EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lady Paton Lord Mackay of Drumadoon Lord McEwan P1464/08	[2010] CSIH 24 OPINION OF THE COURT delivered by LADY PATON in the petition of MAUREEN McLAUGHLIN Petitioner and reclaimer; for suspension and interdict _______

Petitioner and reclaimer: Davies, Advocate; Harper Macleod LLP

First respondents and respondents: Barne, Advocate; DLA Piper Scotland LLP

26 March 2010

Introduction

[1] In 2005 the petitioner and reclaimer was a director of Park Circus Homes (Glasgow) Limited ("the company"). The company undertook a development at Kelvin Quay, Glasgow. In the course of the development, the respondents (Anglo Irish Asset Finance plc, "AIAF") granted the company credit and banking facilities, which were secured inter alia by a joint and several personal guarantee signed on 3 October 2005 by two directors of the company, namely the petitioner and Liam Muldoon. The maximum principal sum payable by a guarantor was £2 million.

[2] By letter to the company dated 31 March 2008, AIAF demanded repayment of a principal sum of £20,732,917.81 and interest of £398,951.29. No repayment was made. On 16 May 2008, the guarantee was registered for preservation and execution in the Books of Council and Session. By letter to the petitioner dated 20 May 2008, AIAF called up the guarantee, and demanded payment of the maximum sum of £2 million together with interest from 20 May 2008 until the date of settlement. When no payment was forthcoming, AIAF instructed sheriff officers to serve a charge upon the petitioner. A charge was duly served on 28 May 2008. Following upon the expiry of the charge without payment, AIAF sought the petitioner's sequestration. A warrant was issued, citing the petitioner to attend Glasgow Sheriff Court on 11 August 2008. The petitioner then raised the present proceedings in the Court of Session, seeking suspension of the charge and warrant, and interdict against further diligence or steps in sequestration. Interim suspension and interim interdict were granted on 8 August 2008. On 12 February 2009, counsel for AIAF argued that the petition was irrelevant and should be dismissed. On 27 March 2009 the Lord Ordinary held the petition to be irrelevant, and at a By Order hearing on 14 May 2009 dismissed the petition. The petitioner reclaimed.

[3] The terms of the guarantee are fully set out in the opinion of the Lord Ordinary.

Whether summary diligence competent

[4] The Grounds of Appeal for the petitioner include the following paragraph:

"... the Lord Ordinary erred in holding that the letter of 20 May 2008 was a certificate in terms of Clause 8.4 of a Guarantee granted by the petitioner in favour of the respondents for the debts of a company of which she was the director. She erred in failing to hold that in the absence of a proper certificate issued pursuant to clause 8.4, the sum due under the Guarantee had not been ascertained; and that accordingly summary diligence by the respondents was incompetent."

[5] Submissions for the petitioner: Counsel for the petitioner accepted that summary diligence was competent on deeds registered for execution in the Books of Council and Session. The warrant obtained on registration was equivalent to a court decree, and entitled the party seeking payment to carry out immediate diligence. However diligence would be competent only if the sum due under the registered deed was so certain that it could be incorporated into a court decree. The sum would be certain if it was clear from the face of the deed how much was due, or if the deed provided a method whereby the debt due could be ascertained. In deeds such as guarantees and loan bonds, involving variable sums, the method usually adopted was a certificate of the sum(s) due issued by the lender. The petitioner's contention was that such a certificate was required in the present case before the lender could proceed to use summary diligence. There was no certificate in existence when summary diligence was instructed, and no ascertained sum due when the charge was executed. Accordingly the summary diligence was not competent. Reference was made to Tennent v Glass 1990 SLT 282 at pages 284D-H and 285B-D; and Chambers Dictionary (7^th ed 1990), definition of "certificate". The Lord Ordinary was wrong to define the guarantee as an "on demand bond", with the letter of 20 May 2008 being a "demand for payment". The document was a guarantee, and the guarantor might wish to dispute the amounts involved. The contract set out a clear procedure which had to be followed. In conclusion, the petitioner was entitled to permanent suspension of the charge and of the warrant to cite in the sequestration. For that suspension, no proof before answer was required.

