In Wednesday’s 12-page CA judgment General Mediterranean Holding SA v QucomHaps Holdings Ltd and others, the guarantor of a loan failed in its argument that it should be excused because the lender had not taken action to preserve the value of equities over which it had security, largely because its evidence was almost non-existent but also because it was arguing for a guarantee beneficiary to be under a much wider obligation vis a vis a guarantor than English law provided. The guarantor argued it was to “take reasonable steps to protect its security”, but the CA held that the 1872 case, Wulff v Jay (where a guarantor was excused because the lender had not registered some security) was more limited. Newey LJ said, “I do not consider that a creditor can be obliged to incur any sizable expenditure or to run any significant risk to preserve or maintain a security”. Wulff v Jay is one of the reasons that any properly-drafted guarantee states something along the lines that the guarantor’s liability shall not be prejudiced by:
“the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or any other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security”
Presumably (the judgment does not say) this guarantee did not contain any such wording: in the past English courts have upheld other protective wording in the non-consumer context.
and then 