Matthews v BSN (SW) Property: "see to it" guarantee cannot found bankruptcy petition, Court of Appeal rules

The Court of Appeal has set aside a bankruptcy order made on a personal guarantee, holding that a "see to it" guarantee gives rise only to a claim for unliquidated damages and so cannot support a creditor's petition under section 267 of the Insolvency Act 1986.

Giving the lead judgement in Matthews v BSN (SW) Property Ltd [2026] EWCA Civ 1442, Lord Justice Nugee, with whom Lord Justices Stuart-Smith and Moylan agreed, allowed the appeal even though the appellant did not attend.

Background

In 2019 Mr Matthews bought a fish and chip business for £1 under a share purchase agreement. The company owed interest-free loans of £66,950 to BSN and £12,800 to Oak First, which were to be repaid within four years. Clause 4.4 provided: "The Buyer guarantees to each of the Seller and BSN the repayment of the Loans by the Company." Unlike on a parallel acquisition, no separate deed of guarantee was executed.

The company stopped trading in 2020 and the loans went unpaid. On a joint petition, a bankruptcy order was made in the County Court at Bristol in June 2024. On first appeal, HHJ Paul Matthews, who is unrelated to the appellant, refused to let him raise the liquidated sum point for the first time. He held in any event that clause 4.4 created a conditional payment obligation.

Proceeding without the appellant

Unable to fund counsel, Mr Matthews asked to withdraw the day before the hearing. Part 38 does not apply to appeals, and under Practice Direction 52A the court may decline such a request. It did so here: the issue went to jurisdiction, a skeleton argument from former counsel was available, and most costs were already incurred, whereas dismissal would usually carry an adverse costs order.

Conditional payment or see to it?

Applying Moschi v Lep Air Services Ltd [1973] AC 331, Nugee LJ explained that a promise by the guarantor to pay if the debtor does not creates a debt. A promise that the debtor will pay creates an obligation whose breach sounds in damages, although the sum recovered is the same.

Clause 4.4 was "about as simple a form of guarantee as one could find" and indistinguishable from the wording in Moschi. Being unambiguous, it could not be given a different meaning by appeals to commercial common sense or by other clauses reflecting what the drafter assumed.

No liquidated sum

The court followed McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286. There, Patten LJ held that liability under a see to it guarantee is not a debt for a liquidated sum, even where the measure of damages equals the unpaid debt. The test is not whether the sum is readily ascertainable, but whether the contract imposes an obligation to pay a pre-agreed amount. Nugee LJ agreed that claims under a liquidated damages clause are petitionable.

New point and estoppel

The first appeal judge was wrong to refuse the new point. Construction of clause 4.4 was a pure question of law that no admissible evidence could have affected, and it went to the court's jurisdiction to make a bankruptcy order. An estoppel argument, based on the appellant acknowledging the guarantee while unrepresented in earlier proceedings, also failed. He had accepted only that he would be liable if the company did not pay, which is true of either form of guarantee.

His set-off arguments would have failed, though he may still rely on other company debts if pursued on the guarantee.

The respondents were represented by Robert Machell, instructed by Kitson Boyce LLP.