Emballator (UK) Limited v Technical & General Guarantee Company Ltd

The identity of the contracting party is determined objectively from the purchase order and surrounding documentary and oral evidence. A direction to invoice a subsidiary does not, without more, establish that a holding company acted only as the subsidiary’s disclosed agent or that the subsidiary alone was liable. Where the evidence shows that the holding company contracted for supplies and remained liable, a trade credit guarantee may respond to its breach even if the subsidiary received the goods, was invoiced, or made a payment. A proposed appeal on that issue should not proceed where it has no real prospect of success and there is no other compelling reason.

The claimant supplied paint cans and containers to companies in the Philip Johnstone group. The defendant issued a £50,000 trade credit guarantee to support further supplies. The guarantee was addressed in error to another company, was rectified, and payment was refused after an invoice was dishonoured.

At Huddersfield County Court, His Honour Judge Spencer QC found that Philip Johnstone Group Ltd was the contracting party and that its breach of the credit facilities was covered. The defendant argued that Group had acted as a disclosed agent for P J Paints Ltd because goods were delivered to Paints, it was invoiced, and it made at least one payment. Permission was renewed on that issue after Rix LJ had granted permission only on the amendment question. The central issue was whether Group or Paints had contracted with the claimant.

Lord Justice Peter Gibson gave the judgment, with Lord Justice Mummery agreeing. The Court of Appeal refused the renewed application for permission to appeal.

1. Identification of the contracting party. The issue was not determined by the fact that Paints received deliveries, was invoiced, or made at least one payment. The purchase order was headed Philip Johnstone Group, while the instruction to invoice Paints did not state that Group was acting as agent or that Paints was the principal. Viewed objectively, the order did not clearly constitute Group as merely a disclosed agent for Paints.
2. Application to the guarantee. The proposed agency construction would leave the trade credit guarantee without utility, because it would mean that no credit facilities had been supplied to Group. That was a surprising consequence, although the construction remained open to argument if required by the documents. The documentary and oral evidence entitled the county court judge to find that Group was the contracting party and remained liable. The credit facilities were therefore supplied to Group, and a breach by Group was covered by the guarantee, even if Paints had also committed a breach.
3. Permission to appeal. The Court of Appeal saw no real prospect of success on the proposed ground and no other compelling reason for the appeal to proceed. The application was accordingly refused. Rix LJ’s earlier paper decision had granted permission only in relation to the refusal to amend the defence.

1. Court of Appeal (Civil Division): On the renewed application, permission to appeal was refused. The court agreed with the county court’s conclusion that Group was the contracting party.
2. Huddersfield County Court: His Honour Judge Spencer QC gave judgment for the claimant on its claim for £50,000 under the trade credit guarantee and refused a late application to amend the defence.
3. Earlier permission decision: Rix LJ, considering the application on paper, granted permission to appeal from the refusal to amend but refused permission on the remaining grounds.