A guarantor remains liable for a €6.3 million bridging facility used to finance the takeover of Buy & Sell Limited, the High Court has held, despite repeated extensions to the loan’s repayment date.
Danske Bank A/S, trading as National Irish Bank (NIB), sought to enforce Niall McFadden’s personal guarantee for a bridging loan made to Naldin Ltd. The parties did not dispute that the guarantee was valid or the amount Naldin owed under the facility. The dispute concerned whether later extensions had discharged McFadden’s guarantee.
The guarantee included a handwritten clause limiting it to the original loan agreement and amendments “agreed in writing”. It also said the clause overrode conflicting terms. The original loan agreement, dated 21 May 2007, provided for a €6.3 million bridging facility, repayable within three months. The facility was extended several times and remained in place for about 27 months.
Justice Clarke found that the extensions were amendments for the purposes of the handwritten clause. But he held that the clause required written agreement between NIB and Naldin, not separate written consent from McFadden. He also found that a written acceptance by NIB could satisfy the clause even where Naldin had requested an extension verbally at a meeting.
On the evidence, the court was satisfied that the legally binding extensions were agreed in writing. The handwritten clause therefore did not prevent NIB from relying on another guarantee term, clause 9.1.2, which allowed the bank latitude in dealing with the borrower without losing recourse to the guarantee. The court held that NIB was not barred from enforcing the guarantee because it had given Naldin more time to repay.
The judge considered a fallback position in case that interpretation was wrong. He said that if the extension to August 2008 had not been agreed in writing, McFadden had not actively participated in that extension in a way that would prevent him from relying on it to discharge the guarantee. He also found that later conduct did not reactivate a guarantee that had already been discharged. That analysis was conditional; it did not alter the court’s principal conclusion that the guarantee remained effective.
The court held that McFadden remained liable under the guarantee. It did not state the final judgment amount in the conclusions, instead directing counsel to provide an up-to-date figure for inclusion in the judgment.