Moody and another v Condor Insurance Ltd and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Park |
| Judgment Date | 03 February 2006 |
| Neutral Citation | [2006] EWHC 100 (Ch) |
| Docket Number | Case No: HC05C01545 |
| Court | Chancery Division |
| Date | 03 February 2006 |
[2006] EWHC 100 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Park
Case No: HC05C01545
Stephen Rubin QC and Nik Yeo (instructed by Ward Hadaway) for the Claimants
Linden Ife (instructed by Wilson Elser Moskowitz & Dicker) for the First Defendant
Hearing dates: 14 & 15 December 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction and overview
This is an application by the claimants, Mr Moody and Mr Miller, for summary judgment against the first defendant, Condor, to enforce what Mr Moody and Mr Miller contend to be its obligation to them under a guarantee dated 13 October 2004. In my judgment, and despite the submissions of Miss Ife, who appears for Condor, Condor has no real prospect of successfully defending the claim. Further, I see no other compelling reason why the case should go to a full trial. Therefore, pursuant to rule 24.2 of the Civil Procedure Rules, I will grant the summary judgment requested.
Mr Moody and Mr Miller owned a company called MGM Precision Ltd, which I will call 'Precision'. Mr Thompson, the solicitor for Mr Moody and Mr Miller, states in his first witness statement in support of the application that Precision was a profitable sub-contracting engineering business operating primarily in the offshore market. On 13 October 2004 Mr Moody and Mr Miller sold Precision to MGM Group Limited, which I will call 'Group'. a company owned by a Mr Dowd. Group is the second defendant, but no relief against it is sought on this application. It was a vehicle company established by a Mr Dowd to acquire Precision. It had no other significant assets.
One part of the purchase price, slightly more than £1.75m, was paid on completion, apparently with money borrowed by Group from a bank. Group also issued some shares to Mr Moody and Mr Miller. But another part of the purchase price, namely £1.2m, was left outstanding and was to be paid in four six-monthly instalments of £300,000 each. Group issued loan notes to Mr Moody and Mr Miller in respect of the debt of £1.2m (two loan notes for £600,000 each). The loan notes provided that, if any instalment was not paid on time, the full outstanding balance became payable immediately. Group failed to pay the first instalment of £300,000 when it was due (which was on 13 April 2005), so (as is now conceded by Miss Ife, though originally it was not) the whole £1.2m is payable.
Group has not made any payment, and appears to be unable to do so. On 25 April 2005 Precision was placed into administration, and the next day the administrator sold its business and assets to another company owned by Mr Dowd. It seems that the price received by Group was enough for it to repay the bank, but left nothing available to pay any part of the debt of £1.2m which it owed to Mr Moody and Mr Miller.
Mr Moody and Mr Miller believed that they had the benefit of a guarantee from Condor of Group's debt of £1.2m, and gave notice to Condor of a claim under the guarantee. Condor has refused to pay, and Mr Moody and Mr Miller have commenced the present proceedings seeking judgment against Condor on what they say is Condor's guarantee liability.
I shall have to examine some parts of the documentary small print as this judgment progresses, but what I have said so far is the essential factual background, with the addition of only the following few supplemental points. Mr Moody and Mr Miller would not have been willing to sell Precision to Group without the protection of a guarantee. Mr Dowd and his vehicle company, Group, knew that. They identified Condor as a potential guarantor. Condor is in the business of granting corporate risk guarantees. It received a premium from Group as consideration for giving the guarantee which Mr Moody and Mr Miller seek now to enforce.
The arguments
The case placed before me by Mr Rubin QC and Mr Yeo on behalf of Mr Moody and Mr Miller is short and simple. They say that the intention and the effect of the documents (which I shall have to examine in a little detail later) was that, in the events that have happened, Condor should be liable to Mr Moody and Mr Miller under the guarantee. Mr Moody and Mr Miller were not nominal parties to the document or documents which contained the guarantee, but the documents were executed by Condor as deeds, and were plainly intended to be enforceable by Mr Moody and Mr Miller directly against Condor. In those circumstances Mr Moody and Mr Miller can proceed directly against Condor, and Condor has no defence against them. Condor may or may not have grounds for claiming against Mr Dowd and Group that it was deceived by them when it entered into the guarantee, but any such grounds cannot give it a defence against the claim by Mr Moody and Mr Miller to enforce its guarantee to them. It must pay up to Mr Moody and Mr Miller under the guarantee, and then, if it wishes to pursue the matter, seek to recoup itself on a claim for an indemnity from Mr Dowd and Group. If its remedy by way of indemnity is worthless (as it clearly is against Group and may be against Mr Dowd), that does not provide it with any justification for not meeting its liability to Mr Moody and Mr Miller.
