England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		10 October 2007

Michael Harvey QC

Introduction

1. In this action the claimant, ING Lease (UK) Limited ("ING") claims £361,759.48 plus interest from the defendant, Mr Philip Ross Harwood ("Mr Harwood") pursuant to a written guarantee dated 31 March 2003, but which the parties agree was in fact signed in about September 2003.
2. Mr Harwood is the former Chief Executive Officer of Homebuy Group Plc. In 1995 he started a business called Peoples Choice Rentals Limited ("PCR") which was engaged in renting domestic appliances (washing machines, televisions etc) to customers in the "sub-prime market", that is to say to customers who tended to have a low income, and were unlikely to have bank accounts or access to bank credit facilities. The business expanded, through the acquisition of other companies and internal reorganisation, and became known as the Value Rentals Group, and more recently the Homebuy Group. In August 2004 Homebuy Group Plc was admitted to the Alternative Investment Market. Unfortunately on 29 September 2006 the company was placed in administration.
3. ING is a finance house which has over the years provided finance to PCR and many of the companies in the Value Rentals Group and/or the Homebuy Group. Generally the finance was provided pursuant to Block Discounting Agreements whereunder ING would purchase from the company concerned blocks of contractual rights (i.e. the contractual rights of the company pursuant to its rental contracts with its individual customers).
4. The guarantee was an "all monies" guarantee in respect of the liabilities of four companies, namely Value Rentals Group Limited ("VRG"), Homebuy Direct Limited, Blackfriar Finance Limited and Homebuy Direct (UK) Limited ("HDUK"). I am concerned principally with the first and last of these companies. Clause 2.1 of the guarantee provided:

"In consideration of ING agreeing to make available facilities or other accommodation for so long as it may think fit to the Company the Guarantor hereby unconditionally and irrevocably guarantees to ING the due and punctual payment and discharge by the Company of, and, if for any reason the Company does not make such payment or discharge, promises to pay or discharge or cause to be paid or discharged on demand of ING, all monies, obligations and liabilities whether actual or contingent now or hereafter due, owing or incurred to ING by the Company in whatever currency denominated whether alone or jointly and in whatever style, name or form and whether as principal or surety including all liabilities under guarantees or indemnities or any instruments whatsoever from time to time entered into by ING for or at the request of the Company, together with interest (as well after as before judgment) to the date of payment at such rates and upon such terms as may from time to time be payable by the Company (or which would have been so payable but for the liquidation or other incapacity of the Company) commission, fees and other charges and all legal and other costs, charges and expenses incurred by ING in relation to the Company or this Guarantee on a full indemnity basis (all such sums together, the "Guaranteed Amounts" which expression shall include any part therefore)."

The expression "Company" was defined as meaning any of the aforementioned four companies, and Mr Harwood was named as the "Guarantor".

5. ING's claim under the guarantee is made in respect of two matters.

(1) The first is a series of debts, totalling £23,774.80, incurred by VRG to Shire Leasing Plc ("Shire") pursuant to 8 hire agreements made between VRG and Shire between 20 October 2005 and 7 February 2006 relating to the hire, by VRG, of vending machines and water coolers for use by their office staff. Shire's rights under each of the hire agreements, including in particular their right to receive monthly rental payments from VRG, were assigned to ING on or shortly following the making of each agreement. Notice of the assignments was duly given to VRG such that VRG became liable to ING for rental payments and other sums payable under the agreements. The debts in question constitute arrears of rental payments and/or damages for early termination of the hire agreements.

(2) The second matter is a debt of £337,984.68 owed by HDUK to ING pursuant to an agreement dated 1 August 2002 made between ING and HDUK (then named Etchco 1133 Limited) and an associated block discounting agreement dated 31 March 2003 made between ING and HDUK. The amount of £337,984.68 was the balance of an original debt of £1,510,830.41. HDUK's debt of £1,510,830.41 came into being on 1 August 2002 at the conclusion of a complicated transaction relating to the affairs of Coin TV Limited (which, together with its associated companies Television Trade Rentals Limited and TTR Limited is referred to as Coin TV) and was equal in amount to Coin TV's indebtedness to ING at that date. The expression "the Coin TV debt" has been used to refer to the indebtedness of Coin TV to ING from time to time. In May 2001 this debt stood at about £500,000, but in the circumstances which I shall explain below it rose to £1,510,830.41 by the date of the agreement concluded on 1 August 2002.

6. As regards the first of these matters Mr Harwood accepts that VRG is liable to ING in the amount of £23,774.80, but he denies that the guarantee on its proper construction covers obligations of VRG incurred to third parties which have been assigned to ING.
7. As regards the second of these matters Mr Harwood accepts that HDUK is liable to ING in the amount of £337,984.68 but he contends that he was given an oral assurance by representatives of ING that he would not be personally liable in respect of any indebtedness relating to the Coin TV transaction. His case is put in various ways. In particular he contends:

(1) that the guarantee on its proper construction does not cover any monies owing in respect of the Coin TV debt;

(2) alternatively that the guarantee contains an implied term that it does not cover any monies owing in respect of the Coin TV debt;

(3) that there was a collateral contract whereby ING agreed that, in consideration of Mr Harwood procuring HDUK to enter into the 1 August 2002 agreement, Mr Harwood would not be personally liable in respect of the Coin TV debt;

(4) that the guarantee should be rectified so that it provides that there shall be no guarantee in respect of monies owing in respect of the Coin TV debt. The precise wording sought is set out later in this judgment;

(5) alternatively that there is an estoppel by representation and/or a promissory estoppel whereby ING are estopped from claiming under the guarantee in respect of monies owing in respect of the Coin TV debt;

(6) alternatively that there is an estoppel by convention such that ING are estopped from claiming under the guarantee in respect of monies owing in respect of the Coin TV debt.

