Greer v Kettle
| Jurisdiction | UK Non-devolved |
| Judge | Lord Atkin,Lord Russell of Killowen,Lord Maugham,Lord Roche |
| Judgment Date | 22 November 1937 |
| Judgment citation (vLex) | [1937] UKHL J1122-1 |
| Date | 22 November 1937 |
| Court | House of Lords |
[1937] UKHL J1122-1
Lord Atkin
Lord Russell of Killowen
Lord Macmillan
Lord Maugham
Lord Roche
House of Lords
My Lords,
I have had the opportunity of reading the Opinions which are about to be delivered by my noble and learned friends Lord Russell of Killowen and Lord Maugham. I agree with them, and I have nothing to add.
Perhaps I may also say now that my noble and learned friend Lord Macmillan has also had an opportunity of reading those Opinions, and he also concurs in them.
My Lords,
The main question for our decision in this appeal is whether a company called Mercantile Marine Finance Corporation, Limited (to which I will refer, for brevity's sake, as Mercantile Marine) is entitled to prove in the liquidation of another company called Parent Trust and Finance Company, Limited (to which I will refer as Parent Trust) for a principal sum of £150,000, together with interest thereon. There are certain subsidiary questions in regard to interest, but these naturally only arise in the event of Mercantile Marine being entitled to prove for the principal sum.
The claim arises under an agreement of guarantee dated the 20th March, 1929, and made between Parent Trust and Mercantile Marine, the guarantee relating to a sum of £250,000 which had been advanced by Mercantile Marine to a company called Austin Friars Trust, Limited (to which I will refer as Austin Friars) under an agreement of charge also dated the 20th March, 1929, and made between Austin Friars and Mercantile Marine.
The case presents this feature:—viz. that no evidence is available of the circumstances in which the loan was made or the guarantee given, except what appears from the documents themselves. The documents and certain admissions by the parties are the only materials which we can consider in deciding this appeal.
By the agreement of charge, Mercantile Marine advanced the sum of £250,000 to Austin Friars; Austin Friars agreed to repay it on the 20th June then next with interest at the rate of 8 per cent. per annum, and charged certain securities mentioned in the Schedule thereto with the repayment of the said advance and interest. The Schedule contained the following items viz.:—
(1) 275,000 shares of £1 each fully paid in Iron Industries, Limited.
(2) 50,000 ordinary shares of 10s. each fully paid in Retail Trade Securities, Limited.
(3) 25,000 ordinary shares of £1 each fully paid in Corporation and General Securities, Limited.
The agreement of guarantee must be referred to in greater detail. In it Mercantile Marine is called "the Corporation," while the words "the guarantors" mean Parent Trust. It contains one recital only which runs thus:—
"Whereas the Corporation have at the request of the Guarantors advanced to the Austin Friars Trust Limited (hereinafter called 'the Borrowers') the sum of Two hundred and fifty thousand pounds on the security of a charge dated the 20th day of March One thousand nine hundred and twenty-nine on the shares particulars of which are set out in the Schedule hereto."
The Schedule is an exact repetition of the Schedule to the agreement of charge, and therefore includes the 275,000 shares in Iron Industries, Limited. The rest of the agreement consists of the following words:—
"In consideration of the Corporation having at the request of the Guarantors advanced to the Borrowers the said sum of Two hundred and fifty thousand pounds the Guarantors hereby covenant with the Corporation that in the event of the Borrowers failing to repay the said sum of Two hundred and fifty thousand pounds and interest as provided in the said Charge on the 20th day of June next forthwith to repay to the Corporation the said sum of Two hundred and fifty thousand pounds together with all interest due and to become due thereon or on any judgment which may be recovered hereunder at the rate of eight per cent. per annum Provided however that should the interest rate of the Bank of England at any time be increased from the amount prevailing at the date hereof whilst the said loan or any part thereof is outstanding then the interest secured thereby is to be increased by a similar amount and that whatever may now or hereafter be the position between the Borrowers and the Guarantors as Sureties the Guarantors shall be considered and be liable as principal debtors for all moneys secured by the said Charge and that the Guarantors and their successors shall not be released nor shall their liability hereunder be affected by time being given to the Borrowers or by the Corporation omitting or neglecting to protect the security created hereby or by the said Charge or by any other arrangement or dealing between the Borrowers and the Corporation in reference to the said security or by any other act omission matter or thing whatsoever whereby but for this provision the Guarantors as Sureties only would have been so released."
It is this document, and this document alone, which is the foundation of the claim of Mercantile Marine. The subsequent events in no way affect the question of the liability of Parent Trust; but for the sake of completeness, they should be stated. Austin Friars did repay £100,000 of the loan; and on two separate occasions in the year 1929, Mercantile Marine, at the request of Parent Trust, extended the time for repayment by Austin Friars of the balance of the loan for the time being unpaid, in consideration whereof Parent Trust covenanted with Mercantile Marine that the guarantee should remain in full force and effect in every respect for the reduced sum.
Subsequently to these extensions of time it was for the first time discovered that the 275,000 shares in Iron Industries, Limited, had not been validly issued, and that accordingly the debt, the payment of which Parent Trust had guaranteed, had never been secured on any of those 275,000 shares. On the one hand the fact that the 275,000 shares had not been validly issued is admitted by Mercantile Marine; on the other hand Parent Trust do not dispute that Mercantile Marine believed that those shares were validly issued, and that they had obtained a valid and effectual charge thereon.
In these circumstances it would seem that the legal rights and liabilities of these parties depend upon the true construction and effect of the agreement of guarantee; and indeed this view was not I think disputed by either side.
For Mercantile Marine it was contended (1) that upon its true construction the agreement for guarantee merely states or postulates that there has been executed by Austin Friars a document or paper answering the description given, viz. a document or paper bearing the particular date and purporting to charge the scheduled shares or stating that they were charged; or (2) alternatively that, if upon its true construction the agreement for guarantee required that the loan to Austin Friars should be a secured loan, then that requirement had been fulfilled, because the loan was in fact secured on the scheduled shares other than the 275,000 shares in Iron Industries, Limited.
These arguments were advanced before your Lordships in all seriousness, but I confess that I find it difficult to treat them with equal gravity.
As regards the first alternative, the agreement according to its plain language does not merely assert the execution or existence of a document or piece of paper which answers the description given, it asserts the existence of a security, and of a security more particularly described viz. a security which consists of a charge on (amongst other shares) the 275,000 shares in Iron Industries, Limited. This is the plain meaning of the words used: and an appreciation of this plain meaning destroys also the alternative contention, which can only be founded upon the view that nothing is asserted beyond the fact that Austin Friars have given some security.
Once it is realised that the debt which Parent Trust are undertaking to guarantee is a debt described as a debt the repayment of which by the principal debtor is secured by a charge on (amongst other shares) the 275,000 shares in Iron Industries, Limited, the case (apart from the question of estoppel, to which I will refer) becomes in my opinion a simple one.
It is not a case, as Bennett J. seems to have treated it, of seeking to imply a condition the implication of which is alleged to be inconsistent with other provisions in the document. In other words, as Romer L.J. said, it is not a case of Parent Trust being released from a contractual engagement. It is a case of an attempt to impose upon them a liability which they have never undertaken. The only debt the repayment of which by the principal debtor they undertook to guarantee was a debt secured by a...
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