In opposition to Mr Moody's and Mr Miller's application for summary judgment Miss Ife advances three arguments.
i) She submits that Mr Moody and Mr Miller have no entitlement to enforce the guarantee against Condor, because they were not signatory parties to the document or documents by which Condor purported to give the guarantee. It is true that those documents were executed by Condor as deeds, but, because they were also executed by another person as well, namely Group, they were not the kinds of deed which are directly enforceable by persons (in this case Mr Moody and Mr Miller) who were not executing parties to them. Miss Ife immediately acknowledges that this is purely a technical argument, and that it has little or no merits in the broader sense. However, she says, and I accept, that, if the argument is technically correct, Condor is entitled to take advantage of it.
ii) She says that Condor may have grounds for setting the guarantee aside as between itself and Group. If so, she says that the guarantee would also fall away as between Condor and Mr Moody and Mr Miller. Whether there are indeed grounds to set the guarantee aside is a question which requires a trial, and summary judgment is inappropriate.
iii) Finally she says that Condor is 'suspicious' about Mr Moody and Mr Miller, and that it should be entitled to have a full trial in order that it can properly investigate its suspicions.
I will now consider the arguments, doing so under three headings which correspond to Miss Ife's three reasons for opposing the application for summary judgment.
Is the documentation such that the guarantee is incapable of being enforced by Mr Moody and Mr Miller?
I need to preface my examination of this question by describing the overall structure of the documentation for the sale of Precision to Group, so far as that structure is relevant to the arguments which were placed before me. The sale documents provided for what might be thought of as three tiers of documents. At (so to speak) the top tier there was the main sale agreement. At the second tier there were several other documents which the main sale agreement required to be executed. One of these was the Loan Note and Guarantee instrument. At the third tier there were two documents which the Loan Note and Guarantee instrument provided were to be executed. These were, first, the loan note certificates and conditions, and, second, the guarantee. I add some observations about the documents at the three tiers in the following sub-paragraphs.
i) The main sale agreement (dated, like all the other documents, 13 October 2004) provided for Mr Moody and Mr Miller to sell and for Group to purchase the shares in Precision on the detailed terms which appeared in the agreement itself and in its eight schedules. It was executed as a deed by Mr Moody and Mr Miller as 'the Sellers' and by Group as 'the Buyer'. One of the obligations of the Buyer at completion was to deliver to the Sellers 'the Loan Note and Guarantee duly executed by the Buyer and Condor Insurance Ltd'. The document so referred to is the one which in the main part of this paragraph 10 I called the Loan Note and Guarantee instrument. The form of it is set out in Schedule 7 to the main sale agreement, and in Schedule 7 it is headed 'Loan Note and Guarantee Instrument'.
ii) The document as executed pursuant to the obligation in the main sale agreement referred to in sub-paragraph (i) above does not bear the heading 'Loan Note and Guarantee Instrument'. It has a front sheet with the titles 'MGM Group Limited – Loan Stock Instrument constituting £1,200,000 Guaranteed Unsecured Loan Notes 2006'. Apart from that it is, as far as I can see, identical to the form in Schedule 7 to the main sale agreement (as, indeed, it was required to be by the main sale agreement). The instrument was executed as a deed by Group and Condor. Mr Moody and Mr Miller were not executing parties to it. It begins: 'This Deed is made on 13 October 2004 between [Group] ('the Company') and [Condor] (the Guarantor')'. The word 'between' should be noted, since one of Miss Ife's arguments relies upon it. The document occupies six and a half pages, nearly all of which are taken up with describing the terms and conditions of the loan notes as between Group and the loan noteholders...
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