[6] Submissions for AIAF: Counsel for AIAF accepted the law as set out in Tennent v Glass. But there was no suggestion in Clause 8 of the guarantee that a certificate in terms of Clause 8.4 must specifically be served upon the petitioner in her capacity as guarantor. Clause 8.4 simply provided a means of ascertaining the amount due. The petitioner was adopting an overly-strict approach. There was no need to certify an amount, as the letter to the company dated 31 March 2008 was sufficient to fix the amount due. In any event, counsel submitted that the letter of 31 March 2008, properly construed, was in effect a "certificate". Once the amount due had been ascertained, it was the responsibility of AIAF to give sheriff officers the relevant figures, whereupon summary diligence could be carried out: cf Paisley Union Bank v Hamilton (1831) 9S 488, at page 499.

[7] Discussion: We do not accept that guarantees or loan bonds invariably adopt a formal certificate as the means of ascertaining the sum(s) due. A formal certificate is certainly one method: cf Halliday, Conveyancing Law and Practice, Vol 1 page 143 paragraph 4-64. But other methods are possible: cf Halliday op cit paragraph 4-64, where a certificate is mentioned merely as an illustration of how provision might be made for the ascertainment of the amount due (the words "as by a certificate" meaning "for example, by a certificate"). In our opinion therefore, the question whether a formal certificate is required depends upon the terms of the guarantee. In other words, what method has been contractually agreed upon by the parties "for the instant verification of the sum, if any, due" (Tennant v Glass at page 284E-F).

[8] In the present case, the guarantee provides inter alia:

Clause 1.1:

"In consideration of the Lender granting time, credit and banking facilities to the Principal, the Guarantors unconditionally guarantee the payment or discharge of the Secured Liabilities and shall on demand in writing pay or discharge them to the Lender ... [emphasis added]

Clause 7.1:

"Before enforcing this Guarantee, the Lender shall not be obliged to take any action or obtain any judgement, nor make or file any claim in any insolvency procedure of the Principal, nor enforce any other security held by it."

Clause 8:

"8.1 A demand for payment or any other demand or notice under this Guarantee may be made or given by any manager or officer of the Lender by letter addressed to the Guarantors or any of them or the personal representatives of the Guarantors or any of their personal representatives and sent by prepaid first class post to or left at the Guarantors' existing or last known place of business or usual abode (or, if more than one, any one of such places) [emphases added].

8.2 If a demand or notice is sent by post it shall be deemed to have been made or given at 2 pm on the day following the day the letter was posted.

8.3 In order to prove that a notice or demand has been served, the Lender need only prove that the notice or demand was properly addressed and posted.

8.4 A certificate by any manager or officer of the Lender as to the amount of the Secured Liabilities or any part of them shall, in the absence of manifest and demonstrable error, be conclusive and binding on the Guarantors or any Guarantor."

Clause 15.9 defines "Secured Liabilities" as meaning:

" ... all or any monies and liabilities which shall for the time being (and whether on or at any time after demand) be due, owing or incurred in whatsoever manner by the Principal [i.e. the company] to the Lender [i.e. AIAF] ... including interest, discount, commission and other lawful charges or expenses which the Lender ... may in the course of their business charge or incur ... together with:

15.9.1 ... all costs and expenses ... recoverable by the Lender ... from the Principal;

15.9.2 ... all costs and expenses ... charged or incurred by the Lender ... in or about the recovery or attempted recovery of money due to the Lender ... under this Guarantee; and

15.9.3 interest calculated and accruing daily from demand in accordance with the usual rates and practice of the Lender ... in the amounts set out in clauses 15.9.1 and 15.9.2 [emphases added]."

Clause 16.2:

"The Guarantor consents to the registration of this Guarantee and of any certificate issued on behalf of the Lender under Clause 8.4 for preservation and execution under Scots law."

