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A failed application to discharge a Personal Guarantee!

In this court case the claimant was an industrial and provident society who specified a credit limit for its members. One of its member’s fell into arrears and the claimant threatened to withdraw its credit. Two individuals agreed to provide Personal Guarantees (“PG’s”).  The member later increased its limit and asked the guarantors to sign new guarantees, which they refused to do. The member subsequently went into liquidation and the claimant called upon the PG’s.

The guarantors argued that they were not liable because:

  • They had not received any consideration for the PG’s.
  • The PG’s had been procured by duress as the claimant had threatened to withdraw the members credit.
  • TThe claimant had not suggested to both guarantors that legal advice be obtained.
  • The PG had been repudiated by seeking a new guarantee on different terms.

The court held that the guarantors remained liable because:

  • Consideration had been provided as the guarantors wanted to continue to benefit financially from the member’s membership of the society.
  • The threat to withdraw the credit facilities was justified and there was no duress.
  • They had the opportunity to take legal advice and the claimant has no obligation to advise them to do so.
  • The refusal to sign a new PG left the existing PG in place.
  • The guarantee was all monies and extended to future obligations.

This case demonstrates yet again that PG’s should not be entered into without full appreciation of the circumstances in which they are given and the consequences if they are called upon.



Date: 20th November, 2012
Author: Steve Smith


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