8. The first matter, upon which there is surprisingly little authority, is essentially a matter of construction of the contract of guarantee. The second matter is much more complex and raises a number of factual issues. However, since my findings as to the factual matrix in which the guarantee was made may be relevant to the first matter as well as the second matter I propose to consider the second matter first.

The background to the guarantee

9. The relationship between Mr Harwood and ING commenced in about 1997. Initially ING provided a block discounting facility of £500,000 to PCR, the company which Mr Harwood had formed with his business colleague, Mr Hargrave. Mr Harwood's main point of contact at ING was Mr Paul Tagg who was an assistant director in the Block Discounting Department. Mr Harwood also had contact with Mr Tom Dramby, who was head of Risk, and Tracey Thurstans, who was a credit manager.
10. On 10 January 1999 Mr Harwood gave a personal guarantee in respect of money owing by PCR to ING. This is the earliest guarantee which has been produced in evidence, but there may well have been an earlier one.
11. By 2001 Mr Harwood's business had expanded. His facility with ING was probably £1.5m (see page 380). I have not been given details of his company's structure at this date but VRG had been formed in May 2000 and was, it appears, acting as the parent company of his group, then known as the Value Rentals Group. By about this time Mr Harwood was wishing to expand the business into the hire purchase of domestic equipment and not simply the rental of such equipment.
12. In May 2001 one of ING's other customers, Coin TV, was experiencing financial difficulties. It owed ING about £500,000 under block discounting agreements. Coin TV provided television sets to customers which were operated by the use of a coin meter. This enabled customers to pay for the rental of their television sets by inserting money into the meter, and the meters were emptied by collectors monthly. However, Coin TV's affairs were in disarray and there was considerable doubt about the value of the security (in the form of rental and/or HP agreements) held by ING. Some of these agreements had probably been assigned to more than one finance house, and/or assigned to ING on more than one occasion. There was also confusion over the correct identity of the assignors since the documentation did not always properly differentiate between the companies comprising Coin TV (i.e. Coin TV Limited, Television Trade Rentals Limited and TTR Limited). To add to the problems only Coin TV Limited was registered in England. The other two companies, Television Trade Rentals Limited and TTR Limited were registered in the Isle of Man. ING instructed Mr Richard Rendle, a partner of Baker Tilly specialising in corporate recovery and insolvency, to advise them. He concluded that Coin TV was "in a complete and utter mess", and recommended that they appoint provisional liquidators, but he explained that there was little point in considering this option unless there was someone who was prepared to continue the trade of Coin TV during the provisional liquidation, and someone who would buy the business at the conclusion of the provisional liquidation.
13. Various discussions took place in May and June 2001 between representatives of ING and Mr Harwood with a view to one of Mr Harwood's companies assisting in the operation of Coin TV's business and, perhaps, subsequently taking over the Coin TV debt and acquiring the assets of Coin TV. I shall have to refer to these discussions in more detail later in this judgment, but for present purposes, it should be noted that the discussions in May and June were necessarily tentative because of the considerable uncertainty that existed.
14. ING decided to accept the recommendations of Mr Rendle and on 13 June 2001 he and his partner, Mr Guy Mander, were appointed joint provisional liquidators of Coin TV Limited and Television Trade Rentals Limited. On 24 July 2001 they were appointed joint provisional liquidators of TTR Limited.
15. On 24 July 2001 the Companies Court authorised the provisional liquidators to enter into a transfer agreement by which the two Isle of Man companies transferred the whole of their businesses and assets to Coin TV Limited. The purpose of the transfer was to allow for the business to be carried on without the provisional liquidators having to be concerned as to which company's assets were being used in the trading and as to which company was entitled to the income stream.
16. Shortly thereafter Mr Rendle, as joint provisional liquidator, appointed one of Mr Harwood's companies (whose name he could not remember, and which has not been identified in the evidence) to act as manager of the Coin TV companies. This company set about collecting the rental payments due from Coin TV customers and remitting them to a specified bank account, and generally servicing the customers' contracts. Funding for the purchase of necessary equipment (such as television sets and meters) was provided by ING and thereby added to the Coin TV debt. Mr Harwood's company was remunerated by payment of a percentage of the rental payments collected.
17. In October 2001 Mr Harwood sought an increase in his facility from ING from £1.5m to £3.5m. I have not seen any correspondence which may have passed between Mr Harwood and ING at this time, or any notes or memoranda prepared by either Mr Harwood or the ING representatives of the conversations which probably took place, but I have seen the application no. 5197, dated 8 October 2001 (page 380), prepared by Mr Tagg for submission to ING's credit committee. Although this is not a document which Mr Harwood saw at the time, it is clearly based upon information derived from Mr Harwood or his companies in so far as it describes the purposes for which the increased facilities were required. It indicates that the increased credit limit was requested to enable the Value Rentals Group:

(1) to acquire Colourscenes (Television) Limited;

(2) to acquire Telebond Rentals Limited;

(3) to buy the business of Coin TV and take over the Coin TV debt.

The application was subsequently re-written on 25 and 26 October 2001 (pages 393 and 408), and the facility was duly increased (as shown by the subsequent application on 21 January 2002 at page 422).