[9] In our view, on a proper construction of the guarantee (and in particular Clauses 8 and 15.9), the reference in Clause 8.4 to "[a] certificate ... as to the amount of the Secured Liabilities or any part of them" is a reference to a certificate disclosing (i) the sums owed by the company to AIAF; (ii) any costs or expenses recoverable by AIAF from the company; and (iii) any interest accruing "from demand", being the demand on the company referred to at the beginning of Clause 15.9. Bearing in mind the definition of the Secured Liabilities and the wording of Clauses 1.1, 8, and 16.2, it is our opinion that summary diligence following upon a demand for payment made by AIAF upon the petitioner as guarantor did not, in terms of the guarantee, require the issuing of a certificate. Provided that the guarantee itself was registered for preservation and execution as envisaged in Clause 16.2, all that was required in terms of Clauses 1.1 and 8 was a written demand for payment in the form of a "letter addressed to the Guarantors or any of them ... sent by prepaid first class post to or left at the Guarantors' existing or last known place of business or usual abode (or, if more than one, any one of such places)." The demand letter does not require to be in any particular form, or to be sent by recorded delivery, nor does it have to contain a formal certificate. The letter would intimate the principal sum due, and any interest or charges calculated in terms of the parties' agreement and interest rates prevailing at the relevant times. In terms of the parties' contract therefore, summary diligence can proceed upon the basis of the guarantee (registered for preservation and execution) and a simple letter of demand specifying the amount due, sent by first class post or left at the petitioner's last known place of business or usual abode.

[10] The letter from AIAF to the petitioner dated 20 May 2008 is, in our view, such a letter, upon which summary diligence can competently proceed.

[11] It is further our opinion that the certificate referred to in Clause 8.4 is intended to provide inter alia for a situation where the company or the guarantor, on receipt of the letter of demand, disputes the amount said to be owed by the company to AIAF. In such circumstances, Clauses 8.4 and 16.2 empower AIAF to issue a document certifying the various sums due by the company as set out in paragraph [8] above. The certificate issued in terms of Clause 8.4 is said to be "conclusive and binding", and is clearly intended to resolve any disputes about quantum. But in the present case, there appear to have been no disputes about quantum (as distinct from liability). The petitioner has not, and does not, contest the figures contained in the letter of demand dated 20 May 2008. As there was no dispute about the figures contained in the letter of demand, AIAF did not have to issue a certificate under Clause 8.4. When the letter of demand failed to produce payment, AIAF were entitled to commence summary diligence, all as envisaged in the parties' formal written contract.

[12] Thus in our view the petitioner's argument, focusing as it does upon "the absence of a proper certificate issued pursuant to clause 8.4", has no merit. We therefore agree with the conclusion reached by the Lord Ordinary in paragraph [28] of her Opinion.

Waiver

[13] In Statement 6 of the petition, it is averred that at a meeting on 31 March 2008:

" ... The petitioner and Mr Paton [solicitor for a third director of the company] asked about the guarantee the petitioner had given, and if it would be called up. Mr Tannahill [the manager of AIAF's Glasgow office] said that if the petitioner agreed to the company going into administration, [AIAF] would not call up the guarantee. In reliance on said statement the petitioner agreed to the appointment of administrators to the company. In these circumstances, [AIAF] have waived their right to enforce the guarantee. In any event, [AIAF] are personally barred from enforcing the guarantee against the petitioner. The petitioner has acted upon the representations by [AIAF] that they would not enforce the guarantee to her prejudice ..."

Those averments are disputed by AIAF, who set out a different version of events in Answer 6.

[14] The Lord Ordinary notes in paragraph [16] of her opinion:

" ... Mr Dunlop [counsel for AIAF] submitted that he accepted that, subject to one argument based on the terms of the guarantee, the averments are enough to instruct a case of waiver which require a proof before answer."

The argument based on the terms of the guarantee was that Clause 9.4 was sufficiently broad to include the guarantor within the phrase "any other person". Clause 9.4 provides:

"9. WAIVER OF GUARANTOR'S RIGHTS

The Guarantors agree that their liability under this Guarantee shall not be reduced, discharged or mitigated by:

... 9.4 any grant of time, indulgence, waiver or concession to the Principal or any other person; ..."

Thus, it was argued, the petitioner had contracted out of any right which she might otherwise have to argue waiver as a defence. In paragraph [30] of the opinion, the Lord Ordinary accepted Mr Dunlop's argument.

