England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HUDDERSFIELD COUNTY COURT
(His Honour Judge Spencer QC)

		Royal Courts of Justice Strand London WC2A 2LL Tuesday, 19th March 2002

Tuesday, 19th March 2002

1. LORD JUSTICE PETER GIBSON: This is a renewed application by the defendant, Technical & General Guarantee Company Ltd, for permission to appeal from that part of the order of His Honour Judge Spencer QC in the Huddersfield County Court on 27th November 2001 by which he gave judgment to the claimant, Emballator (UK) Ltd, on its claim for the payment of £50,000 pursuant to a trade credit guarantee given by the defendant to the claimant. Earlier the judge had refused a late application by the defendant to amend its defence. The judge refused permission to appeal. The defendant applied to this court for permission and Rix LJ, considering the application on paper, granted the defendant permission to appeal from the refusal to amend but otherwise refused permission to appeal.
2. The claimant is a supplier of paint cans and containers. It supplied its goods to a company in a group of companies of which the holding company is Philip Johnstone Group Ltd ("Group") and P J Paints Ltd ("Paints") is one of two subsidiaries of Group. Group and its subsidiaries in 1999 were in financial difficulties. Administration orders were made in respect of them. The eponymous Philip Johnstone then wanted further supplies from the claimant and other suppliers, but he needed to provide the claimant and the other suppliers with a trade credit guarantee to persuade them to make the further supplies. The defendant agreed to provide guarantees in the total sum of £400,000 to be divided, as Mr Johnstone required, among the several suppliers. The defendant relied on Mr Johnstone to give the details. On 4th May the defendant executed a guarantee addressed to Emballator Packaging Ltd, the first paragraph of which reads as follows:

"In consideration of Emballater Packaging Limited providing Philip Johnstone Group Ltd, whose registered office is situate at Tingewick Road, Buckingham MK18 1AN, with credit facilities, details of which are annexed hereto, for the payment of trade invoices, TECHNICAL & GUARANTEE COMPANY LIMITED of 14-16 Place Cornavin, 1201 Geneva, Switzerland (`the Guarantor') at the request of Philip Johnstone Group Ltd, hereby undertake in connection with such credit facilities to pay you the net loss sustained, should Philip Johnstone Group Limited be shown to be in material breach of such credit facilities, within 28 days of receipt of proof of such material breach, providing such loss shall not exceed a maximum of Fifty Thousand Pounds Sterling (£50,000.00) for the manufacturing of paint."

3. Emballator Packaging Ltd was named in error for the claimant, as the judge held, and he ordered rectification of the guarantee accordingly. The reference to details of credit facilities also appears to have been in error. We are told that no details were ever annexed to the guarantee. On 11th August 2000 a cheque for some £20,000 in favour of the claimant was dishonoured. The claimant called on the defendant to honour the guarantee, but the defendant refused to do so on a number of technical grounds, hence these proceedings.
4. The judge when giving judgment referred to evidence which he had received from Mr Johnstone that Group had retained some administration duties on behalf of the subsidiary companies, including the procurement of supplies. The judge found that the trading was being done by the claimant and Group. The defendant had argued before the judge that the trade was with Paints. Paints it was who was invoiced and who made payment of at least one of the invoices, and it was Paints to which the VAT bad debt notification had been sent. It was argued that the credit facilities were offered to Paints and that if there was any breach of the credit facilities, it was by Paints, which was indebted to the claimant, not Group. The claimant argued that the contract was with Group, as appeared from the order form.
5. The order form, which has been taken to be typical, is one which is headed "Philip Johnstone Group", then come the words "purchase order", followed by "please invoice Paints". Then there are details of the purchase order, the date of the order, the supplier and the product, the value of the order, the delivery date, and then the delivery address, which we are told is the address both of Paints and of Group. Then, after signatures at the bottom, one finds "Philip Johnstone Group Head Office" and details of Group's registration.
6. The judge referred to that document and to the evidence of Mr Riley, the secretary of the claimant and to the confirmation by two other witnesses of the claimant, that Group was the company with which the claimant dealt. The judge also referred to Mr Johnstone's evidence that it was Group which was the contracting party. The judge concluded at page 13 of his judgment:

"So I have no difficulty whatsoever on the evidence I have heard in deciding that the indebtedness here, the breach of credit facilities here, was in fact a breach by Philip Johnstone Group Limited, and therefore it is covered by this bond."

7. This is the sole point on which the defendant seeks permission to appeal today. What is said by Mr Ashe QC, for the defendant, is that the judge erred in law. He accepts that Group procured supplies for Paints, but he says that it did so as agent, and as a disclosed agent, of Paints and on its behalf. He relies on the fact that deliveries were made to Paints, and he says that Paints was the company which made payment, at least of one invoice. He submits that it is clear from all the evidence that Group was merely the holding company acting as procurer of supplies as agent of the trading company Paints. He has drawn our attention to what was said in Halsbury's Laws, Fourth Edition Reissue 1990, Volume 1(2), paragraph 170, where it is said:

"Where an agent in making a contract discloses both the existence and the name of a principal on whose behalf he purports to make it, the agent is not, as a general rule, liable on the contract to the other contracting party, whether he had in fact authority to make it or not; but a personal liability may be imposed upon him by the express terms of the contract, by the ordinary course of business, or by usage..."

8. I am not able to accept this argument. It is to be noted first that if Mr Ashe is right, the trade credit guarantee would have no utility whatever. It would mean that both the claimant, the supplier of the goods, and Mr Johnstone, on whose information the document was prepared, both did not understand the basis on which the claimant and Group were entering into the contract constituted by the acceptance of the purchase order. If Mr Ashe is right, there were no credit facilities whatever supplied by the claimant to Group, and so the guarantee would have no effect at all. That is a very surprising conclusion to reach, though it is of course properly open to the defendant to argue that is the true effect of the guarantee. I cannot see that the purchase order itself clearly constitutes Group as merely an agent on behalf of Paints, and clearly constitutes Paints as the principal. All that is said about Paints is that it is to be invoiced. But that says nothing as to whether Group was intending that it should be personally liable.
9. Viewing the matter objectively, as one must, I do not see that is the result of this purchase order. It seems to me that Group, as the contracting party, was personally liable. There is nothing apart from the direction to invoice Paints to bring Paints into the picture at all. The judge heard the evidence which I have recounted, and it seems to me that, consistently with that evidence, Group was not only the contracting party but it also remained liable to the claimant on the contracts. In my judgment the judge was fully entitled on the documentary and the oral evidence to conclude as a fact that the credit facilities were supplied to Group and that any breach was by Group, even if there was some breach by Paints.
10. Accordingly, in agreement with Rix LJ, I see no real prospect of an appeal succeeding on this point. There being no other compelling reason why the appeal on this point should be allowed to go ahead, I would refuse the application.
11. LORD JUSTICE MUMMERY: I agree.
Order: Application refused.