18. Coin TV had also been indebted to the finance house Hitachi Credit (UK) Plc ("Hitachi") in the sum of £623,995.35. On 12 October 2001 a written agreement was made between PCR and Coin TV Limited whereby this debt was purchased by PCR from Hitachi for the sum of £20,000. The agreement was not put in evidence but is apparent from the novation agreement of 31 July 2002 (referred to below). It represented a step towards the acquisition of the Coin TV business by HDUK.
19. On 18 January 2002 Company Voluntary Arrangements were entered into in respect of the Coin TV companies. Subsequently on 19 February 2002 Lawrence Collins J made orders declaring that the provisions of Part 1 of the Insolvency Act 1986 should apply to the two Isle of Man companies.
20. On 21 January 2002 Mr Harwood sought a further increase of £1.4m in the facility provided by ING. This would take the credit limit from £3.5m to £4.9m. Again, the only documents which I have seen are the application no. 5369, dated 21 January 2002 (page 422) and the minutes of the credit committee dated 24 January 2002 (page 194). The purpose of the request was to enable the Value Rentals Group to purchase the Coin TV business and take over the Coin TV debt which, by this time, had reached about £1.4m.
21. This application was pursued in April 2002 in the slightly larger amount of £1.5m, such that the credit limit would be raised from £3.5m to £5.0m. As before, the only documents which I have seen are ING's internal documents, namely the application no. 5432 dated 10 April 2002 (page 203) and the minutes of the meeting of the Dutch credit committee at ING's parent company in Holland on 23 April 2002 (page 201). The facility was duly increased.
22. On 10 April 2002 new block discounting agreements were entered into between ING and the following companies in the Value Rentals Group, namely PCR, VRG, Colourscenes (Television) Limited, Telebond Rentals Limited, Peter J Swales Limited and Etchco 1094 Limited.
23. Also, in about April 2002, Mr Harwood gave a personal guarantee in respect of all monies owing to ING by the following four companies, VRG, Colourscenes (Television) Limited, Telebond Rentals Limited and Peter J Swales Limited. The document (page 189) is undated but the evidence is that it was probably signed in about April 2002. It will be recalled that Mr Harwood had previously given a personal guarantee in respect of the indebtedness of PCR (see paragraph 10 above).
24. At about the end of July and/or the beginning of August 2002 three agreements were entered into in relation to the purchase by HDUK (then named Etchco 1133 Limited) of the business of Coin TV, namely:

(1) an Assets Sale Agreement (undated) made between Coin TV Limited, Etchco 1133 Limited and Messrs Rendle and Mander whereby the assets of Coin TV were sold to Etchco 1133 Limited for £1. The assets included the cash collection (defined as all cash collected by Coin TV Limited from customers since 12 March 2002) and the benefit of the contracts (defined as meaning all uncompleted (whether in whole or in part) contracts, agreements, orders, engagement and arrangements of the Business between Coin TV Limited and the customers);

(2) an agreement dated 1 August 2002 made between Etchco 1133 Limited, ING, Coin TV Limited and Messrs Rendle and Mander whereby Etchco 1133 Limited agreed to pay ING an amount equal to the ING debt (which at that time was about £1,510,830.41);

(3) a novation agreement (undated) made between the Coin TV companies, Messrs Rendle and Mander, Etchco 1133 Limited and PCR expressed to be supplemental to the agreement of 12 October 2001 between PCR and the Coin TV companies (see paragraph 18 above) whereby PCR agreed to release and discharge the Coin companies from the agreement of 12 October 2001 and to undertake to perform the agreement in place of the Coin TV companies.

25. During the latter part of 2002 and the early part of 2003 Mr Harwood's Value Rentals Group underwent reorganisation. I have not been provided with full information, but an organisation chart shows that by about 18 June 2003 the Group contained two limbs. The holding company was Value Rentals Group (Holdings) Limited, incorporated on 18 September 2002. One limb, headed by Value Rentals Group (UK) Limited, incorporated on 17 February 2003, was concerned with rental customers. The other limb, headed by Homebuy Direct (Holdings) Limited, incorporated on 17 February 2003, was concerned with hire purchase contracts. One of the subsidiaries in this limb, Homebuy Direct Limited, was incorporated on 16 August 2002.
26. On 18 June 2003 there was an application, no. 5622, for review and modification of the facilities provided by ING. Again I infer that Mr Harwood was aware in general terms of the application which was being made. By this time HDUK had shown a turnover (over the 9 months up to 31 December 2002) of £488,000 and made a pre-tax profit of £197,000 (page 469).
27. On about 31 March 2003 HDUK entered into a block discounting agreement with ING.
28. At about this time the following companies entered into a composite guarantee (page 76) whereby they guaranteed the indebtedness of each other to ING:-

Value Rentals Group (Holdings) Limited

Value Rentals Group (UK) Limited

Homebuy Direct (Holdings) Limited

VRG

Homebuy Direct Limited

Blackfriar Finance Limited

HDUK

29. On about 30 July 2003 ING entered into block discounting agreements (corporate) and block discounting agreements (interest only) with three group companies namely VRG, Homebuy Direct Limited and Blackfriar Finance Limited.
30. I am satisfied that all the matters which I have set out in paragraphs 9 – 29 above, including, of course, the full terms of the various agreements, are matters which can properly be taken into account when construing the guarantee. They clearly fall within Lord Hoffmann's description of the background or matrix of fact as explained in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912H. These matters are not intended to be exhaustive, and I shall have to consider the extent to which any of the matters referred to in the next section of this judgment are also admissible for the purpose of construction of the guarantee.