[15] In this reclaiming motion, Mr Barne for AIAF sought to withdraw Mr Dunlop's concession that the averments of waiver were sufficient for a proof before answer. He wished to argue that those averments were irrelevant. We are prepared to allow him to do so.

[16] Submissions for the petitioner: Counsel submitted that the petitioner's averments were relevant and sufficient to support a claim of waiver. As for Clause 9.4, certain parties other than the petitioner and Mr Muldoon had given securities to AIAF. Clause 9.4 made it clear that if those other parties were given the benefit of any waiver or other indulgence, that did not affect the petitioner's obligations. The Lord Ordinary had not known about the package of securities for the Kelvin Quay development when she made the observations contained in paragraph [30] of her judgment. In any event, guarantees should be construed contra proferentem: Aitken's Trs v Bank of Scotland 1944 SC 270 at page 277. Thus even if a party could contract out of waiver (as AIAF suggested relying upon McBryde, Contract, paragraph 25.07), very clear words would be required to achieve such a result. Clause 9.4 was not sufficiently clear, and the petitioner was accordingly entitled to claim waiver.

[17] Submissions for AIAF: Having withdrawn the concession made in the Outer House, counsel submitted that what was averred to have taken place at the meeting was more akin to an agreement, or a variation of the guarantee, than waiver. Even if the averments were habile to set up a case of waiver, waiver was excluded by Clause 9.4 for all the reasons advanced by counsel in the Outer House and noted in paragraph [16] of the Lord Ordinary's judgment. The phrase "any other person" was very broad, and included the petitioner as guarantor. Accordingly no relevant case of waiver was made out.

[18] Discussion: In Armia v Daejan Developments Ltd 1979 SC (HL) 56, Lord Keith of Kinkel noted at page 72:

"The topic of waiver may arise in a number of guises in a variety of contexts. The truth is that it is a creature difficult to describe but easy to recognise when one sees it, subject to the proviso that it is on occasion difficult to distinguish it from variation of a contract."

In the course of his submissions, Mr Barne did not disagree with that passage, but argued that what was averred by the petitioner in Statement 6 of the petition amounted to variation of the contract, not waiver. Any averments said to relate to waiver were irrelevant.

[19] We do not agree. Variation of a formal written contract such as the guarantee would generally require writing of some sort, whereas waiver of a right arising under the contract would not necessarily require writing. Accordingly the averments are, in our view, consistent with an act of waiver. In any event, waiver is a fact-sensitive issue, which in this case requires an exploration of the facts at a proof before answer: cf the observations of Lord Keith, cited above. Ultimately therefore we have reached the view that the petitioner has averred sufficient to entitle her to a proof before answer on the question of waiver, unless she is prohibited from relying upon waiver in terms of Clause 9.4. We turn therefore to consider the proper construction of that clause.

[20] One of the matters which persuaded the Lord Ordinary of the correctness of Mr Dunlop's submission was that it was "hard to see in the context of the contract to what third party" the lender might grant time, indulgence, waiver or concession: paragraph [30] of the Lord Ordinary's judgment. However in the course of the reclaiming motion, Mr Davies explained that other parties had given security in addition to the petitioner and Mr Muldoon. Thus in terms of Clause 9.4, if another guarantor benefited from waiver of some sort, neither the petitioner nor Mr Muldoon could contend that they too should benefit from that a waiver. A quite different clause, Clause 12.2, was relevant to any indulgence granted to one or other of the petitioner and Mr Muldoon.

[21] In our view, if a contractual provision is to have the effect that one contracting party may, either orally or in writing, waive a right to demand performance, yet subsequently change his mind and insist upon that very performance, possibly by a court action, then clear and unambiguous words are required. As the Lord Ordinary points out in paragraph [16] of her opinion:

" ... the logical end of [the] argument is that the lender's manager could have said that the lender would not enforce the guarantee, thereby apparently waiving the lender's right to do so; but the lender could thereafter enforce the guarantee and still argue successfully that [the guarantor] had contracted out of waiver."

