Actionstrength Ltd v (1) International Glass Ltd in Gl En Spa (2) Saint-Gobain Glass UK Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon Brown,Lord Justice Peter Gibson,Lord Justice Tuckey |
| Judgment Date | 10 October 2001 |
| Neutral Citation | [2001] EWCA Civ 1477 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2001/1810 |
| Date | 10 October 2001 |
[2001] EWCA Civ 1477
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
(THE HON MR JUSTICE MITTING)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Simon Brown
Lord Justice Peter Gibson
Lord Justice Tuckey
Case No: A2/2001/1810
Mr M. Soole (instructed by Reynolds Porter Chamberlain of London WC1V 7HA) for the Appellant Mr J. McGhee (instructed by Halliwell Landau of Manchester M2 2JF) for the Respondent
This is the second defendant's appeal against Mitting J's order made on 30 July 2001 dismissing its application under CPR 24.2 for summary judgment against the claimant in the action on the grounds that the claim has no real prospect of success and there is no other reason why its disposal should await trial.
The trial is presently listed for five days commencing on 2 October 2001 with 10 witnesses of fact. The appeal has, therefore, been expedited: if it succeeds the inconvenience and expense of trial will be avoided. The appeal raises, I may say at once, an interesting and to my mind not entirely easy point of law under s.4 of the Statute of Frauds 1677. Arising, however, as it does on a CPR 24.2 application, the facts can be comparatively shortly stated.
On 26 May 1999 the appellant as employer contracted with the first defendant as main contractor to build a float glass factory at Eggborough in Yorkshire, a contract in respect of which the first defendant (Inglen) duly executed a performance bond.
On 2 August 1999 the respondent as sub-contractor agreed with Inglen to provide the necessary labour for the contract works.
From the outset the respondent suffered from late payment by Inglen and periodically it threatened to pull its workforce off site. Matters came to a head on 11 February 2000 when, notwithstanding the respondent having recently received 2 late payment certificates respectively for £100,000 on 3 February and £200,000 on 9 February, £197,000 odd still remained outstanding from its December invoice. It is the respondent's case against the appellant that on 11 February its complaints were put squarely to the appellant and agreement was reached between their respective representatives to this effect (and I now quote from paragraph 22 of the witness statement made by Mr Sutcliffe, the respondent's business development manager):
"… if the claimant agreed not to withdraw the workforce from site the second defendant would ensure that the claimant would receive any amount due to it by Inglen, under the contract for provision of labour, if necessary by re-directing to the claimant payments due by the second defendant to Inglen. Mr Watkinson [representing the second defendant] also stated that the second defendant had a performance bond in place provided by Inglen in the sum of £700,000 which could be utilised if Inglen did not honour its contract with the claimant."
The respondent's managing director, Mr Smith, made a statement to essentially the same effect.
It is not alleged that Inglen were party to this agreement or ever accepted that money due to them could be paid to the respondent.
In reliance on the appellant's promise the respondent agreed to continue to supply labour to Inglen so that the appellant's factory could proceed towards completion. The work continued until early March 2000 by when Inglen's liability to the respondent under the sub-contract had risen to £1.3 million odd. At that stage, however, it became clear that Inglen was unable to meet its liability to the respondent and that the appellant too would not make payment. The respondent accordingly then withdrew its workforce from site.
On 2 May 2000 the respondent issued Particulars of Claim claiming £1,305,493 plus interest against both defendants. The claim against the first defendant, Inglen, although clearly irresistible, has proved worthless: a default judgment was obtained against it on 12 June 2000 but since then it has been put into liquidation in Italy. The respondent, therefore, seeks to effect recovery against the appellant pursuant to the agreement of 11 February 2000. Its claim against the appellant was pleaded in paragraphs 5 and 6 of the Particulars of Claim. Paragraph 5 alleges that on 11 February 2000 the appellant:
"… agreed that in consideration of the claimant not withdrawing its labour from the site as aforesaid [i.e. as it had told the second defendant it proposed to do] the second defendant would ensure that the claimant received any amount due to it from the first defendant under the supply contract if necessary by redirecting to the claimant payments due by the second defendant to the first defendant."
Paragraph 6 then alleges that in breach of that agreement and despite demands made upon it, the appellant refused to pay the respondent the sum due or otherwise ensure its payment.
By its defence the appellant disputes the factual allegations and denies entering into any such agreement with the respondent as is alleged against it. More relevantly for present purposes, however, the appellant contends in the alternative that in any event the alleged agreement constituted a guarantee which, in the admitted absence of any written note or memorandum, is accordingly unenforceable against it by virtue of s.4 of the Statute of Frauds 1677. S.4 provides so far as material:
"No action shall be brought … whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person … unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."
By its reply the respondent advances two arguments. First and principally it contends that the Statute of Frauds has no application to the agreement sued upon here. Alternatively it contends that the appellant is estopped from relying on the Statute.
It is the appellant's case that neither of those arguments can succeed and that on the contrary the s.4 defence is sound in law. That was the basis upon which, following the close of pleadings and service of the witness statements, it issued its CPR 24.2 application for summary judgment. Such an application requires, of course, that the relevant facts should be assumed as alleged by the respondent.
In his short judgment dismissing the application, Mitting J concluded that, although pleaded in terms which appeared to be that of a claim on a guarantee, one possible construction of the respondent's witness statements was that the appellant in fact undertook a primary obligation to pay. There should accordingly be a trial to determine the detailed facts. It was, therefore, unnecessary to decide whether the respondent's alternative plea of estoppel itself had any real prospect of success. Having quoted (as I have done above) from paragraph 22 of Mr Sutcliffe's statement, the judge remarked that "it reads remarkably like a guarantee". He then, however, continued:
"but if the comma is put after the phrase 'if necessary' so that the obligation then becomes to redirect to the claimant payments due by the second defendant to the first defendant, then it looks remarkably like a promise to enter into a primary obligation, namely, to withhold payments from the first defendant and to pay them or to make payment to the claimant."
Mr Soole on appeal challenges that approach. As both parties agree, the question whether or not a guarantee is within the Statute of Frauds must be approached as a matter of substance rather than form. It is the essence of the appellant's case that, however precisely one construes the terms of this agreement, in substance it imposed only a secondary liability upon the appellant, a liability contingent upon Inglen defaulting on its primary obligation under the sub-contract with the respondent. Such a liability, submits Mr Soole, falls foul of s.4.
The most favourable construction of the agreement from the respondent's point of view is that formulated before the judge below: that the appellant would (1) attempt to persuade Inglen to meet its obligation to the respondent and (2), failing that, would withhold monies due from the appellant to Inglen and pay the respondent itself out of such monies (using also, if necessary, the performance bond which Inglen had provided).
The appellant contends first that that was not the form of agreement either pleaded by way of claim or evidenced in the witness statements, but secondly that in any event even an agreement in that form is caught by s.4.
For my part I would reject the first limb of that contention. True it is, as indeed Mr McGhee acknowledges, that the Particulars of Claim would need to be amended to reflect this way of putting the respondent's case: as presently drafted, it asserts in both paragraphs 5 and 6 an obligation to "ensure" payment of all monies due to the respondent irrespective of whether that could be achieved by withholding and re-directing monies due to Inglen. In my judgment, however, for CPR 24.2 purposes, such a putative amendment should be allowed and, no less importantly, the respondent's witness statements should reasonably be taken to support this more promising formulation of the agreement. Although I see the matter rather differently from the judge below and for...
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