Guernsey Legal Resources

    The plaintiff, a Guernsey company in compulsory liquidation, owed just under £202,000 to the bank. The company’s loan facility provided a maximum group overdraft facility of £200,000 for the plaintiff and KWL Advertising (UK) Ltd (“the UK company”). The security for the overdraft included guarantees in respect of the plaintiff’s liabilities given by the defendants and the UK company, which were governed by Guernsey law. Under them, in the event of the plaintiff being wound up the bank was entitled to be ranked as creditor and to prove for the full amount owed, to the exclusion of the defendants’ rights as guarantor until its claim had been satisfied. A wider commercial arrangement between the companies and the bank purported to assign the benefit of the guarantees to the plaintiff, so that it was simultaneously the debtor and beneficiary of the guarantees. The arrangement stipulated that it superseded any previous arrangements between the parties in relation to the matters it dealt with; it was to be governed by English law, and the parties submitted themselves to the jurisdiction of the English courts. The plaintiff claimed to be entitled to the benefit of the guarantees; the defendants filed an exception de fond, submitting that to allow the company to be both debtor and beneficiary would offend commercial sense and that the assignment of the benefits under the deed was ineffective.