The discussions in mid 2001 about a personal guarantee

31. Mr Harwood's pleaded case is that it was orally agreed in or around June 2001 that he would not be personally liable for the Coin TV debt if one of his companies took over Coin TV's contracts with its customers and Coin TV's indebtedness to ING. He alleges that this agreement was made with Mr Dramby and Mr Tagg in the presence of Mr Rendle. See paragraph 16(b)(2) of the amended defence and the further information supplied on 26 January 2007.
32. There is also an allegation that representations were made by Mr Dramby and/or Mr Tagg to the effect that Mr Harwood would not be personally liable for the Coin TV debt and/or that ING would not seek to recover that indebtedness from him (paragraph 16(b)(6) of the amended defence). In response to a request for further information, dated 2 July 2007, Mr Harwood said that these representations or promises were made on dates which Mr Harwood could not specifically recall but in or after May 2001 and in a number of meetings which took place between Mr Dramby, Mr Tagg, Mr Rendle and Mr Harwood.
33. In his witness statement Mr Harwood described how he had been approached by Mr Dramby and Mr Tagg in around May 2001 and asked if he would be willing to assist them with a problem they had with Coin TV. He described attending a series of meetings with Mr Dramby, Mr Tagg, Miss Thurstans and Mr Rendle and said that, at this very early stage in various meetings, they all discussed the basis on which he would be prepared to help ING. He said that he made it absolutely clear that, given the circumstances identified by counsel (namely insolvency counsel instructed by ING) and Mr Rendle, if he was going to help ING by allowing a Value Rentals Group company to take over the Coin TV business and therefore the debt to ING he could not possibly be expected to provide ING with a personal guarantee. He said that it was agreed by both Mr Dramby and Mr Tagg that he would not have to provide a personal guarantee in respect of the Coin TV debt.
34. He made a brief further reference to this alleged agreement in paragraph 24 of his witness statement. I am satisfied that he was referring to the agreement already described and not contending that there was a further express agreement and understanding at the time of the making of the 1 August 2002 agreement.
35. At the commencement of his oral evidence he explained in his own language what had occurred. He said that he was approached by Mr Tagg and Mr Dramby who said that they had a problem with their customer Coin TV. The relationship between ING and Coin TV had broken down irretrievably. There were a series of meetings at which the problem was discussed. He was informed there was a debt of £500,000, but that ING did not want to write it off as a matter of principle; that the security was unenforceable; that it was uncertain whether the contracts were rental or hire purchase and that some contracts had been discounted twice. He understood that Coin TV was in a complete mess. ING could not sell the Coin TV debt in its present state. They needed to keep the business going. There were collection agents collecting money from customers but not passing it on. Tom Dramby wanted to know if he, Mr Harwood, would assist. Mr Harwood said that he would assist, and he explained to the court that he knew it was in his interests to build up goodwill at ING.
36. On the issue of personal guarantees Mr Harwood said that this issue was spoken about on more than one occasion. He explained that because it was so unlikely that he would want to give a personal guarantee this was not expected by ING. He said that this was accepted at the beginning. He explained that he was happy to put the debt into a company and give a cross company guarantee, but that he was not to be personally liable.
37. In cross examination he said that at the beginning he said to Mr Dramby that "there was no way that I would personally guarantee this", and that this was accepted. He said that the question of a personal guarantee was not discussed ad infinitum, but that it did crop up on a number of occasions at meetings. He explained that the point was so obvious, and had been accepted at the beginning.
38. Mr Harwood's evidence about the discussions in the early stages is supported by the evidence of Mr Rendle. In his witness statement Mr Rendle referred to the early meetings in about June 2001 and said:

"I cannot now recall whether it was in that particular meeting or in another one of the series of meetings that took place when Mr Harwood said that he was prepared to help ING out of this mess and buy the business by taking on the Coin TV debt. However, Mr Harwood made it clear that if he was going to take on the mess that was Coin TV, which was not of his making, and take on the debt due to ING then he would only do so on the basis that he would not provide any personal guarantees whatsoever. This was entirely sensible and reasonable given the state of the business and the very limited security that ING held. There was no viable alternative course of action, any other course of action would have created a significant write off in the books of ING if not a total loss. I remembered that Mr Dramby and Mr Tagg agreed that they would proceed on this basis. I was not aware from any subsequent meetings that that agreement had changed".

In cross examination Mr Rendle said that Mr Harwood made it clear to ING that he did not want to give a personal guarantee, and that this occurred before his appointment as provisional liquidator on 13 June 2001. He thought the occasion would therefore have been in either late May or early June, and he said that Mr Tagg and Mr Dramby said that they would proceed on that basis.

39. There is also support from the evidence of Mr Tagg. He described in his witness statement how, in about May 2001, he approached Mr Harwood and asked him if he would be interested in helping ING out by taking over the administration of the Coin TV debt. He said that Mr Harwood looked into Coin TV and said that he was prepared to help ING. Mr Tagg said that he believed that Mr Harwood had seen an opportunity to get into the "non-status" rental market which was different from the rental market in which he was then operating. He described how there were a number of subsequent discussions which took place shortly after between ING and Mr Harwood as to the terms on which he would be prepared to take over the debt. He added that Mr Harwood was also looking at expanding his businesses at the same time, for example, by acquiring other entities.
40. On the question of a personal guarantee Mr Tagg said in his witness statement that during the lengthy negotiations that took place regarding taking on the Coin TV debt it was agreed and understood that the Coin TV debt would not be subject to any personal guarantee from Mr Harwood. He said (at paragraph 20):

"The reason for this is that Mr Harwood was helping ING out of a difficult situation and the liability which he was taking on was not supported by security of any value. If Mr Harwood had not agreed to take on the debt then ING would have had no other option but to write it off. ING was grateful that Mr Harwood was prepared to take on this debt. In those circumstances, ING was prepared to agree that it was not a debt for which he would be personally liable."

41. In cross examination Mr Tagg agreed that he was a friend of Mr Harwood. He explained that they knew each other on business issues and had attended social functions together. He agreed that he had been offered a job by Mr Harwood before he left ING in March 2005. He said that the discussions about personal guarantees were very early on – at the time they were talking about Mr Harwood taking over (through a company) the Coin TV debt. He said that he remembered that it was discussed initially that this debt would not be part of his personal guarantee.
42. I am satisfied on all the evidence that there were one or more discussions in the period May to July 2001 during which Mr Harwood made it clear that if one of his companies acquired the Coin TV business and took over the Coin TV debt he was not prepared to give a personal guarantee in respect of that debt, and that Mr Dramby and Mr Tagg indicated that they were prepared to proceed with the negotiations on that basis. The gist of the discussion was along the lines Mr Harwood described to me, namely that he had said to ING that "there was no way I would personally guarantee this". Whether these discussions amount to a contractual agreement is a matter which I shall have to consider below.

Were there subsequent discussions about a personal guarantee?

