Cattles Plc v Welcome Financial Services Ltd & Ors [2010] EWCA Civ 599 (13 May 2010)

Cattles Plc v Welcome Financial Services Ltd & Ors [2010] EWCA Civ 599 (13 May 2010)

Clause 6.2 of the group guarantee deed is not limited to claims arising from a company's capacity as guarantor but extends to any claim by a guarantor against a debtor or co-guarantor in competition with or in priority to the bank, including inter-company debts. The wording 'any claim' is general and unqualified, and the context and purpose of the clause support a broad construction to preserve the bank's position as creditor until it is paid in full.

Citation
[2010] EWCA Civ 599
Parties
Claimant/respondent: Cattles plc; Defendant/respondent: Welcome Financial Services Limited; Defendant/respondent: The Royal Bank of Scotland plc; Defendant/appellant: Party A
Jurisdiction
England and Wales
Judgment Date
13 May 2010
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court (chancery Division)
Outcome
Appeal dismissed
Legal Topics
Guarantees and Indemnities, Insolvency Proceedings, Inter Company Debt, Construction of Contractual Clauses, Priority of Creditors
Banking and Finance Law Insolvency Law Contract Law Guarantees and Indemnities Insolvency Proceedings Inter Company Debt Construction of Contractual Clauses Priority of Creditors

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Parties

Cattles plc

Claimant/respondent

Welcome Financial Services Limited

Defendant/respondent

The Royal Bank of Scotland plc

Defendant/respondent

Party A

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court (chancery Division)

Legal Issues

  1. 1 Proper construction of clause 6.2 of a group guarantee deed in favour of RBS
  2. 2 Whether clause 6.2 restricts only claims arising from capacity as guarantor or all claims by a guarantor against a debtor in competition with the bank
  3. 3 Whether Cattles plc can claim against Welcome Financial Services Limited in competition with RBS prior to RBS being paid in full

Ratio Decidendi

Clause 6.2 of the group guarantee deed is not limited to claims arising from a company's capacity as guarantor but extends to any claim by a guarantor against a debtor or co-guarantor in competition with or in priority to the bank, including inter-company debts. The wording 'any claim' is general and unqualified, and the context and purpose of the clause support a broad construction to preserve the bank's position as creditor until it is paid in full.

Court Disposition

Appeal dismissed

Orders

  • Appeal by Party A dismissed
  • No need to consider further contingent declarations