Multiplex Construction Europe Ltd v Dunne

A contractual obligation is an indemnity, rather than a guarantee, where its proper construction imposes a primary obligation on the promisor, even if the document uses the language or heading of a guarantee. The court must identify the objective meaning of the words used in their commercial and factual context. In a commercial contract between parties of equal bargaining power, the contra proferentem rule has little, if any, application.

Where insolvency is an express trigger for immediate payment, the obligation may crystallise independently of the underlying debtor’s account with the creditor. Insolvency set-off principles therefore do not prevent summary judgment against a personally liable primary obligor where the contractual sum is fixed and the relevant trigger has occurred.

Multiplex sought summary judgment for £4 million against Gordon Dunne personally. The claim arose from an Advance Payment Deed and a later Sale, Hire-Purchase and Buy-Back Agreement involving Mr Dunne, Dunne Building and Civil Engineering Ltd and Dunne Group Ltd.

The agreements provided financial support to DBCE and increased the advance from £3 million to £4 million. DBCE and DGL subsequently entered administration. The central questions were whether Mr Dunne’s obligations were primary obligations under an indemnity or secondary obligations under a guarantee, whether DBCE’s alleged set-offs and cross-claims created a triable issue, and whether insolvency rules required the application to be refused.

1. Summary judgment granted. Mr Dunne was jointly and severally liable with DGL as a primary obligor to pay Multiplex £4 million, together with interest. Costs and consequential matters were reserved for further submissions.
2. The court construed the Advance Payment Deed as amended by the later agreement. The advance was a defined sum, increased from £3 million to £4 million. The later agreement created discretionary rights of deduction, set-off and withholding; it did not create an automatic accounting process reducing the advance as DBCE earned further sums under the sub-contracts.
3. The document’s heading and use of the word “guarantees” were not determinative. The material question was whether the liability was secondary to DBCE’s liability or primary. The insolvency trigger required Mr Dunne to become immediately liable for payment of the advance. That construction accorded with the commercial purpose of protecting repayment if DBCE became insolvent.
4. The indemnity wording in the operative clause reinforced that conclusion. The insolvency trigger was independent of the alternative trigger based on DBCE’s inability to repay following demand. Mr Dunne’s obligation on insolvency therefore crystallised without proof of default or an account being taken between Multiplex and DBCE.
5. The court rejected the proposed reliance on DBCE’s set-offs, counterclaims, outstanding applications for payment and performance bonds. The deed made the guarantor’s obligations independent of other security and contained no mechanism allowing those matters to reduce the defined advance.
6. The insolvency rules did not provide a compelling reason for trial. The authorities concerning insolvency set-off and adjudication did not govern this case. The claim was against Mr Dunne personally under a primary contractual obligation, not against the insolvent company for the balance of a mutual account.

First-instance decision. No prior appellate decision was stated in the judgment.