43. The evidence about subsequent discussions during the 2 year period from August 2001 to September 2003 concerning a personal guarantee is much weaker. I have referred in paragraphs 31 and 32 above to Mr Harwood's pleaded case. Apart from an unspecified reference to "after May 2001" in the reply to the request for further information dated 2 July 2007 the pleaded case is confined to May and June 2001.
44. Mr Harwood said that the matter did crop up on a number of occasions at meetings. He also said that the matter was discussed at the time of the 1 August 2002 agreement, but he did not refer to any specific occasion. Mr Rendle acknowledged that it was difficult to remember conversations from 6 years ago, and he was not able to give any firm evidence about discussions relating to a personal guarantee in this subsequent period. Similarly, although Mr Tagg said in evidence that he thought that ING would not be asking for a personal guarantee he was not able to remember any occasion when the matter was discussed during this subsequent period. His workbook, in which it would be expected that he might have made notes of conversations or meetings with Mr Harwood, has not been disclosed, and no correspondence between ING and Mr Harwood or his companies, during this period, has been put in evidence.
45. It is in these circumstances that Miss Windle, on behalf of ING, has relied upon ING's internal documents, particularly the various credit applications, to show what was recorded, and read, by ING's representatives during this period and subsequently. She has done so to show the state of mind of ING's representatives and thereby throw light on the likelihood of such representatives making representations about there being no requirement for a personal guarantee. All the applications concerned were prepared by Mr Tagg. Mr Dramby and Miss Thurstans were members of the United Kingdom Credit Committee who would generally have seen the various applications.

Application no. 5197, October 2001

46. Application no. 5197, dated 8 October 2001 requested an increase in the existing facilities from £1.5m to £3.5m for the purpose, amongst other things, of acquiring the Coin TV business and taking over the Coin TV debt. Page 3 of the document identified one of the required covenants as being the personal guarantee of Mr Harwood. Page 9 (page 388) described the proposal regarding Coin TV as follows:-

"Since the demise of Coin TV/TTR in May of this year, PCR and in particular Phil Harwood, have provided ING and Hitachi with a means to recovering debt. The current liquidation is nearing conclusion and PCR are offering to buy the business from the liquidator and take over the debt. The liquidator has already outlined his willingness to sell to PCR and PCR intend to raise the £1m required through a refinancing of their current portfolio. This along with the Coin TV agreements will be thrown into the pot of the syndicate. This will enable ING to recover costs and rule off Coin TV as a recovery. Harwood is confident that with continued investment in new equipment, he can turn Coin around into a viable business in 3 years. With the help of some of the more forward thinking agents, he is offering an opportunity for the agents to own their own businesses whilst paying off the debt and building a nest egg. His vision and problem solving have been invaluable to the workout and clearly ING would be in a far worse position without his help. Undoubtedly, Harwood recognised an opportunity to help ING would help him and his group of companies as they sought facilities for the growth strategy".

There was no reference to the Coin TV debt being excluded from (or carved out of) the personal guarantee. On page 12 (page 391) under the heading "Financial Analysis" it was stated:

"Full financial projections have been provided for a period up until March 2005. Based on the acquisition of CS [i.e. Colourscene (Television) Ltd] and the taking over of Coin TV debt the business almost doubles its net asset value to £21.6m and increases its net worth to £7.7m".

47. This application was re-written on 25 October 2001. The requirement of a personal guarantee was stated on page 3 (page 395). On page 6, under the heading "Executive Summary" it was stated,

"One of the transactions is to integrate the Coin TV debt into the Group. Effectively VRG are purchasing the debt from ING and Hitachi Credit once the liquidation is completed and the liquidator has approved the sale. Hitachi have written off their debt and already sold their benefits to VRG. As a consequence a quantifiable amount of £1.1m is required to fund the debt. The debt includes ING's capital of £650k, £350k of legal and professional costs and £100k already invested in new kit purchased by Peoples Choice Rentals ("PCR") (part of the VRG Group). PCR under the control of Phil Harwood has been instrumental in the administration of the portfolio after the demise of Coin TV/TTR. In operating the systems Harwood has recognised an opportunity to turn the business around and make profit from the portfolio by bolting it on to VRG. Also he recognised an opportunity to assist two major block discounting providers to enhance his own and the company's reputation".

Again, there was no reference to the Coin TV debt being excluded from the personal guarantee.

48. The application was further re-written on 26 October 2001 (page 408). The requirement of a personal guarantee was still present, however the declared purpose no longer referred to the acquisition of Coin TV. The Executive Summary simply stated (page 413):

"VRG as a Group are also assisting ING in managing the Coin TV portfolio where their expertise has been invaluable during the CVA liquidation".

This application was apparently approved because the limit had risen to £3.5m by the time of the next application on 21 January 2002 (page 422).

Application no. 5369, January 2002

49. This application requested an increase in the facility of £1.4m, from £3.5m to £4.9m, for the purpose of taking on the Coin TV debt (page 429). Page 3 (page 424) stated that the personal guarantee of Mr Harwood was required and specifically stated under this requirement "add Coin TV/TTR". Mr Tagg was unable to give any explanation for his addition of these words. They are, of course, inconsistent with his evidence that he understood at the time that the Coin TV debt was not to be included in the personal guarantee. The application contained the following paragraph about Coin TV:

"As a result of our involvement we asked the Group to assist us during the CVA liquidation of Coin TV/Television Trade Rentals. So far VRG have managed to stabilise the position and through supplying new TVs have begun to turn the business around. They are critical to the future success of the business and therefore critical to ING to recovering their debt. Therefore ING have asked VRG to take over the debt which they have agreed subject to the increased exposure not being taken within the existing limit. As a consequence the overall limit will exceed local authority and is the basis for this application.

