Wolsey Securities Ltd v Abbeygate Management Services Ltd

A guarantee is construed according to the obligations which the guarantor expressly undertook. Where a joint venture agreement and a facility letter are separate contractual documents, obligations arising only under the facility letter will not fall within a guarantee of obligations under the joint venture agreement unless the documents make them part of the same agreement. Management charges provided for in cash-flow appraisals are outside the guarantee where the underlying company has given no undertaking to pay them. An auditor’s certification of the joint venture’s net loss does not itself establish that every component of an accounting calculation is contractually recoverable. An estoppel argument requires a proper evidential and pleaded foundation, particularly where the relevant correspondence does not amount to clear agreement.

Wolsey Securities Limited sued Abbeygate Management Services (Hampton) Limited as guarantor of Abbeygate Securities Limited’s obligations under a joint venture agreement for a property development. The claimed sum included an outstanding facility balance and two categories of management charges identified in an auditor’s calculation.

Master Eyre entered summary judgment for Wolsey under Part 24 in the sum of £97,762.42. The defendant appealed. The appeal concerned the proper construction of the joint venture agreement, the relationship between that agreement and a separate facility letter, the scope of the guarantee, and whether correspondence prevented the defendant from disputing the amount claimed.

1. Appeal allowed. The court determined the contractual construction rather than merely asking whether the defendant’s construction had a real prospect of success.
2. The facility letter and the joint venture agreement were separate agreements. Although the joint venture agreement defined the facility letter and referred to it in several provisions, those features did not establish that both documents formed one contract for the purposes of the guarantee. The existence of two separate documents, without an express provision treating them as one, supported that conclusion.
3. The management charge calculated by reference to interest on outstanding balances arose under the facility letter. Abbeygate Management’s guarantee covered obligations contained in the joint venture agreement, but did not extend to that charge. The commercial context supported this construction: Wolsey bore the risk of a loss-making venture, subject to the limited contractual interest arrangement where the projected cash flow did not materialise.
4. The further management charge appearing in the cash-flow appraisals and referred to in the joint venture agreement was also outside the guarantee. The agreement contained no undertaking by Abbeygate Securities to pay it, and the charge was not referred to in the facility letter.
5. The parties accepted that the auditor’s function under clause 9.2 was confined to certifying the net loss. They also accepted that clause 9.3 entitled Abbeygate Securities to recover half the loss from Wolsey, not the reverse, and that the £6,002.66 facility principal was due and guaranteed.
6. The estoppel argument was not established. It had not been properly pleaded, and the correspondence relied upon did not show clear agreement. In particular, Wolsey’s solicitors had rejected the auditor’s calculation and proposed a different settlement figure.
7. The summary judgment order was therefore set aside to the extent necessary, and the appeal was allowed.

1. High Court (Queen’s Bench Division): Master Eyre granted summary judgment for Wolsey Securities Limited under Part 24 on 20 December 2005.
2. High Court (Queen’s Bench Division): Permission to appeal was granted by Rafferty J on 23 February 2006. Mr Justice Jack allowed the appeal on 23 June 2006.