30 October 2012

Guarantors claimed the Bank was not entitled to appoint an administrator to the borrower and that the appointment, caused the company to cease trading. That resulted in the destruction of all of the value in the company. Consequently, the value of their shares was destroyed. In compensation they sought a reduction in the amount of their liability under the guarantees.

The claim was struck out because there is a very old rule that a shareholder of a company cannot recover damages merely because the company has suffered damage, and cannot recover damages that are merely a reflection of a loss suffered by the company.

The guarantors next claim they were owed a fiduciary duty by the bank which was breached in the appointment of the administrator. The judge rejected this commenting:

The relationship between a creditor that is secured in respect of a debt and a guarantor of that debt is not one of the established categories of fiduciary relationship.

Click here to read the full judgment.

Kate resize

Kate Cooper joined Bransgroves Lawyers in 2006 and has been a partner since 2009. Kate specialises in Supreme Court litigation in the fields of mortgage enforcement, professional negligence and originator/funder disputes. She has an extensive transactional practice including, origination deeds, aggregation deeds, commercial and construction lending and mortgage securitisation.

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