ING Lease (UK) Ltd v Harwood
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Waller,Lord Justice Laws,Lord Justice Lawrence Collins |
| Judgment Date | 09 July 2008 |
| Neutral Citation | [2008] EWCA Civ 786,[2008] EWCA Civ 401 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 July 2008 |
| Docket Number | Case No: A2/2007/2487 |
[2008] EWCA Civ 401
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR MICHAEL HARVEY QC)
Lord Justice Rix
Case No: A2/2007/2487
Miss B Lucas (instructed by Messrs Peters & Peters) appeared on behalf of the Appellant
Miss V Windle (instructed byAddleshaw Goddard LLP) appeared on behalf of the Respondent
This is an application for permission to appeal, heard at an adjourned hearing of the application on notice to the respondent. The applicant is Mr Philip Harwood, the respondent ING Lease UK Limited —a company, I assume, within the group of the ING Bank. I will refer to it as “ING”.
ING sued upon a personal guarantee made by Mr Harwood in September 2003. One of the matters guaranteed in that guarantee by Mr Harwood was the pre-1 August 2002 debt —known in this litigation as the “Coin TV” debt —of a company known as Homebuy Direct UK Limited (“HDUK”). The debt at that time was some £337,000.
The background to that guarantee is as follows: Mr Harwood in 2001 was a successful businessman engaged in the business of renting domestic appliances to customers in the sub-prime market. He, or his companies, were banking customers of ING. Another customer of ING at that time was a failed company, or group of companies, known as “Coin TV”. In the spring of 2001 Coin TV was in difficulties and indeed entered into liquidation. ING approached Mr Harwood to see if the Coin TV operation would be of interest to him in the hope that, if it was and he was prepared to take over the Coin TV operation, ING could rescue the indebtedness of Coin TV to it, which at that time was in the order of £0.5 million. There were conversations between ING by their executives Mr Paul Tagg (an assistant director in the block discounting department) and Mr Tom Dramby who was head of risk, and Mr Harwood. The effect of those conversations was that Mr Harwood was interested in the suggestion put to him by ING, but made it clear that if such a transaction did proceed it was to be on the basis that he would accept no personal liability for Coin TV's debts. I assume that was said because there was already at that time possibly in existence a personal guarantee from him in respect of his own companies. The judge, Mr Michael Harvey QC, sitting as a Deputy High Court Judge, in his judgment of 10 October 2007 accepted that these conversations took place. They took place, I should add, in the presence of Mr Rendle, one of the joint provisional liquidators of Coin TV.
There was then a period of quite some time while the Coin TV operation was managed in liquidation or provisional liquidation with the help of Mr Harwood and his companies until August 2002 —I think 1 August 2002 —when the so-called “ING Agreement” was made, whereby a new company set up by Mr Harwood —originally called, I think, Etchco 1133 Limited, subsequently renamed as Homebuy Direct UK Limited (the HDUK company of which I have spoken) —bought the Coin TV business, I think for a nominal sum, and took upon its books the Coin TV debt which, by then, had grown from the original £0.5 million of which I have spoken, to something in the order of £1.5 million. Although there was, I think, some provision in the ING Agreement for cross-company guarantees, there was no requirement made of Mr Harwood at that time of a personal guarantee. This was despite the fact that, as the internal documentation of ING showed at trial as a result of disclosure (although Mr Harwood did not know about this at the time), the Coin TV transaction had been authorised by ING's senior officers or committee upon the basis that Mr Harwood would extend his personal guarantee to cover the Coin TV debt. Now, quite why the transaction authorised on those terms internally by ING was made without the requirement of Mr Harwood's personal guarantee is not disclosed by any finding of the judge, but I would myself draw the provisional working inference from those basic facts that it was because the deal could not be made on any other basis, reflecting the original conversations between Mr Harwood and Messrs Tagg and Dramby of the spring and summer of the earlier year, 2001.
