ING Lease (UK) Ltd. v Harwood

A party seeking to exclude a debt from a signed guarantee through estoppel, collateral contract or a duty to speak must establish the necessary common understanding and reliance when the guarantee was signed. A tentative understanding reached during earlier negotiations will not suffice if later events show that it was no longer operative. The court may consider the changed commercial context, contemporaneous documents, subsequent guarantees and the parties’ states of mind. Where the case depends on factual findings based substantially on witness impressions and contemporaneous evidence, an appellate court will be slow to interfere. The guarantee was therefore enforceable according to its terms.

ING Lease (UK) Limited claimed against Mr Harwood under an all-monies personal guarantee. The guarantee covered liabilities of companies in his group, including Homebuy Direct (UK) Limited, which had assumed the debt owed by Coin TV Limited to ING.

The Deputy High Court Judge, Michael Harvey QC, rejected arguments based on construction, implied term, collateral contract, rectification, estoppel and a duty to speak, and entered judgment for ING in the sum of £337,984.68 plus interest: 2007 EWHC 2292 (QB). Permission to appeal was granted on the remaining issues. The central question was whether any understanding that Mr Harwood would not give a personal guarantee for the Coin TV debt remained operative when he signed the guarantee in September 2003.

Appeal dismissed. Waller LJ delivered the judgment, with Laws LJ and Lawrence Collins LJ agreeing.

1. Mr Harwood’s alternative claims depended on a common factual foundation. Whether characterised as promissory estoppel, estoppel by representation, estoppel by convention, collateral contract or a duty to speak, he had to establish that, at least when he signed the guarantee, he relied on an understanding that it would not cover the Coin TV debt.
2. The discussions in May to July 2001 were tentative. Although the judge found that Mr Harwood had made clear that he would not personally guarantee the debt, and that ING was prepared to continue negotiations on that basis, the discussions did not establish that the understanding remained operative in September 2003.
3. The later circumstances pointed the other way. The commercial position had materially improved, the Group had been reorganised, and there had been no relevant discussions after July 2001. The inter-company composite guarantees, together with Mr Harwood’s personal guarantee of companies guaranteeing HDUK’s liabilities, were inconsistent with the suggested absence of personal liability and cast serious doubt on any continuing common understanding.
4. The judge’s findings concerning the intentions of ING’s representatives and Mr Harwood were supported by the credit applications, associated documents and the absence of evidence preserving the alleged exclusion. They were substantially based on the assessment of witnesses and contemporaneous documents and were not shown to be open to appellate challenge.
5. The Court of Appeal did not need to determine the detailed legal boundaries between the pleaded causes of action because none could succeed without the necessary factual foundation. The all-monies guarantee was enforceable according to its terms. The appeal was dismissed.

• Court of Appeal (Civil Division): Appeal from the judgment of Michael Harvey QC, sitting as a Deputy High Court Judge, dismissed.
• Queen’s Bench Division: Judgment for ING against Mr Harwood for £337,984.68 plus interest under the personal guarantee: 2007 EWHC 2292 (QB).