right, so, on what grounds do you think that you don't have to pay what you have promised to pay?
     
    Posted: Feb 11, 2019 By: Newchodge Member since: Nov 8, 2012
    #11
  12. Pendulum

    Pendulum UKBF Contributor Free Member

    40 3
    Is that literally all it says? It seems to me that not only is it too vague, but that the demand was improperly issued, because you and the other man did not receive any value.

    The company may have received value, but the note doesn't so much as mention the company, and I fail to see how - given that wording - it binds you as individuals for anything other than some value that you and the other man would personally receive.

    However the above is just my non-qualified opinion, and I think that whether or not I might be right, you should urgently obtain an initial free consultation with a solicitor.
     
    Posted: Feb 12, 2019 By: Pendulum Member since: Mar 31, 2013
    #12
  13. DavidG92

    DavidG92 UKBF Newcomer Free Member

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    Like I said above, on the grounds that I didn’t personally guarantee anything. What is the point of the Personal Guarantee if the Promissory Note assigns the same responsibility?
     
    Posted: Feb 12, 2019 By: DavidG92 Member since: Feb 11, 2019
    #13
  14. obscure

    obscure UKBF Ace Free Member

    2,866 671
    You are looking at this wrong (and have been from right back to the start of this charade - when you started your business). Lawyers don't cost money they save you money. If you had paid a relatively small amount to a lawyer up front you wouldn't have been in this situation to start with - you wouldn't have had to pay in stress and worry and wouldn't now be facing the possibility of paying far more in debt or suffering years of disruption as a result of bankruptcy.

    Even now paying a lawyer will save more than it costs. Pay for an hour or two for them to review everything. They may find an easy out, or affirm that you are indeed stuffed.
     
    Posted: Feb 12, 2019 By: obscure Member since: Jan 18, 2008
    #14
  15. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    Good question - anyone Solicitors on here with the answer?
     
    Posted: Feb 12, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #15
  16. DavidWH

    DavidWH UKBF Enthusiast Free Member

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    I actually had to google what a Promissory Note was, as I've never come across one.

    From what I've read it sounds more like a promise to pay a fixed amount, such as a loan, rather than a PG, which are often used by suppliers where the amount will vary such as giving credit to a customer. A PG & Promissory note sound like two separate things.

    Agree with above, seek proper legal advice... although you may have been in a better position if you did so before filing your defence.
     
    Posted: Feb 12, 2019 By: DavidWH Member since: Feb 15, 2011
    #16
  17. Newchodge

    Newchodge UKBF Big Shot Free Member

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    That is the question you should have got legal advice on before signing. However, if you are rihgt, why were you asked to sign?
     
    Posted: Feb 12, 2019 By: Newchodge Member since: Nov 8, 2012
    #17
  18. DavidG92

    DavidG92 UKBF Newcomer Free Member

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    To show the company's intention to pay, as Director of said company
     
    Posted: Feb 12, 2019 By: DavidG92 Member since: Feb 11, 2019
    #18
  19. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Entering into the contract showed the intention to pay!
     
    Posted: Feb 12, 2019 By: Newchodge Member since: Nov 8, 2012
    #19
  20. DavidG92

    DavidG92 UKBF Newcomer Free Member

    12 0
    and by this notion, signing a Personal Guarantee showed an intention to Personally Guarantee. I didn't sign one.
     
    Posted: Feb 12, 2019 By: DavidG92 Member since: Feb 11, 2019
    #20