Basically we can lose a potential bad debt and secure on an improved covenant. The debt will either be repaid in 18 months or will be covered by good paper written by the Group. Currently the Coin TV/TTR paper securing the debt is significantly short in value to the debt. Therefore a security replacement would be preferable." (Page 427)

"With the CVA coming to an end we have 3 options:

(i) To continue to have the debt managed whilst at the same time making further investment in new kit and having the upside of a viable business in possibly 3 years time.

(ii) To quantify total debt now and have that debt taken over by a known business that has a satisfactory credit covenant who will be able to cover the debt with good paper within 18 months or pay the debt off.

(iii) Write off whole debt i.e. c£1.4m.

ING Lease (UK) Limited have taken the view option (2) is the most preferable whereby we will recover all debt plus interest and all costs associated with the liquidation and litigation." (page 428)

This application came before the Credit Committee on 24 January 2002 and re-write was requested. The re-written application (which has not been seen) came before the Committee again on 26 March 2002 and was approved for submission to the Dutch Credit Committee, subject to a small re-write.

Application no. 5432, April 2002

50. This application (which was probably the re-written application approved by the Credit Committee on 26 March 2002) was prepared on 10 April 2002. It requested an increase of £1.5m in the facility for the re-purchase of the Coin TV debt. Again, it required the personal guarantee of Mr Harwood and again Mr Tagg had added the words "add Coin TV/TTR" in the box on the form relating to this personal guarantee (page 205). He could offer no explanation. In particular, he could not explain why the UK Credit Committee had not asked him to amend the application if, in fact, no personal guarantee was required in respect of the Coin TV debt.
51. This application was approved by the Dutch Credit Committee on 23 April 2002 (page 201). The minutes of the meeting include the statement:

"Cross guarantees issued by all the Group companies. VRG's owner/ manager is personally liable for the total VRG exposure."

There was no indication that the Coin TV debt was to be excluded from the personal guarantee. Mr Tagg agreed that the documents show that he ought to have asked for a personal guarantee from Mr Harwood. It is probable that a copy of the minutes of the meeting was sent to England so that the UK Credit Committee would know the result of the application. Indeed the document (at page 201) contains the annotation "ATTN [i.e. attention] T Dramby, T Thurstans."

Application no. 5622, June 2003

52. This application was prepared on 18 June 2003 and its purpose was stated to be "review and modification of existing block discounting facility." It contained a requirement for the personal guarantee of Mr Harwood (page 458). It also stated (at page 464):

"In the unlikely event of default and unlike the scenario ING faced with Coin TV the collection could be continued as collection staff work on a fully employed basis. We also have the personal guarantee of majority shareholder Phil Harwood, which should ensure his full cooperation."

This application came before the UK Credit Committee on 24 June 2003. Mr Dramby and Miss Thurstans were present and Mr Tagg was in attendance. The application was approved for submission to the Dutch Credit Committee. There was no suggestion that the application was incorrectly referring to a full personal guarantee from Mr Harwood as distinct from one which excluded any liability relating to the Coin TV debt.

53. Mr Tagg prepared a memo on 14 July 2003 (page 452) and although he described the structure of the facility and referred in detail to the Coin TV matter he made no reference to any limitation upon the personal guarantee of Mr Harwood.

Application no. 5784, March 2004

54. This application was prepared in March 2004. It sought an increase of £1m in the facility. The boxes on page 5 of the document showed that a personal guarantee was required in respect of four existing facilities, as well as the new requested facility, but the applicable box was blank in respect of the facility of £1,511,000 relating to the Coin TV debt. Mr Tagg relies upon this as supporting his understanding. Mr Harris, who was not personally involved with these facilities at the time, thinks that the omission was simply a mistake. Miss Windle contends that it was probably a mistake, and she draws attention to the statements later in the application (pages 482 and 483) reading:

"The Managing Director, Philip Harwood, is personally liable."

"There is in place a full composite cross company guarantee of all Group companies plus the support of the personal guarantee of Chief Executive and major shareholder Phil Harwood."

55. This application came before the UK Credit Committee on 17 March 2004 (page 493). Mr Dramby was present. The application was approved for submission to the Dutch Credit Committee. The minutes contain the statement "the transaction will be supported by the personal guarantee of the director", but it is unclear whether this was referring to the total facility or simply the new requested facility. The application was approved by the Dutch Credit Committee on 23 March 2004 and the minutes state (pages 254 and 255):

"The owner/manager is personally liable (albeit his personal financials are not available) and a full composite cross company guarantee of all Group companies is in place."

"We will have a cross-guarantee from all Group companies . . . . and the personal guarantee of the owner."

As before there is no suggestion that the personal guarantee was to be limited so as to exclude liability in respect of the Coin TV debt.

56. On 1 April 2004 ING sent a facility letter to the directors of VRG (page 494). This referred to block discounting agreements dated 31 March 2003 with VRG, Blackfriar Finance Limited and Homebuy Direct Limited. It seems clear that the third named company should have been described as HDUK, because the applicable facility for this company was stated to be £1.5m. The letter set out the conditions precedent for the facilities, one of which was:

"Executed unlimited personal guarantees of Phil Harwood (already held)."

This was a reference to the guarantee which had been signed in September 2003. Nowhere in the letter is there any indication that the guarantee was limited in any way. This facility letter was countersigned by one of Mr Harwood's co-directors, but he does not suggest that he would have done other than sign it himself if he had been asked to do so.

Application no. 5949, July 2005

57. This application, prepared in March 2005, was an application to review and extend the existing facility. It was issued under Mr Tagg's name and he agreed that he would have checked it even if someone else had prepared it for him. Page 3 shows that the personal guarantee of Mr Harwood was required in respect of each of the facilities, including, in particular, the facility of £1,511,000 relating to the Coin TV debt. The box which had been blank on application no. 5784 was duly completed on this application showing that an unlimited personal guarantee of Mr Harwood was required (page 503). Page 10 of the application (page 509) included the statement:

"The Managing Director, Philip Harwood, is personally liable."

