Anyone who is asked to personally guarantee repayment of a corporate loan should take a deep breath – and expert legal advice – before signing on the dotted line. The point was powerfully made by a High Court case in which a businessman found himself liable to pay more than $150 million immediately.
A bank made a secured, fixed-term loan to various corporate entities. The debt was personally and unconditionally guaranteed by the businessman. After installments on the loan fell into arrears, a company to which the bank had assigned the benefit of the loan launched proceedings against him with a view to enforcing the guarantee.
In ruling on the matter, the Court noted that the loan agreement, whilst governed by Greek law, conferred non-exclusive jurisdiction on the English courts to resolve any disputes arising under it. Although there were certain procedural defects in the way the proceedings had been issued, the businessman had long been aware of the claim he faced and had suffered no prejudice. His argument that he had not been properly served with the proceedings was technical in the extreme.
The deadline by which he was required to file an acknowledgement of service and a defense to the claim had come and gone without compliance and the company was thus entitled to a default judgment in the full amount of its claim. He in any event had no viable defense to the proceedings and the company was therefore also entitled to summary judgment on the merits. The businessman was ordered to pay the entirety of the outstanding debt, which with interest came to $156,802,126.
