Scottish Sheriff Court Decisions

A81/10 - MOLSON COORS BREWING COMPANY LIMITED -V- TAHIR RAMSAN

DUNDEE 11^TH MARCH 2011

NOTE

1. The action is concerned with a claim for payment against the defender on the basis that he entered into a personal guarantee in favour of the pursuers in support of a company Glam Leisure Limited of which he was a director. At the commencement of the debate the defender's agent conceded that his client has no Plea in Law directed at quantum and that the sum sued for should be deemed the amount due by the defender to the pursuers if the personal guarantee were valid. The defender, equally, candidly accepted that he had signed the document purporting to be a Personal Guarantee. The question at issued between the parties was the proper construction of the document, (number 5/1 of Process). The defender moved to amend his first Plea in Law at the Bar to provide for the remedy of reduction ope exceptionis. This was supported by his existing averments which narrated an alleged misrepresentation. I allowed this amendment.
2. The defender's agent's submissions can be put simply. The defender had made it clear to the pursuers that he did not want to trade with them on credit terms and he would not personally guarantee the company debts. He was, I was told, induced to sign the documents produced to the court by misrepresentation.
3. The pursuer's position can be put just as succinctly. The defender admitted signing the documents in the pursuer's First Inventory. The document 5/1 of process is headed up "Coors Guarantee and Indemnity"; Glam Leisure Ltd is designed as "the Customer" and the defender is designed as "Guarantor". The deed states in terms, " ......in return the Guarantor has agreed to enter into this Guarantee and Indemnity in respect of the monies and other liabilities of the Customer to Coors on the terms set out in this agreement." The defender signed the guarantee and under his signature is printed the words "Guarantor". The witness to the signature is a book keeper retained by Glam leisure and is independent from the Pursuers. The deed used by the pursuers would normally have several more pages (which appear to have been omitted) but the two page document made sense and the missing pages contained additional clauses to the advantage of the pursuers. The omission of the additional pages did not in any way render the deed unintelligible nor was the defender prejudiced in any way. The defender had signed two documents. 5/3 of process was the account opening element of the sale and purchase agreement between Glam Leisure and the pursuers and was patently signed by the defender in a representative capacity. The personal guarantee should be construed according to the ordinary language used which, in the pursuer's submissions, was a guarantee on a personal liability basis of the debts of Glam Leisure.
4. The defenders position on misrepresentation was, on record, confined to the allegation that the defender signed the agreement with the pursuers because they promised to hold promotional events at the night club premises operated by Glam Leisure in Dundee. The defenders agent conceded that he had no other relevant averments to support his amended plea for reduction of what he submitted was a purported guarantee. He declined to move to further amend before me.
5. After considering the competing submissions on the matter, and having regard to a recent decision of the Inner House (and the authorities helpfully reviewed by Lord Clarke in his Opinion) Brandon Hire PLC -v- Steven Russell [2010] CSIH7 , in my view the Defender must be deemed to have read the deed (5/1) and to have accepted personal liability as a guarantor. The Defender 'personally guarantees' payment in respect of all sums due from his company to the Pursuers. The wording is clear and unambiguous and must be given effect. He signed above a clearly printed line for his signature underscored with the word "Guarantor". The defender could have put his pen through any part of the deed he declined to sign.. He did not do so and is bound by its terms.
6. In discussion with the parties' agents we contrasted the present case with the facts in the decision of the Extra Division in the case of Montgomery Litho Limited v Maxwell 2000 SC 56. In that case, the pursuers entered into a contract with a company of which the defender was the managing director, for the supply, to the company, of printing services. The contract for the printing services, itself, was never reduced to writing. An application had been presented to the pursuers for a credit account. It was held that that application formed part of the contract between the company and the pursuers. The application provided "I have read and accepted the company's Standard Terms and Conditions ... all transactions are subject to the company's Standard Terms and Conditions". The defender had signed the application. The defender, however, had at no time requested to see the Standard Terms and Conditions. Standard condition 7 of the pursuers' Terms and Conditions provided as follows:

"In the case of a Limited Company the Director responsible for opening a credit account with the printer and who signs the application shall be jointly and severally liable for any and all payments that become due to the printer".

