Instagroup Limited v Northwest Insulations Limited (In Liquidation)

A guarantee must be construed objectively, by reference to its language, purpose, structure and relevant background. General expressions such as “all monies”, “howsoever arising” and “continuing guarantee” do not automatically extend a guarantee beyond the contractual relationship for which it was given. The consideration clause, document heading and commercial context may confine apparently wide wording.

A guarantor is discharged by a material variation of the principal contract unless the variation is evidently beneficial or incapable of increasing the guarantor’s risk. Replacement of the underlying agreement by a new agreement will ordinarily discharge the guarantee.

InstaGroup supplied insulation materials and contracted with Northwest Insulations Limited to undertake insulation work under government schemes. David Stansfield, a director of Northwest, signed a credit account application containing a personal continuing guarantee for sums due by the company.

InstaGroup claimed that the guarantee covered liabilities arising under a later, detailed agreement for the provision of services, including indemnity and repayment claims. Stansfield applied for reverse summary judgment, contending that the guarantee was limited to credit supplied goods. The central issues were the proper construction of the guarantee and, alternatively, whether it was discharged when the later agreement was made.

1. The application for reverse summary judgment succeeded. The court had all evidence necessary to determine the short construction issue, and there was no reason to defer it to trial: CPR r 24.2 and the principles summarised in Daniels v Lloyds Bank [2018] EWHC 660 (Comm) applied.

2. The 2008 Agreement was headed as a credit account application and was intended to enable the company to obtain credit for goods supplied by InstaGroup. Its consideration clause, reference to sale conditions, informal standard form and the surrounding wording confined the company’s obligations to monies owing for goods supplied to it. The phrase “howsoever arising” and the expression “all monies” did not, without more, extend liability to services or later contractual arrangements.

3. The guarantee referred back to the company’s obligations under the 2008 Agreement and therefore covered sums due for goods supplied under that agreement. The expression “continuing guarantee” described liabilities arising over time within that contractual relationship; it did not enlarge the guarantee’s subject matter.

4. The later agreement was not part of the original factual matrix and imposed service obligations of a different character. The guarantee therefore did not cover the claimed liabilities. It was unnecessary to decide whether the guarantee had been discharged by that agreement.

5. Alternatively, if the guarantee had extended to the earlier scheme arrangements, the later agreement discharged it. A material variation would discharge the guarantor unless its beneficial or non-prejudicial character were self-evident. The later agreement expressly superseded previous arrangements and was a new agreement rather than a variation. Replacement of the underlying agreement would ordinarily bring the surety’s obligations to an end.

First-instance application for reverse summary judgment. No prior appellate decision was stated in the judgment.