A businessman has been held personally liable for debts of more than $12 million even though he was not a party to the loan agreements which created the debt. The High Court ruled that a letter he wrote offering to provide security for the loans and which persuaded the lender to delay demands for repayment gave rise to contractual obligations.
A total of over $34 million had been loaned under the terms of three agreements to corporate entities which were said to be controlled by the businessman who had fallen into financial difficulties. The lender sought repayment from the businessman personally and from his principal trading company.
Finding that company liable to repay the whole debt, with interest, the court found that the businessman had, by a letter written on the company’s behalf, induced the lender to defer repayment of sums due in return for a promise that remittances would be made in accordance with a specified timetable. The court ruled that the letter amounted to a binding offer that had been accepted and relied upon by the lender and therefore had contractual force.
The businessman was also personally liable in tort in respect of two of the loans – totalling more than $12 million – having caused harm to the lender by failing to arrange and register security for the loans as he had promised to do. That failure had rendered the lender’s rights worthless. One of the loans had been induced by the businessman’s misrepresentation and, in that instance, he had deliberately prevented effective security from being provided.