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Property Developer Personally Liable for £1.7 Million Bank Debts
A developer who reluctantly signed bank guarantees to secure his company’s debts at the height of the property boom is facing liabilities in excess of £1.7 million after failing to convince the High Court that he was subjected to economic duress.
The businessman had signed the guarantees in 2006, when the property market was burgeoning and all appeared set fair for the future, but faced disaster in 2010 when his company went into administration and the bank sought to enforce its security.
He challenged the validity of the guarantees on the basis that the bank had misled him into believing that it was keen to expand its involvement in the real estate sector. He also argued that he had only been informed of the requirement to provide security at the last possible moment, by which time he had ‘burned his bridges’ with other potential lenders and had no choice but to reluctantly sign.
However, in dismissing his case, the Court found that representations made to him by the bank were neither untrue nor negligent. He had in any case not relied upon them and would have signed both guarantees in any event.
As an experienced businessman, he fully understood what a personal guarantee meant and the risk that he was taking. He had received independent legal advice and the bank did not bring any significant pressure to bear upon him. The Court entered judgment for the bank for the sums due under both guarantees.