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Matthews v BSN (SW) Property Ltd & Anor
Factual and Procedural Background
Appellant purchased shares in two companies in 2019. One company, Company A, owed loans to Respondent Company A and Respondent Company B. The share purchase agreement for Company A stated that Appellant guaranteed repayment of those loans. [1][2][3]
Company A ceased trading in 2020. Respondent Company A and Respondent Company B later served statutory demands and presented a joint bankruptcy petition against Appellant. The County Court made a bankruptcy order on the basis that the guarantee created at least a petitionable debt owed to Respondent Company A. [4][5][6][7]
The High Court dismissed Appellant’s appeal. Appellant then appealed to the Court of Appeal. He did not attend or have legal representation at the hearing, but the Court proceeded because the appeal raised a jurisdictional issue of potential general significance. [8][9][10][11][12]
Legal Issues Presented
- Whether the guarantee in clause 4.4 was a “see to it” guarantee, giving rise to damages, or a conditional payment guarantee, giving rise to a debt. [11][13][14]
- Whether Appellant should be permitted to raise the liquidated-sum issue for the first time on appeal. [12][15][16]
- Whether contractual indemnities and set-off provisions extinguished or reduced Appellant’s liability. [17][18][19]
- Whether Appellant was estopped by statements made in earlier proceedings from disputing the nature of his liability. [20][21]
Arguments of the Parties
Appellant’s Arguments
- The guarantee was a “see to it” guarantee, creating a claim for damages rather than a liquidated debt capable of supporting a bankruptcy petition. [11][13][14]
- The contractual indemnity and set-off provisions meant that sums allegedly owed by Company A could be set off against the loans. [17][22][23]
- Other undisclosed liabilities of Company A should also be available for set-off. [19][24]
Respondents’ Arguments
- The guarantee should be construed as a conditional payment guarantee and therefore created a petitionable debt. [25][26]
- Other provisions of the share purchase agreement supported an obligation on Appellant to repay the loans. [27][28]
- Even a “see to it” guarantee created a liability for a readily ascertainable liquidated sum. [29][30]
- Appellant should not be allowed to raise a new point on appeal because the evidence and conduct of the earlier hearing might have been different. [16][31]
- Appellant’s earlier statements amounted to an admission or estoppel concerning his personal liability. [20][21]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Tendring DC v AB [2024] EWCA Civ 1248, [2024] 4 WLR 96 | Part 38 of the CPR does not apply to appeals. | The Court retained discretion whether to grant Appellant’s request to withdraw the appeal. [32][33][34] |
| Moschi v Lep Air Services Ltd [1973] AC 331 | A guarantee may be a conditional payment obligation or a “see to it” obligation giving rise to damages. | The wording of clause 4.4 was materially equivalent to a “see to it” guarantee and created liability in damages. [14][35][36][37][38] |
| McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286, [2012] 2 All ER (Comm) 265 | A “see to it” guarantee does not ordinarily create a debt for a liquidated sum. | The Court followed its analysis and held that Appellant’s guarantee was not petitionable. [39][40][41][30][42] |
| Re Ward, ex p Ward (1882) 22 Ch D 132 | A contractually fixed liability may constitute a debt even where the amount is determined by an agreed contractual mechanism. | The case concerned a debt fixed by contractually incorporated rules, not damages, and therefore did not assist the Respondents. [43][44][45] |
| Wallis v Smith (1882) 21 Ch D 243 | Liquidated damages are a sum assessed by contract as payable for breach. | The principle supported treating genuinely pre-agreed contractual sums as liquidated sums, but did not convert this guarantee claim into one. [46][47] |
| Singh v Dass [2019] EWCA Civ 360 | A new point is generally not allowed on appeal where the evidence or trial would have been different. | The Court held that this restriction did not apply because the issue was a pure question of contractual construction. [16][31][48] |
| Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 | The quality and circumstances of drafting may be relevant to contractual construction. | The Court doubted that evidence about the drafting process would assist and held that clear words could not be altered by such considerations. [49][50] |
| Collier v P&MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329 | A mere assertion of dispute is insufficient; there must be a genuine triable issue. | The Court noted the principle but did not finally decide whether the evidence concerning other liabilities satisfied it. [24][51][52] |
Court’s Reasoning and Analysis
The Insolvency Act 1986 permits a bankruptcy petition only for a debt that is, among other things, a liquidated sum payable immediately or at a certain future time. Although “debt” is broadly defined, the liquidated-sum requirement is jurisdictional. [53][54][55]
Clause 4.4 stated that Appellant guaranteed repayment of Company A’s loans; it did not state that Appellant would pay if Company A failed to do so. Applying Moschi, the Court held that this wording promised that Company A would repay the loans and therefore constituted a “see to it” guarantee. Appellant’s liability was damages measured by the unpaid loans, not a debt under the guarantee itself. [56][57][58]
The surrounding provisions referring to repayment and set-off did not justify a different construction. They might have been relevant if clause 4.4 were ambiguous, but the clause was clear. Commercial considerations could not impose a meaning that the contractual words could not bear. [59][60][27][28]
Following McGuinness, the Court held that a claim under a “see to it” guarantee is not a claim for a liquidated sum merely because the amount of damages is readily ascertainable. [39][30][42]
The Court permitted Appellant to raise the issue for the first time on appeal. The issue was one of construction, no materially different evidence would have been required, and it concerned the Court’s jurisdiction to make a bankruptcy order. [48][61]
The alleged estoppel failed. Appellant’s earlier statement established that he would have to pay if Company A did not, but it did not establish whether his liability was a debt or damages. The distinction had not been raised in the earlier proceedings. [62][63][64]
The indemnity argument failed because the loans were expressly identified in the agreement and were not undisclosed liabilities discovered after the sale. Reading the indemnity and set-off clauses otherwise would eliminate the repayment provisions and produce an absurd result. [18][65]
The Court did not finally determine the argument concerning other liabilities, although it noted that a bare assertion of dispute might be insufficient. [19][52]
Holding and Implications
APPEAL ALLOWED. The Court permitted Appellant to raise the liquidated-sum point and held that clause 4.4 created a “see to it” guarantee, not a debt in a liquidated sum capable of supporting a bankruptcy petition. [66][67][68]
The bankruptcy order was therefore unsustainable on the basis relied upon. The Court’s conclusions on the remaining set-off issues were not final where unnecessary to the outcome. No broader implication beyond the direct effect on the parties was identified, and no new precedent was set. [69][52][66]
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