58. By this time further reorganisation of the Group had occurred and Homebuy Group Plc had come into being, and had been admitted to the Alternative Investment Market in August 2004.
59. A further facility letter was sent to the directors of Homebuy Group Plc on 13 April 2005 (page 142). This again referred to HDUK as Homebuy Direct Limited. As before, it claimed that one of the conditions precedent was the executed unlimited personal guarantee of Mr Harwood (said to be already held).

Credit Committee Meeting, 8 September 2005

60. On 8 September 2005 the Credit Committee considered a credit memo dated 5 September (which has not been seen) relating to Homebuy Group Plc. The minutes of the meeting state that the memo was seeking the deferral of the credit review until October 2005 because Homebuy were intending to settle most of the outstanding debt. Mr Harwood explained in his witness statement that at about this time he had obtained a £75m facility from Royal Bank of Scotland, part of which was to fund the acquisition of a company called Telebank and it was a condition of the loan that Homebuy would pay down all the block discounters with whom it had facilities and consolidate all its borrowing. The significance of the minutes is that they refer expressly to the only facility which will remain, namely the facility associated with the Coin TV debt and state:

"We will retain Phil Harwood's guarantee." (Page 152).

This document contains no suggestion that the guarantee was limited. On the contrary it pre-supposes that it covers the facility relating to the Coin TV debt.

61. In March 2006, in connection with a partial repayment of the sum of £1.5m owing to ING in respect of the Coin TV debt, and repayment of sums owing under other facilities, ING asked Mr Harwood to countersign a letter relating to his personal guarantee in the following terms (page 154):

"As you will be aware, we are releasing the security that we retained in respect of our agreement with Value Rentals Group Limited, Homebuy Direct Limited and Blackfriar Finance Limited (the "Companies") and also re-assigning to the Companies all leases, hire purchase and conditional sale agreements that have previously been assigned to us by the Companies. In consideration of our agreeing to do so, by signing this letter you agree that notwithstanding the aforementioned release of security and re-assignment, the Guarantee shall remain in full force and effect and shall not be affected or discharged by the transaction mentioned."

As before the reference to Homebuy Direct Limited should have been to HDUK, but there is no suggestion that this caused any confusion to Mr Harwood. Through his solicitors Mr Harwood requested a slight addition to the document before signing it, namely the addition of the words:

"It is agreed and acknowledged that notwithstanding any release, reassignment or confirmation contained herein, nothing in this letter is intended to nor shall have the effect of extending the scope or operation of the Guarantee."

ING's solicitors advised that there was no benefit in adding these words and the letter, dated 10 March 2006, was duly countersigned by Mr Harwood in its original form. ING make the point that Mr Harwood did not say at this stage that the guarantee was limited, and had no application to any liability in respect of the Coin TV debt. ING make the additional point that once the sums due under the other facilities had been repaid (as was to happen on about 10 March) the only liability remaining would be the liability of HDUK to ING in respect of the Coin TV debt. Mr Harwood told me that this had not occurred to him.

62. I have referred above (in paragraph 44) to Mr Harwood's evidence that the matter was discussed at the time of the 1 August 2002 agreement. I have looked to see whether there are any indications lending support to this evidence. The 1 August 2002 agreement was prepared by Mr Harwood's solicitors, Leigh Crowder of Birmingham, but no documents such as correspondence or notes have been produced which might suggest that the question of the personal guarantee was discussed. Miss Lucas, on Mr Harwood's behalf, has emphasised that the agreement by clause 4 required Etchco 1133 Limited to procure cross company guarantees, but that there was no requirement in the agreement for a personal guarantee from Mr Harwood. However, this is an argument which can only be taken so far because (1) the agreement does not state that Mr Harwood should not be required to give a personal guarantee – it is simply silent on the point and (2) Mr Harwood was not a party to the 1 August 2002 agreement and it is not self evident that if ING had required a personal guarantee from Mr Harwood it would necessarily have insisted upon a term, such as a term obliging Etchco 1133 Limited to procure such a guarantee from Mr Harwood, to be included in the 1 August 2002 agreement.
63. So far as the signing of the guarantee in September 2003 is concerned, it is common ground that there were no discussions about excluding from its ambit any liability in respect of the Coin TV debt. Mr Harwood cannot specifically recall signing the guarantee. He told me that he had had a conversation with Mr Tagg and had been told that a personal guarantee needed to be signed in respect of the trading companies. He said that it seemed normal to him. Mr Tagg said in his witness statement that he prepared the guarantee, but that he could not now remember the conversation he had with Mr Harwood before the document was sent to him on 22 September (page 455). He agreed that he did not tell Mr Harwood at this time that the document did not cover the Coin TV debt. He said that the conversation would have been along the lines of needing to tidy up the documentation. He effectively agreed in cross examination that there were no relevant discussions at this time.
64. In the light of all the evidence I am not satisfied that there were any relevant discussions during the period August 2001 – September 2003 about Mr Harwood not being required to give a personal guarantee in respect of the Coin TV debt. In particular I am not satisfied that any of the ING employees made any representations to Mr Harwood during this period to the effect that he was not to be personally liable in respect of the Coin TV debt. The particular factors which have led to this conclusions are:

(1) the weakness and lack of particularity of any evidence of such representations;

(2) the numerous references in the credit applications and associated documents to a requirement for a personal guarantee including (a) the absence of any references to an exclusion in respect of the Coin TV debt; and (b) the express references to the inclusion of the Coin TV debt (see paragraphs 49 and 50 above). These references point to the strong likelihood that no such representations were made.

(3) The different commercial context from the period May – July 2001. Whereas the viability of the Coin TV business was very doubtful in the initial period (May – July 2001), thereafter the position steadily improved. By October 2001 Mr Harwood was confident that he could turn Coin TV into a viable business in 3 years. Hitachi had surrendered its debt for a nominal sum of £20,000. By March 2002 most of the legal hurdles had been overcome. Although I have not been given full financial details it is apparent that by June 2003 HDUK had a turnover of about £488,000 (for the 9 months ending 31 December 2002) and a pre-tax profit of £197,000 (page 469).

