Quest 4 Finance Ltd claimed an indemnity from two of the directors of Hilmax Engineering Ltd; Maxfield and Carter, pursuant to a warranty document dated 18 July 2006. The third defendant, Chesney, had been adjudged bankrupt so the proceedings were discontinued against him.

Hilmax had fallen into financial difficulty and required additional finance. Quest was in the business of providing short term finance for sums equivalent to twice the borrower’s monthly wage bill. Quest’s product was described in a brochure as not requiring personal guarantees from directors nor charges over the company; simply requiring a “warranty” which was put in place to cover the event of any fraudulent acts knowingly committed.

Hilmax then entered into a loan agreement with Quest under which Hilmax gave certain warranties. The directors also signed documents in which they warranted the Hilmax had complied and would continue to comply with its warranties in the loan agreement. Significantly, the directors stated in their warranties that they had not placed any reliance on the advice or opinion of any person representing the interests of Quest.

Shortly after entering the loan agreement, Hilmax went into administration. That constituted a breach the directors’ warranties under the loan agreement and Quest therefore brought a claim against the directors. The directors argued that the warranties should be set aside on the basis that they were induced by a misrepresentation that personal guarantees were not required. On the other hand, Quest argued that the directors were prevented from relying upon the statements in Quest’s brochure by reason of the declaration of non-reliance.

Three main issues arose at trial. The first was whether the directors had believed the representations contained in Quest’s brochure and relied upon them. The second was whether the brochure constituted “advice” given by Quest given within the meaning of the declaration of non-reliance. The third was whether the obligations contained in the directors warranties were effectively personal guarantees.