The Importance of the All Sums Due Clause

February 2018

The High Court, in the recently decided case of Allied Irish Banks Plc v McKeown & anor [2017] IEHC 363, granted an order for summary judgment in favour of AIB in respect of amounts owing by the first named defendant on foot of facilities originally granted in 2005, for which the second named defendant provided two separate but practically identical guarantees in 2009. The original facilities were subsequently refinanced a number of times, most recently in 2013. While acknowledging that the monies had been advanced to the first named defendant by AIB and not repaid, the defendants contended that they had arguable grounds for defence based on, inter alia, their contention that the guarantees provided by the second named defendant were discharged on the refinancing of the facilities. The defendants contended that, as the 2013 refinancing constituted material changes in the underlying contractual obligations between the plaintiff and the first named defendant without the consent of the second named defendant, the guarantees were discharged. In rejecting the contention that the material changes to the first named defendant’s obligations resulted in the discharging of the guarantees the Court noted in particular clause 6 of both guarantees, which provided:

“The Bank shall be at liberty without obtaining any consent from the Guarantor and without thereby affecting its rights or the Guarantor’s liability hereunder at any time:-

(i) to determine, enlarge or vary any credit to the Borrower …”

Ms Justice Costello held that, pursuant to clause 6 (above), AIB was expressly entitled to vary the first named defendant’s facility without obtaining any consent from the guarantor and without thereby affecting its rights or the guarantor’s liability under either guarantee.

While this does provide comfort to lenders seeking to rely on an existing all sums due guarantee for facilities granted after the date of the guarantee, it is still advisable that the lender seek a confirmation from the guarantor that their guarantee applies in respect of such further facilities.

For more information, please get in touch with your usual Whitney Moore contact, Jamie Enright or any member of our Banking and Finance team.

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