West Bromwich Commercial Ltd v Unadkat

A guarantee being requested because of a possible rental void does not, without more, establish a promise that it will be enforced only if a rental void occurs. A collateral warranty or estoppel requires a representation or promise of sufficient clarity and certainty. The court must assess the evidence in its full context, including contemporaneous documents, the parties’ conduct and the inherent plausibility of the asserted arrangement. An agent may have ostensible authority to give such assurances, even where actual authority is absent. An entire agreement or non-variation clause applies according to its proper construction and may not exclude a representation made before the relevant guarantee was executed.

The claimant sought payment under eight limited personal guarantees securing lending to companies connected with the defendant. The defendant admitted signing the guarantees but alleged that the claimant’s representatives had assured him that they would be required, and enforced, only to cover rental voids or shortfalls.

The claim had previously received summary judgment on 17 March 2014. The defendant appealed, and the Court of Appeal allowed the appeal on 1 March 2017, after which the matter proceeded to trial. The central issues were whether the alleged assurances were made, whether they formed collateral warranties or generated an estoppel, and whether the guarantees’ contractual terms excluded reliance on them.

1. Claim succeeded. The defendant failed to establish that the claimant had promised to enforce the guarantees only where rental voids occurred. The evidence concerning the alleged conversations was unreliable when tested against contemporaneous documents, the defendant’s prior accounts, his conduct and the commercial probabilities.
2. The court distinguished between the reason for requiring a guarantee and the circumstances in which it could be enforced. Even where a guarantee was required because of a risk of rental void, that did not itself amount to a promise that enforcement would be restricted to that event.
3. A collateral warranty or estoppel required a representation or promise that was clear or unequivocal. The defendant’s evidence did not meet that standard. His assertions that the guarantees would lapse on lease renewals were also unsupported, particularly in relation to Zipdale.
4. On Pyari, the facility letter was capable of releasing the defendant on satisfactory renewal of the relevant lease. That release related to the 2005 advance. The later 2006 facility referred to the guarantee already held and did not adopt the earlier release term. The defendant’s later signatures as guarantor confirmed that he remained bound.
5. Mike Nixon lacked actual authority, but his position and role gave him ostensible authority to make promises of this kind. That issue was not determinative because the alleged promises were not proved.
6. Clause 28 of the Commercial Mortgage Conditions was incorporated into the guarantees. Properly construed, it governed amendment or waiver of existing finance documents and did not apply to a pre-contractual representation of the kind alleged. The court applied the reasoning considered in Axa v Campbell Martin [2011] EWCA Civ 133.

Judgment was therefore entered for the claimant on the guarantee claims.

• High Court (Commercial Court): The present trial followed an earlier summary judgment for the claimant on 17 March 2014.
• Court of Appeal: The defendant’s appeal was allowed on 1 March 2017, after which the claim proceeded to trial.