Triodos Bank NV v Dobbs

Court of Appeal 24 May 2005

This case is outside the Consumer Credit Act 1974, but is included because it explains how the courts may deal with guarantors and their guarantees.

Acorn Televillages Ltd was building a commercial development at Crickhowell in Mid Wales. They needed credit to complete the development, and in 1996 borrowed a total of £900K via two loans, Dobbs was a director of the company and he offered a guarantee over the credit to the level of £50K (presumably the remainder may have been covered by the security in the buildings).

The company renegotiated the debts in 1998, and included additional borrowings for a different purpose. In 1999, the debts were consolidated into a single loan.

Presumably the company defaulted on the debt, and Mr Dobbs was pursued under his guarantee which stated "...the lender could agree to any amendment or variation in respect of an obligation of the borrower under the [original] loan agreements."

The Court of Appeal held that the only permitted variation which could still bind Mr Dobbs was one that was within the ambit of the first loans. He had no liability beyond the original guarantee, except for any rescheduling, such as of repayments. He could not be liable for any other borrowings.