So the ING Agreement was made in early August 2002. There came a time in September 2003 when the critical personal guarantee, an all debts guarantee (upon which ING sue in this litigation), was put before Mr Harwood. On this occasion the bank guarantee did include the original Coin TV debt —that is to say, the Coin TV debt as it existed prior to the takeover of Coin TV by HDUK. Albeit by this time, in September 2003 (or, possibly, if I have that wrong, at any rate by the time of the trial) that debt had been reduced from its original sum of £1.5 million to the sum of £337,000 upon which ING sued in these proceedings. The judge's findings about the making of this guarantee are contained in paragraph 63 of his judgment. He there states that:
“…it is common ground that there were no discussions about excluding from its ambit any liability in respect of the Coin TV debt. Mr Harwood cannot specifically recall signing the guarantee. He told me that he had had a conversation with Mr Tagg and had been told that a personal guarantee needed to be signed in respect of the trading companies. He said that it seemed normal to him. Mr Tagg said in his witness statement that he had prepared the guarantee, but that he could not now remember the conversation he had with Mr Harwood before the document was sent to him on 22 September (page 455). He agreed that he did not tell Mr Harwood at this time that the document did not cover the Coin TV debt. He said that the conversation would have been along the lines of needing to tidy up the documentation. He effectively agreed in cross examination that there were no relevant discussions at this time.”
So, effectively, the judge finds that there were no relevant discussions at the time of signing of the bank guarantee, save that Mr Harwood was told that this was a tidying up exercise. Mr Harwood's evidence was that it had never occurred to him that he was making himself personally liable for the Coin TV debt.
In these circumstances the question arose on Mr Harwood's defence as to why he should not be liable in accordance with his signature for the bank guarantee that he signed, even if he had been careless or ignorant in its signing. His defence was put in a number of ways, but essentially it relied upon the discussions between Mr Harwood and Messrs Tagg and Dramby in the spring and summer of 2001, albeit it was also said that there were similar discussions as things got closer to the making of the ING Agreement in 2002. The judge rejected that last allegation.
As for the discussions in the spring and summer of 2001, the judge set out the evidence of the three witnesses that he had heard at trial in relation to those conversations. Those three witnesses were Mr Harwood, Mr Rendle (the joint provisional liquidator, an entirely independent witness) and Mr Tagg. I think both Mr Rendle and Mr Tagg himself —although previously, of course, an employee of ING —gave evidence for Mr Harwood. The evidence of all three witnesses was that there had been an agreement —the judge records that evidence —at the time of these 2001 conversations, to the effect that if Mr Harwood's companies took over the Coin TV debt he would not be personally liable, or asked to be personally liable, for those debts. Upon the basis of that evidence, Mr Harwood's case at trial was that those conversations amounted to a representation either of fact or of a promissory nature by ING an unequivocal representation, such as to found an estoppel against Mr Harwood being made liable for the ING debt if he entered into the transaction (ultimately the ING Agreement), which he was invited to do. It was also said that that case could be put as a contract, or at any rate in the form of a collateral warranty, consideration being provided by the subsequent undertaking of the Coin TV debt by Mr Harwood's business. Mr Harwood's defence was also put in other ways. It was suggested that there was an implied term that he would not be liable for the Coin TV debt (I think an implied term of the guarantee that he would not be liable for the Coin TV debt) and/or a case in rectification of the guarantee was also made.
All these defences failed. So far as the 2001 conversations (which the judge accepted had been made) are concerned, Mr Harwood's case failed because the judge concluded that these conversations —although they had taken place, and although he accepted that Mr Harwood had made it clear that he was not prepared to give a personal guarantee in respect of the Coin TV debt – nevertheless, the judge concluded that no contract or estoppel had taken place at that time or as a result, because these were simply discussions which were pre-contractual discussions of a negotiating nature. He said at paragraph 67 of his judgment that a principal difficulty in Mr Harwood's defence was his agreement in cross-examination that there “never was a contractual agreement that he would not be asked for a personal guarantee.”
What is said on this application, however, is that the judge erred in thinking that the question was whether a contract or estoppel situation had been entered into or arrived at as of these 2001 discussions, well in advance of the ING Agreement being made. Mr Harwood's case was rather that such a collateral contract had been entered into if he entered, or his companies...
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