The High Court gave ADM Londis plc judgment for €75,000 against two individual guarantors in a dispute over an insolvent retailer’s debt, while allowing them to defend the balance, including by counterclaim.
Mr Justice Clarke delivered the judgment on 12 July 2006. The application sought summary judgment against the second and third-named defendants under guarantees relating to the first defendant company’s liabilities. Judgment had already been obtained against that company for €162,110.37, a sum the parties agreed it could not pay.
The judge rejected several proposed defences. He found that the guarantee was clearly identifiable on its face, so the defendants’ claim that they did not know what they had signed did not establish a defence under the doctrine of non est factum. He also found that a change in the plaintiff company’s legal nature did not prevent it pursuing claims under contracts and guarantees made by the same entity in its earlier form.
The court accepted that the defendants had a potential defence concerning specific items in the principal debt, limited to €12,000. It also held that the possibility of the plaintiff recovering some of the debt through a second guarantee from a financial institution did not prevent judgment against the defendants. The plaintiff could not, however, recover the same money twice.
The more difficult issue was a proposed counterclaim based on alleged breaches of a franchise agreement. The judge considered it arguable that guarantors might, in some circumstances, rely on a claim belonging to the principal debtor, particularly where it could operate as an equitable set-off closely connected to the debt. He did not decide that legal question. He also noted uncertainty about whether the franchise agreement was with another company in the Londis group, and said the defendants had provided little evidence of the counterclaim’s possible value.
The judgment records evidence from the second defendant that a competing outlet opened close to the retailer’s business. The judge said it was not credible, on the material presented, that all the business’s difficulties resulted from wrongdoing by the plaintiff or related companies. Estimating the potential counterclaim for the purposes of the application, he considered it could amount to no more than half of the €150,000 balance after allowing for the €12,000 disputed items.
The court therefore entered judgment for €75,000 against the second and third-named defendants and gave them liberty to defend, including by counterclaim, in respect of the balance. The judgment does not resolve the counterclaim or finally determine liability for that remaining amount.