Guarantee & Indemnity

Catalyst Business Finance Limited

vs
Very Tangy Television Limited
Timeline of Events

Meeting with Catalyst Additional 50,000$(min 30,000$ released by Catalyst

Verbal Confirmation 30,000$) requested Catalyst refused to pay further
28th May ‘15 29th July ‘15 1st September ‘15

29th May ‘15 24th August ‘15 10th May ‘16

New request by Catalyst MoU with Select TV Catalyst demanded
Transfer of 50,000$ Request made to release repayment of 80,000$ from
some amount VTTL
 The Dispute
Money unpaid; Disclaimed liability for the Tuckwell claimed that Personal Guarantee was
Catalyst identifies a repayment and contended that his a contract of guarantee and that his liability
default, demands liability was secondary & VTTL’s would arise only if there was a breach by
repayment & legal cost liability was primary VTTL. As it was a breach by Catalyst, he had
no liability

Catalyst did not get paid, Tuckwell conteded that the loan agreement was for a single payment of
Catalyst Demanded
demanded repayment from Mr. ₤500,000 and the 2 tranches of advances totalling ₤80,000 were not paid
repayment of ₤80,000
Tuckwell under the Personal under the loan agreement. Hence, he did not even have secondary
Guarantee liability
Rulings of the court on the claims made by Mr. Tuckwell?

There is no legal basis on which the Loan maybe drawn down in To decide the liability of Tuckwell,
₤50,000 or ₤30,000 could possibly have single sums or in multiple it had to understand whether his
been paid. The emails make it clear that advances. liability was primary or secondary
Mr. Tuckwell, on behalf of VTTL, was If Loan made in parts, those parts under Personal Guarantee and
seeking sums under the loan agreement. are the Advances and are refers to “The Alpha Train Case”
repayable after 90 days.
VTTL claimed that Catalyst was in breach of Loan Agreement by not lending the total amount and filed a separate counter
claim of 7.6 million in damages. The court claimed that the case seems to face several difficulties, but it was not their decision to
make.
The Alpha Train Case
CONTRACT OF SURETYSHIP

Surety Agrees to Answer for

some existing or future Creditor
Principal liability
Debtor Liability
Surety’s liability is in addition to, not substitution for, the liability of the principal

CONTRACT OF GUARANTEE CONTRACT OF INDEMNITY

The Surety promises the creditor to be The Indemnifier undertakes his obligation
responsible for the due performance by by way of security for the performance of
the principal obligation by other
Liability of the surety is SECONDARY to
that of the principal, who remains primarily PRIMARY LIABILITY falls upon the
liable to the creditor giver of the indemnity

Coextensive Liability: No liability if the Independent Liability: Safeguards the

underlying obligation is void or unenforceable creditor against the possibility that underlying
transaction is void or unenforceable

How Decide?
TRUE CONSTRUCTION OF CONTRACT
Introduction to Performance Bond & Court’s conclusion

Court’s introduction to Performance Bond

o Performance bond is basically a stringent contract of indemnity.
o It’s a contractual undertaking by a person, usually a bank, to pay a specified
amount of money to a third party on the occurrence of the stated event.

Identification of Performance Bond

o Sometimes liability arises on mere demand. It all depends on the wording in
the contract.
o In substance, these are unconditional undertakings to pay the money.

Court’s conclusion
o Contractual parties are free to set their terms. Guarantee, indemnity,
performance bond form a spectrum.
o A minor change in the language may shift the document from one category
to another.
o Identify whether the liability is secondary to the principal or primary to the
principal.

“Where on the spectrum a particular case falls calls for a nice judgment on the part of the
Final Judgement
 A contract may refer to three persons but still be a contract of indemnity in creating a primary
obligation for the party

 A contract may use the word ‘guarantee’ but in substance be a contract of indemnity

“I indemnify and hold you harmless against all losses and costs that you may
suffer or incur by reason of any failure of the Borrower to comply with any
terms of the Agreement and against all Losses and Costs arising out of or in
Clause connection with the recovery by you of any monies ……”
3
Mr. Tuckwell has in express terms has undertaken to indemnify Catalyst.

I agree that my liability shall not be affected by:

“any invalidity, illegality, unenforceability, irregularity or frustration of any
actual or purported obligation of, or security held from, the Borrower or any other
Clause person;”
7.7 “and I shall be liable under this deed in every respect as a principal debtor”
These references would be pointless if the personal guarantee & indemnity gave
rise to a secondary liability. It is clearly a primary obligation because it extends
beyond losses & costs for which the borrower is liable.
Thank You