7. The Standard Terms and Conditions defined the "printer" as the pursuers. The pursuers sought to recover from the defender payment of the company's debts, due to them, for printing services on the footing that he had guaranteed these. The Extra Division dismissed the action. It is clear that the Extra Division reached the decision, in that case, on the basis that the terms of the personal guarantee had not been made the subject of any contract between the pursuers and the defender. The mere reference to the standard terms and conditions of the pursuers was not sufficient for that purpose, particularly where the defender had never actually seen those terms and conditions. The principal reasoning of the court is to be found at page 59F to page 60A, in the Opinion of the Court delivered by Lord Sutherland where he said:

"The question really is whether a particular condition is of such an unusual nature that it should specifically be drawn to the attention of the other party rather than being left simply as part of a large collection of other terms and conditions which are of a fairly standard nature. We are quite satisfied that in the present case the imposition of a personal obligation of guarantee on a director of a company is something which is unusual, to say the least of it, to be found in terms and conditions which purport to regulate the contract as between the two companies. It is certainly not unusual for a director to be asked to sign an obligation guaranteeing the company's liability, particularly in the case of a small limited liability company. It is, however, distinctly unusual for this to be done under the guise of terms and conditions relating to the contract between the two companies. We accept that there is no reason in principle why a credit application form of this kind could not incorporate both an application for credit on behalf of the company and a personal guarantee by an individual of the company's obligations. The latter provision would, however, require in our view to be so expressed as to give fair notice that it concerned the individual as such and that it imported an obligation by him personally. In the present case there is nothing to indicate that the defender signed the form in any capacity other than as a director of Newtext. There is nothing to indicate that he signed it in a personal capacity, giving a personal guarantee for the company's obligations. It follows that there is no legal basis for the pursuers' assertion of joint and several liability..."

8. It is, in my opinion, clear that the decision in Montgomery Litho is one which arises from the approach of the law as to what is required to bring adequately to the notice of a person, a contractual obligation of an unusual or unduly onerous nature if he is to be bound by it, can be seen from the discussion in the court's opinion at page 58F to page 59E and the authorities referred to, in particular the decision of the Court of Appeal in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433 which the Extra Division followed. It should be noted that, in the passage cited from the judgment of the court in Montgomery Litho Limited, the court expressly recognised that there was nothing unusual for a director to be asked to sign an obligation guaranteeing the company's liability, particularly in the case of a small limited liability company. The problem in that case was that the obligation in question had not been brought adequately to the attention of the defender so as to produce an implied assent thereto by him.

9. In the present case, as has been noted, it was not contended that there was insufficient notice given to the defender of the terms in question to render them as being of no contractual effect at all. The argument rather was that, as a matter of construction, and with pages missing, the deed should not be found to have imposed any personal liability on the defender. I cannot agree with that submission. The document stands alone and uses words that are quite clear. It is an agreement between the pursuers and the defender in quite discrete capacities from those assigned to them in the other deed (5/3). To accept the approach advanced on behalf of the defender would mean that the deed 5/1 had added nothing to the contractual arrangements that would otherwise subsist in the circumstances. The present case is, in my judgment, clearly distinguishable from the circumstances in the case of Montgomery Litho Limited supra because in that case the director had never adhibited his signature underneath words which provided for joint and several liability between himself and his company. He had, in fact, never seen the wording of any such a provision. A mere reference to the company's Standard Terms and Conditions, in which the provision was to be found, was held not to provide sufficient notice to the director that not only was his company bound to pay for the printing charges, but that he too was jointly and severally liable therefor. In this case the defender could not, in my opinion, reasonably assert that the deed 5/1 did not make make it abundantly clear that it was a guarantee and that he was being asked to sign in his personally capacity as a guarantor.

10. I now turn to question of misrepresentation. I regret to say that the defenders position on this point seemed to me to wholly misdirected. The only averment on record for the defender is that which refers to the pursuers offering an inducement to contract with them by staging promotional events which would, presumably bring extra custom into the nightclub. This cannot be a misrepresentation. Indeed it appears to have been a business offer directed to the primary contract between the pursuers and Glam Leisure Ltd. The defender would only profit tangentially from any increased sales or customer numbers: the company on the other hand would see direct cash flow benefits. Moreover the defender's agent was unable to explain to be how such an offer was a misrepresentation? He indicated that his client's position was that various things had been said by the representative of the pursuers who negotiated the contract between the pursuer and Glam Leisure which touched on why the defender was deceived into signing a personal guarantee against his own express inclination. He accepted however that he had no record for any such assertion. He, for professional reasons, was not in a position to offer to amend as this stage. He accepted that I had to assess the defenders pleadings as they stood in the Record and conceded that his client's position on misrepresentation was untenable on the extant pleadings.

11. I have therefore concluded that the defenders case on the merits is unsupportable in law both on the issue of the proper construction of the deed of guarantee and in respect of alleged misrepresentation. The defender's agent, at the outset, conceded that if I were against him then quantum was not disputed. I have accordingly sustained the pursuers' preliminary pleas and granted decree de plano as craved with expenses as taxed.

George Alexander Way

Sheriff of Tayside Central and Fife