[22] We have not found Clause 9.4 to contain the clear and unambiguous language necessary to achieve that result. In our view the clause lends itself to the construction outlined in paragraph [16] above, namely that if another guarantor involved in the development project, being someone other than the petitioner or Mr Muldoon, were to be granted an indulgence of some sort, that would not affect the liability of the petitioner or Mr Muldoon.

[23] We are fortified in our view by the observations of Lord Justice-Clerk Cooper in Aitken's Trs v Bank of Scotland 1944 SC 270 at page 277:

"(Second) In construing a formal guarantee, embodied, as this guarantee is, in the printed form prepared by the bank and exacted by them from cautioners, we are bound to treat the cautioner's obligation as stricti juris, and to interpret any ambiguous provisions contra proferentes, that is, in the sense adverse to the interests of the creditor who framed it and now founds upon it. This rule is amply vouched by the authorities cited by Gloag and Irvine, Rights in Security, pp 734-5, and Gloag on Contract (2^nd ed) p 401."

A construction contra proferentem of Clause 9.4 does not, in our opinion, permit the construction which was contended for by Mr Dunlop on behalf of AIAF in the Outer House.

[24] Accordingly we consider that the petitioner is entitled to a proof before answer on the question of waiver.

Personal bar

[25] Submissions for the petitioner: Counsel for the petitioner submitted that the averments relating to personal bar in Article 6 were sufficient for proof. Personal bar was similar to waiver, and the two concepts might overlap. The prejudice suffered by the petitioner was that the guarantee was triggered when company went into administration. A clear representation had been made to the petitioner, upon which she had acted, resulting in prejudice being suffered by her. If it were to be suggested that such prejudice was minor or non-existent (for example, because the petitioner could not and had not averred that she was in a position to prevent the company from going into administration) then that was a matter for proof. Reference was made to Gatty v Maclaine 1921 SC (HL) 1.

[26] Submissions for AIAF: Counsel for AIAF adopted the arguments presented in the Outer House, noted and accepted by the Lord Ordinary at paragraph [29] of her judgment. The facts relied upon were not habile to establish personal bar. Mr Tannahill had not led the petitioner to believe that a certain state of facts existed. Representations of fact, rather than indications of future intention, were what mattered. Moreover there were no averments of any prejudice to the petitioner. AIAF, as the floating-charge holders who sought to put the company into administration, had an absolute right to do so in terms of the insolvency legislation. Accordingly the averments disclosed no relevant case relating to the petitioner's consent and any resulting prejudice. The averments said to relate to personal bar were irrelevant.

[27] Discussion: As was explained in Gatty v Maclaine 1921 SC (HL) 1 at page 7:

"... Where A has by his words or conduct justified B in believing that a certain state of facts exists, and B has acted upon such belief to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the same time."

Counsel for the respondents argued that what had occurred in the present case was not an assertion of a state of facts but rather a reference to future intention on the part of the lender (paragraph [15] of the opinion of the Lord Ordinary). A passage in Gloag, Contract (2^nd ed) at page 281 appeared to support that contention. There, it is noted that:

" ... the words or acts on which the plea of waiver or personal bar is founded must amount to something more than a statement of intention. A statement that a party does not intend to enforce a condition does not bind him not to change his mind, or bar him from doing so. 'It has been well established by a long train of authority that in order to support a plea of estoppel by representation, the representation must be a representation of existing facts; a promise or a representation of intention to do something in the future is entirely insufficient.' (Lord Atkinson, Yorkshire Insurance Co v Craine [1922] 2 AC 541 at page 553) ..."

However an important qualification follows:

"But statements or conduct which may primarily refer to the intention of one party not to insist on the fulfilment of a condition may in substance be inducements to the other to abstain from taking steps to purify it, and, if so, may amount to a case of waiver. This obviously may raise a narrow question of the construction of the statement or conduct in question ..."

