Brandon Hire Plc v Russell

Factual and Procedural Background

This appeal arises from a decision of the sheriff of North Strathclyde at Paisley who sustained the pursuers' first plea-in-law by refusing to admit certain averments of the defender to proceed to probation. The dispute concerns a guarantee allegedly given by the appellant in respect of obligations owed by a company, referred to as "the company," to the pursuers under a contract for the hire of plant equipment. The pursuers obtained judgment against the company in Bristol County Court and now seek payment from the appellant personally, relying on a guarantee clause in a document signed by the appellant as a director of the company.

The document in question contains five sections, with Section E headed "Guarantee." It includes a declaration whereby the signatory personally guarantees payment of all sums due from the company to the pursuers. The appellant signed this section in the capacity of director. The appellant's defence is that he did not sign in a personal capacity and that the guarantee clause did not give fair notice that he was incurring personal liability. The sheriff refused to admit the appellant's defence to probation, leading to this appeal.

Legal Issues Presented

1. Whether the wording of Section E of the document imposed personal liability on the appellant as an individual, distinct from his capacity as director of the company.
2. Whether the appellant was given sufficient notice that by signing the guarantee clause he was undertaking personal liability.

Arguments of the Parties

Appellant's Arguments

• The appellant signed the application form only in his capacity as director of the company and did not intend to incur personal liability.
• The wording of Section E did not clearly distinguish between corporate and personal liability and was not sufficiently clear or prominent to give fair notice of a personal guarantee.
• The small print and placement of the guarantee clause within a document primarily designed to bind the company added to the lack of clarity.
• It was accepted that Section E had contractual effect but the question was whether it imposed personal liability on the appellant.

Pursuers' Arguments

• The wording of Section E was clear and unambiguous in imposing personal liability on the appellant.
• The clause was headed "Guarantee" in bold and the appellant was directed to read and sign the declaration, thereby accepting personal liability.
• The appellant was deemed to have read the clause and accepted personal liability as guarantor.
• Nothing prevented the appellant from deleting the personal guarantee clause if he did not intend to be bound personally.

Table of Precedents Cited

Court's Reasoning and Analysis

The court considered whether the wording of Section E imposed personal liability on the appellant. The clause was prominently headed "Guarantee" and contained a clear declaration of personal guarantee. The appellant signed in the space marked "Signature of Director," but the wording of the clause was clear and unequivocal that the signatory personally guaranteed payment of all sums due from the company.

The court rejected the appellant's argument that the clause was insufficiently clear or prominent to impose personal liability. Unlike in Montgomery Litho Limited, where the director had no actual notice of the personal guarantee clause, here the appellant signed directly beneath the guarantee declaration. The court held that the appellant was deemed to have read and accepted the clause and that nothing prevented him from deleting the personal guarantee if he did not wish to be bound.

The court found that the appellant's defence did not disclose a reasonable ground for defending the claim and therefore the sheriff was correct to refuse to admit the defence to probation.

Holding and Implications

The appeal was refused.

The court upheld the sheriff's decision to refuse the appellant's defence to probation, confirming that the appellant is personally liable under the guarantee clause. The direct consequence is that the appellant remains liable to pay the judgment debt owed by the company to the pursuers. No new legal precedent was established; the decision applied established principles regarding personal guarantees and the requirement for clear notice of unusual obligations.