Gastronome (UK) Ltd v Anglo Dutch Meats (UK) Ltd

A contractual guarantee is construed objectively by asking what it conveyed to a reasonable person with the background knowledge reasonably available to the parties when it was given.

Where the named addressee is a generic description rather than a legal entity, the commercial purpose and surrounding facts may identify the intended beneficiary. If the context leaves only one possible entity, extrinsic evidence may correct a misnomer. This identifies the contract’s intended subject; it does not rewrite the guarantee. A construction confining the guarantee to an entity which would neither contract with nor invoice the debtor may be commercially nonsensical.

Gastronome supplied poultry products to International Foods Solutions Ltd. Anglo Dutch Meats Ltd, which held a substantial interest in that company, provided a guarantee of amounts properly due for the supplies. International Foods Solutions later went into liquidation, leaving the debt unpaid.

The first-instance judge held Anglo Dutch liable under the guarantee. Anglo Dutch appealed, arguing that the guarantee was addressed to a French company operating at Le Bignon, rather than to Gastronome (UK), the company which contracted with and invoiced International Foods Solutions. The central issue was the proper construction of the guarantee and the admissibility and relevance of extrinsic evidence.

Appeal dismissed. Lord Justice Tuckey gave the judgment, with Lord Justice Dyson and Sir Peter Gibson agreeing.

1. The court applied the objective approach to contractual construction summarised by Lord Hoffman in ICS v West Bromwich Building Society [1998] 1 WLR 896 and applied by the Court of Appeal to a guarantee in Egan v Static Control Components Europe Limited [2004] EWCA Civ 392. The question was what meaning the guarantee would convey to a reasonable person possessing the background knowledge reasonably available to the parties when it was given.
2. The relevant background included the commercial purpose of the guarantee. Anglo Dutch knew that Gastronome (UK) alone supplied International Foods Solutions with the products and that the guarantee was given so those supplies could continue. It would have been commercial nonsense to construe the guarantee as applying only to an imprecisely identified entity which would neither contract with nor invoice International Foods Solutions.
3. “Gastronome” did not identify a particular company or legal entity. The address stated in the guarantee was the factory address and was a mistake. Since the context identified only one intended entity, the guarantee could be construed as referring to Gastronome (UK). If treated as a misnomer case, extrinsic evidence could be used to identify the misdescribed party. This did not rewrite the contract, but gave effect to the parties’ objective intention. The court considered that the same result followed under the more restrictive approach discussed in Dumford Trading AG v OAO Atlantrybflot [2005] EWHC Civ 24.
4. The earlier guarantee did not control the construction of the later guarantee. Although the mistake might have been less obvious in 2002, the background to the 2003 guarantee was different and unequivocal. The guarantee therefore applied to amounts due by International Foods Solutions to Gastronome (UK).

Order: appeal dismissed.

1. Court of Appeal (Civil Division) The court dismissed Anglo Dutch Meats’ appeal.
2. Queen’s Bench Division HHJ McCahill QC, sitting as a High Court judge, held Anglo Dutch Meats liable under the guarantee and entered judgment for £184,824.26 plus interest and costs.