[28] In our opinion, taking the petitioner's averments at their highest, it is at least arguable that Mr Tannahill, AIAF's manager, represented existing facts to the petitioner, namely that if the petitioner were to consent to the company's going into administration, the petitioner's guarantee would not be called up. That representation induced the petitioner to give her consent. As indicated in the passages quoted above, that might constitute waiver. Alternatively, if the petitioner could demonstrate that she had acted upon the belief that such a state of facts existed, to her prejudice (by agreeing to the appointment of administrators to the company), there might be personal bar. It is not inconceivable that the petitioner could demonstrate prejudice suffered by her as a result of consenting to the company going into administration, bearing in mind that such a procedure would be less likely to fail, and might take a shorter time, than an application which was opposed, even if the opposition was eventually held to be without merit. Furthermore a company not in administration and continuing to trade might be able to pay off its indebtedness, thus avoiding any exposure of the directors to personal liability in terms of any guarantees. Also such a company, and its directors, would not suffer the stigma of having gone into administration.

[29] As the concepts of waiver and personal bar may overlap, we consider that not only should the averments of waiver be remitted to a proof before answer, but also any averments relating to personal bar.

Conduct on the part of AIAF said to have prejudiced the position of the petitioner as guarantor

[30] In Statements 7 and 8 of the petition, the petitioner avers misconduct on the part of AIAF and their local manager Mr Tannahill, such that the company paid out sums totalling £500,000 which should have been retained (representing damages for delays), and also incurred excessive costs during the completion of the development. In Statement 8, the petitioner characterises Mr Tannahill's conduct as "negligence", and certain deductions made from the company's account as "unauthorised". She further avers:

"The petitioner is accordingly entitled to have any liability under the guarantee for the debts of the company discharged to the same extent. Further and in any event the guarantee has been materially prejudiced by the conduct of Mr Tannahill and [AIAF] in insisting that the company make payments they were entitled to withhold to the contractors, and that the company take on a more onerous contract with Gregor Shore Limited. In these circumstances, the petitioner is entitled to be discharged from her guarantee. Accordingly, no sum would be due by the petitioner under the guarantee."

[31] Submissions for the petitioner: In the Outer House, counsel for AIAF successfully challenged Statements 7 and 8 as irrelevant, arguing that the guarantee was in effect an "on demand bond" in respect of which there was no equitable defence of prejudicial conduct by the lender. In this reclaiming motion, counsel for the petitioner argued that the Lord Ordinary was wrong to conclude in paragraphs [28] and [31] of her judgment that the document was an "on demand bond". The guarantee was a more conventional document than that in IIG Capital LLC v Van der Merwe [2008] 2 All ER 1173, where the guarantor was bound as principal obligant by an original and independent obligation. Moreover in IIG, there was provision for a certificate of the sums due under the guarantee, whereas in the present case, Clause 8.4 simply provided for information about the amount of the company's debt, with no provision for a sum due under the guarantee. Where someone was truly a guarantor, as in the present case, it was open to that guarantor to plead equitable defences: Gloag & Irvine, Rights in Security, page 865. The issue was not one of a liquid against an illiquid debt: rather the issue was whether liability was discharged in whole or in part, and that was a matter for proof. Esto the court were to reach the view that a formal certificate had been issued, that certificate was not necessarily enforceable if it was not issued honestly and in good faith: Arenson v Arenson [1973] 1 Ch 346 at page 361H-362B; Campbell v Edwards [1976] 1 WLR 403 at page 440; Bache & Co (London) Ltd v Banques Vernes et Commerciale de Paris SA [1973] Lloyd's Law Rep 437. In the present case, even if the court held that a certificate had been issued, it had not been issued in good faith, as AIAF knew of the conduct complained of. The petitioner was accordingly entitled to a proof before answer on the matter.

[32] Submissions for AIAF: Counsel for AIAF adopted the arguments presented in the Outer House and recorded in paragraphs [17] and [31] of the Lord Ordinary's opinion. Counsel further submitted that the averments in Statements 7 and 8 were too inspecific to go to proof. (i) The argument that the guarantor's liability was accessory in nature and could not be greater than the company's liability had merit only if the company's debt could be shown to be below £2 million. On the present pleadings, that had not been demonstrated. Not only were there no averments justifying a claim of negligence on the part of Mr Tannahill, but there were no averments suggesting that any negligence, or indeed any other type of prejudicial conduct, would have the effect of reducing the company's debt to below £2 million. (ii) The argument founded on common law, namely that the guarantor could be discharged because of prejudicial conduct on the part of the lender, was excluded by the terms of the guarantee itself, and in particular Clauses 1.3 and 9.9. Contracting parties were entitled to contract out of the common law position: Aitken's Trs v Bank of Scotland 1944 SC 270. Clauses 1.3 and 9.9 in effect provided that the guarantor could only be discharged if the conduct would have resulted in the discharge of the principal. Further, Clause 13 had the effect that the guarantee could be regarded as an "on demand bond". The guarantee, properly construed, effectively created a primary obligation imposed upon the petitioner in addition to her obligation as guarantor. The terms of the guarantee bound the petitioner as guarantor, failing which as principal.

