The director of BMS, Ghuman, signed an order
form, a lease agreement with One World Leasing (OWL) and a direct
debit mandate.

On 12 October 2006, the salesman returned to
deliver the equipment and obtain Ghuman’s signature on the delivery
note and a further document which turned out to be a director’s
personal guarantee. OWL counter-signed the lease agreement on 18
October 2006.

Ghuman was dissatisfied with the quality of
the goods and services, about which he made complaints that were
not dealt with to his satisfaction, and BMS stopped making payments
in early 2007 and demanded its money back. It thereafter ceased

OWL purported to terminate the lease agreement
and issued proceedings against Ghuman under the personal guarantee
in August 2007. However, it ceased trading and assigned the lease
agreement to Investec Asset Finance (IAF) later that year. IAF was
subsequently substituted as claimant.

Ghuman’s grounds for defending were as

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(1) Although the lease agreement was signed by
OWL on 18 October 2008, it had been entered into orally on 6
October and therefore pre-dated the signing of the personal
guarantee; in the circumstances, the personal guarantee failed for
past consideration.

(2) Although OWL assigned the lease agreement
to IAF, it failed to assign the personal guarantee, and therefore,
IAF had no right to bring a claim on the personal guarantee to
which it was not a party.

(3) The services provided were unsatisfactory,
entitling BMS to cancel the lease agreement, which it did,
therefore discharging it from further liability and also
discharging Ghuman from liability under the personal guarantee.

The trial of Investec Asset Finance Ltd vs
Ghuman was heard by His Honour Judge Pierce Higgins at Worcester
County Court on 24 November 2009 and, with the agreement of both
parties, the Judge dealt with Issue (2) as a preliminary issue.

Clause 2 of the assignment of the lease
agreement stated that it assigned all OWL’s “right, title, benefit
and interest” in the lease agreement and included any securities
created on or after 1 October 2007.

IAF argued that the personal guarantee was a
“right” or “benefit” under the lease agreement and that OWL only
agreed to accept the proposal of finance on the basis that a
personal guarantee would be provided. The judge held the assignment
of the lease agreement did not include an assignment of the
personal guarantee. In particular, the latter was a separate
transaction between different parties and therefore did not create
any rights or interests under the lease agreement.

The lease agreement made no mention of the
personal guarantee and contained an “entire agreement” clause
preventing the implication of further terms.

The express reference to the inclusion of
post-1 October 2007 securities indicated that securities created
before that date (including the personal guarantee) were not
included in the assignment. Finally, if there was any uncertainty
or ambiguity in the language of the assignment (which the judge
found that there was not), the “contra proferentem” rule compelled
him to resolve such ambiguity against IAF and in favour of

Therefore, the personal guarantee was not
assigned by OWL to IAF, IAF had no right to bring the claim and the
action was dismissed with costs. The judge did not need to deal
with Ghuman’s other defences.

Sunil Iyer

The author is a barrister at the
Nottingham-based chambers KCH Barristers