West Law Report

Obligation to pay guarantee

Posted in Times Law Report by mrkooenglish on June 29, 2008

From The TimesJune 25, 2008

Obligation to pay guarantee
IIG Capital llc v Van der Merwe in the Court of Appeal
Court of Appeal

Published June 25, 2008

IIG Capital llc v Van der Merwe

Where shareholders of a company over which they had complete control borrowed money for the business, the question whether they guaranteed to repay the loan as principal or as secondary obligors had to be assessed in that context. A call and payment of what was found to be due from the guarantors would lead almost certainly to a right of indemnity from the company to pay the guarantee.

The Court of Appeal (Lord Justice Waller, Lord Justice Lawrence Collins and Lord Justice Rimer) so stated on May 22, 2008, when dismissing the appeal of Fransina and Gerrit Van der Merwe against Mr Justice Lewison in the Chancery Division ([2007] EWHC 2631 (Ch)) who gave summary judgment in favour of IIG Capital llc, a New York company, of a sum certified as due under guarantees for a loan agreement they were obliged to pay.

LORD JUSTICE WALLER said that in the deeds of guarantee the obligation to pay moneys “expressed to be due” “upon demand” “unconditionally” as “principal obligor” “not merely as surety” indicated the defendants were taking on something more than a secondary obligation.

A clause which provided that “a certificate in writing signed by a duly authorised officer … stating the amount at any particular time due and payable by the grantor shall … be conclusive and binding on the guarantor for the purposes hereof” put the matter beyond doubt.

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