QUEEN'S BENCH DIVISION
B e f o r e :
sitting as a Deputy Judge of the High Court
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VODAFONE LIMITED |
Claimant |
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-and- |
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(1) GNT HOLDINGS (UK) LIMITED (2) NICHOLAS JAMES BARTER |
Defendants |
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Neutral Citation Number: [2004] EWHC 1526 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Date: 10th March 2004
Before:
Christopher Moger QC
sitting as a Deputy Judge of the High Court
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BETWEEN:
VODAFONE LIMITED
Claimant
-and-
(1) GNT HOLDINGS (UK) LIMITED
(2) NICHOLAS JAMES BARTER
Defendants
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JUDGMENT
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Crown Copyright ©
£495,419.61: the sum claimed.
The Letter of Guarantee
"This is the draft copy guarantee which will need to be completed on GNT Holdings UK Ltd headed paper and signed by the director of the holding company….I must reiterate that it must be on the HOLDING company's letterhead…"
"56 handsets assessed and approved by k mcgrath c byrne and j etheridge, terms parentla company guarntee (sic) received and fortnightly payment terms of 30k or all unbilled to date which ever greater"
"You are entitled to sign on behalf of Holdings and if Vodafone are stupid enough to accept Holdings as a guarantor that is even better."
"I do recall having a conversation with him regarding the Agreement with Vodafone and GNT UK but at no point in time was any kind of guarantee or other security discussed."
The terms of the Letter of Guarantee
"Dear Sir/Madam,
GNTUK
Following discussions between the above named company, a wholly owned subsidiary of Holdings, and yourselves, I am writing to confirm that in consideration of VUKL entering into the agreement referred to below, we hereby irrevocably and unconditionally guarantee, as principal obligor, to pay on demand any debt incurred by the company in their business dealings with you and/or any other liabilities incurred by GNTUK in connection with the company's obligation to VUKL, including, without limitation in connection with the agreement for the supply of telecommunication services and equipment entered into of even date.
The Guarantee shall not be affected by and shall remain valid but not withstanding any amendment or variation to the agreement.
If you require any further information, please do not hesitate to contact me.
Yours faithfully .."
[i] The object of the exercise is "the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would have been reasonably available to the parties in the situation in which they were at the time of the contract".
[ii] "Subject to the requirement that it should have been reasonably available to the parties … (the background) includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man."
[iii] "The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax."
[iv] "The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention they plainly could not have had."
[i] All the dealings GNTUK had ever had with Vodafone were with VL and not with VCL, which was a shell company, or with VKUL which was a holding company which did not trade with customers. At the date of the letter there was no liability of GNTUK to VCL or VUKL and none was in contemplation.
[ii] Vodafone Connect, to whom the letter is addressed, was a trading name of VL.
[iii] The discussions referred to in the letter were between GNTUK and VL. They related to an attempt by GNTUK to satisfy VL about its credit worthiness in connection with a proposed transaction between them about the supply of 56 connections to the Vodafone network. They culminated in VL agreeing to supply those connections to GNTUK provided it had a parent company guarantee from Holdings.
[iv]A purchase order for the 56 connections had been placed with VL by GNTUK on 2 November 2001 – an order of "even date" with the letter. It was that order that VL had agreed, conditionally, to supply subject to the provision of the guarantee. That agreement, albeit conditional expressly on the supply of the guarantee and impliedly on signature of customer agreement forms at some unspecified later date, was communicated to GNTUK by VL via its agent on 2 November 2001 – a communication of "even date" with the letter.
Authority
"It was resolved that Mr Malkus be elected CEO of the company and Mr Antony Slingsby was duly elected as Chairman of the company. All directors will have the power to negotiate contracts to the value of £100,000, with any higher investment requiring two signatures. A complete list of the powers will be provided by Mr Barter by the end of May … All powers granted in previous board meeting are hereby revoked."
"and he (Mr Malkus) still seeks authorisation of the board before entering any agreements on behalf of Holdings."
Mr Slingsby, speaking from his experience of the company, told me that he thought that passage was too widely drawn by which he meant that it was not accurate to claim that Mr Malkus's actions were so limited. If it was the intention of the letter to imply that Mr Malkus's authority was similarly limited, in my judgment it was not accurate.
The letter also claims
"No day to day business decisions are made without the Board's ratification."
Mr Slingsby told me that was not correct.
It was contended that Mr Barter's position as an executive director of Holdings clothed him with implied authority to sign the letter of guarantee for Holdings.
"An actual authority is a legal relationship between principal and agent created by consensual agreement to which they alone are parties."
In Freeman & Lockyer at 505-506 Lord Diplock described the 4 conditions that must be fulfilled where a third party dealing with a corporation has to rely upon the ostensible or apparent authority of a servant or officer of the corporation to enforce his rights against the corporation. It is not suggested, in this case, that the fourth condition is not satisfied. The others are
"(1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor;
(2) that such representation was made by a person or persons who had "actual" authority to manage the business of the company either generally or in respect of those matters to which the contract relates;
(3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it".
Breach of Warranty of Authority
Conclusion