Skip links

Was $486,000 Bank Loan to a Lawyer or His Firm?

An American lawyer who was named as the personal recipient of a $486,000 bank loan nevertheless persuaded the High Court that he had an arguable case that it was not him, but the financially troubled firm in which he was a partner, that was the true borrower.

The loan agreement had been addressed to the lawyer and its opening paragraph specifically defined him as the borrower. In those circumstances, the bank applied for summary judgment against him on the basis that it ‘could not be clearer’ that the obligation to repay the money fell on him personally.

However, in resisting the application, the lawyer pointed out that the money had been paid not to him but into the account of his Washington DC-based firm, which had subsequently filed for Chapter 11 bankruptcy. He asserted that the close relationship between the bank and the firm meant that the former must have been aware of the latter’s acute financial difficulties.

The lawyer also argued that he had been consistently and repeatedly assured by more senior colleagues within the firm that the loan was merely a mechanism by which it could shore up its finances and that the burden of repayment would fall upon the firm, not individual partners.

The Court acknowledged that, on a purely textual and syntactical basis, the bank’s arguments were ‘very powerful’. However, in opening the way for the dispute to go to trial, it noted that the lawyer’s evidence, if accepted, ‘would put the contractual documents in a very different light’.