Wolsey Securities Ltd v Abbeygate Management Services Ltd

Where a joint venture agreement refers to a related facility letter, the documents must be construed together, whether they constitute one composite agreement or separate but inter-related agreements. A guarantee of the company’s obligation to repay advances extends to management charges debited to the company’s loan account under the facility letter, because those charges then form part of the monies advanced under the facility. Charges not debited may not form part of the facility. The court should confine its declaration to the construction issue where the evidence does not establish whether charges were debited or could be debited later.

Wolsey Securities Ltd claimed against Abbeygate Management Services Ltd under a guarantee in a joint venture agreement concerning a property development. The underlying company was in liquidation. Wolsey claimed sums including management charges arising under a facility letter annexed to the joint venture agreement.

Jack J refused summary judgment under Part 24 of the CPR and declared that Abbeygate Management was not liable for either category of management charge: [2006] EWHC 1493 (QB). The central issue on appeal was the combined construction and effect of the joint venture agreement and facility letter, particularly whether the guarantee covered management charges debited to the company’s loan account.

Appeal allowed to the stated extent. The Court of Appeal set aside paragraph 2 of the judge’s order and substituted a declaration that management charges were in principle payable by Abbeygate Securities Ltd and consequently by Abbeygate Management Services Ltd as guarantor, except to the extent that the charges had not been debited to the company’s loan account.

1. The question whether the joint venture agreement and facility letter were one agreement or two was largely semantic. Even if separate, the documents were inter-related and had to be interpreted in the light of each other.
2. Clause 2.12 of the joint venture agreement required repayment of all monies advanced by Wolsey in pursuance of its facility. Clause 4.3 of the facility letter entitled Wolsey to debit any management charge due to the company’s loan account. Once debited, the charge became part of the monies advanced under the facility and therefore part of the company’s repayment obligation, for which the guarantee applied.
3. The expression “any management charge” in clause 4.3 embraced both categories of management charge identified in the documents. If charges had not been debited, they might not form part of the facility, although they might still require deduction under clause 8.1.2 for the separate purpose stated there.
4. The court rejected the argument that management charges could not be guaranteed because Wolsey had to share the joint venture’s losses. Wolsey had in fact allowed its claim to be reduced by its share of the certified net loss.
5. The court declined to determine whether the charges had been debited, or whether charges not previously debited could be debited later. Those matters required evidence and had not been argued. The declaration was therefore limited to the construction issue.

Longmore LJ gave the principal reasons. Toulson LJ agreed with the substance and the substituted declaration. Auld LJ agreed with Longmore LJ’s conclusion and reasons. The appeal was allowed to that extent and no further.

1. Court of Appeal (Civil Division): The appeal from the judgment of Jack J was allowed to the stated extent. Paragraph 2 of the order was set aside and a substituted declaration was made.
2. High Court of Justice, Queen’s Bench Division: Jack J refused summary judgment for Wolsey and declared that the defendant was not liable for the management charges under the joint venture agreement: [2006] EWHC 1493 (QB).