[33] Discussion: We accept that there is a presumption against construing what purports to be a guarantee as an "on demand bond": cf dicta of Waller LJ at paragraph [30] of IIG Capital LLC v Van Der Merwe [2008] 2 All ER 1173. Whether that presumption is rebutted in any particular case depends upon a proper construction of the terms of the guarantee, read as a whole.

[34] In the present case, we consider that Clause 13 of the guarantee puts the matter beyond doubt. Clause 13 states, in clear and unambiguous language, that the petitioner binds herself in a separate and independent stipulation "as sole or principal debtor" to pay "all sums of money which (for any reason) may not be recoverable from the Guarantors on the footing of a guarantee". Such sums are to be "paid by [the petitioner] on demand in writing by [AIAF]". Thus the guarantee construed as a whole, including Clause 13, in our view points clearly to the existence of a primary obligation imposed upon the petitioner. Accordingly if the petitioner were not to pay AIAF "on the footing of a guarantee" (because, for example, she contended that certain defences available to the company were also available to her as guarantor), then Clause 13 is activated, and she becomes liable as a primary obligant. It is our opinion therefore that any allegedly prejudicial conduct on the part of AIAF cannot be prayed in aid by the petitioner.

[35] That being so, it is perhaps unnecessary to consider AIAF's argument in respect of Clauses 1.3 and 9.9. However it appears to us that Mr Barne was correct in his submission that those clauses, properly construed, mean that the petitioner could not expect to be discharged from her secondary obligation as guarantor unless the conduct complained of would have the effect of discharging the principal debtor. Nothing in the averments suggests that there was any conduct having such an effect.

[36] In any event, we agree with counsel for AIAF that the averments relating to the allegedly prejudicial conduct are so lacking in specification that they should not be remitted to probation. In particular, there is nothing to suggest that any damages to which the company might be entitled would reduce the company's overall debt from approximately £21 million to under £2 million. For those reasons also we are not persuaded that the pleadings relating to allegedly prejudicial conduct should be remitted to probation.

[37] Further, as Waller LJ observed at paragraph [19] of IIG:

"There is no doubt that, in a contract of guarantee, parties may, if so minded, exclude any one or more of the normal incidents of suretyship ..."

In this particular guarantee, Clause 9 provides inter alia:

" ... The Guarantors agree that their liability under their Guarantee shall not be reduced, discharged or mitigated by ...

9.9 ... anything done or omitted by any person which but for this provision might operate to exonerate or discharge or otherwise reduce or extinguish any of the Guarantors' liability under this Guarantee."

We consider that the terms of Clause 9.9 are wide enough to cover the sort of alleged prejudicial conduct complained of by the petitioner. Accordingly the petitioner has contracted out of any capacity to rely upon alleged prejudicial conduct on the part of AIAF.

[38] In conclusion we are persuaded that the petitioner's pleadings so far as relating to alleged misconduct on the part of AIAF and Mr Tannahill are irrelevant and lacking in specification, and should not be remitted to probation.

Decision

[39] For the reasons given above, we intend inter alia to recall the Lord Ordinary's interlocutor of 14 May 2009, repel the petitioners' first and second pleas-in-law, grant such further interim orders for suspension and interdict as may be necessary, and allow a proof before answer restricted to issues of waiver and personal bar. We shall put the case out By Order to enable parties to address us on the appropriate terms of the interlocutor giving effect to this opinion, and on further procedure. We reserve meantime any question of expenses to enable counsel to address us on that matter.