(4) Mr Harwood's wish to expand the Group. I am satisfied that this was one of his major aims. In the space of some 3 years (from August 2001 to August 2004) he succeeded in acquiring other businesses, reorganising his Group, further reorganising his Group under a public limited liability company (Homebuy Group Plc) and gaining admission to the Alternative Investment Market. He undoubtedly wished to retain the goodwill and confidence of ING (and indeed his other lenders) and as HDUK started to prosper would have had little concern about giving a personal guarantee.

Did the discussions in mid 2001 amount to a contractual agreement?

65. I now turn to the question which I left over (see paragraph 42 above), namely whether the discussions which I have found took place in mid 2001 amounted to a contractual agreement and, if so, what were its terms? This question is relevant in two respects. First, it is accepted by the parties that if there was a contractual agreement this could be a part of the background material and therefore admissible evidence in the construction of the guarantee. Second, it is directly relevant to Mr Harwood's reliance upon such an agreement as a collateral contract.
66. Miss Lucas, on behalf of Mr Harwood, contends that there was a contractual agreement to the effect that if one of Mr Harwood's companies took over the Coin TV debt he would not be personally liable for it. Before any contract is established the court must be satisfied that, viewed objectively, the parties intended their statements to have contractual effect. As regards statements alleged to constitute a collateral contract a helpful summary of the relevant principles was given by Lightman J in Inntrepreneur v East Crown [2000] 2 L.R. 611. He said at paragraph 10 of his judgment:

"The relevant legal principles regarding the recognition of pre-contractual promises or assurances as collateral warranties may be stated as follows:

(1) a pre-contractual statement will only be treated as having contractual effect if the evidence shows that parties intended this to be the case. Intention is a question of fact to be decided by looking at the totality of the evidence;

(2) the test is the ordinary objective test for the formation of a contract; what is relevant is not the subjective thought of one party but what a reasonable outside observer would infer from all the circumstances;

(3) in deciding the question of intention, one important consideration will be whether the statement is followed by further negotiations and a written contract not containing any term corresponding to the statement. In such a case it will be harder to infer that the statement was intended to have contractual effect because the prima facie assumption will be that the written contract includes all the terms the parties wanted to be binding between them;

(4) a further important factor will be the lapse of time between the statement and the making of the formal contract. The longer the interval, the greater the presumption must be that the parties did not intend the statement to have contractual effect in relation to a subsequent deal;

(5) a representation of fact is much more likely intended to have contractual effect than a statement of future fact or a future forecast."

67. Miss Lucas's principal difficulty is that Mr Harwood agreed in cross examination that there never was a contractual agreement that he would not be asked for a personal guarantee. This accords with the commercial probabilities. It is most unlikely that any such oral agreement, whether in the terms advocated by Miss Lucas or the slightly different form put to Mr Harwood, would have been made. The parties had been dealing with each other for several years on the basis of written documents in the form of block discounting agreements, composite guarantees and personal guarantees, and would have expected all further agreements to be in writing. Although Mr Tagg said in his witness statement that there was an oral agreement that the Coin TV debt would not be subject to any personal guarantee from Mr Harwood his oral evidence was vague. He said that he could not specifically remember any assurance that ING would not be asking for this personal guarantee but that it was his understanding that ING would not be asking for this personal guarantee. I have referred above to the various application forms which he prepared, and it is noteworthy that there is no record of any such agreement having been reached. On the contrary some of the entries are only consistent with there being no such agreement.
68. Mr Rendle recalled in his witness statement that Mr Harwood had made it clear that if one of his companies took on the ING debt he would not provide any personal guarantee, and Mr Rendle went on to say that Mr Dramby and Mr Tagg agreed that they would proceed on this basis. By itself this evidence is insufficient to establish that the parties had the necessary contractual intent. In cross examination he agreed that it was difficult to remember events. It was put to him that no one had given Mr Harwood an assurance that he would never be asked for a guarantee. He was unable to refute this – simply saying that he was trying to remember.
69. On all the evidence I am not satisfied that there was any oral contractual agreement.

Construction of the guarantee

70. Clause 2.1 of the guarantee, which I have cited in full at paragraph 4 above, provides that:

". . . . the guarantor hereby unconditionally and irrevocably guarantees to ING the due and punctual payment and discharge by the Company of . . . . all monies, obligations and liabilities whether actual or contingent now or hereafter due, owing or incurred to ING by the Company . . . . "

The company is defined in clause 1.1 as including HDUK.

71. In Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912H Lord Hoffmann summarised the principles of interpretation as follows:-

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear, but this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. 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; see Mannai Investments Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749.

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the commonsense 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 which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Navierra SA v Salen Rederierna A.B. [1985] A.C. 191, 201:

"If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."

72. In my judgment the discussions in mid 2001 are not admissible for the interpretation of the guarantee. I have found that they did not amount to a contractual agreement. The discussions were simply negotiations, and indeed negotiations which had taken place at a very preliminary stage, over 2 years before the guarantee was signed.
73. I have recited the background facts in paragraphs 9 – 30 above. However, I cannot find anything in these facts to enable me to conclude, as Mr Harwood invites me to do, that the guarantee on its proper construction excludes the liability of HDUK in respect of the Coin TV debt. This argument must therefore be rejected.

Implied term

74. Alternatively, Mr Harwood contends that the guarantee contains an implied term to the effect that it does not cover any monies owing in respect of the Coin TV debt. The precise term alleged is that the guarantee:

"Does not extend to any monies, obligations, or liabilities, whether actual, or contingent now or hereafter due, owing or incurred to ING by Homebuy Direct (UK) Limited (formally known as Etchco 1133 Limited) or its successors in title where that indebtedness relates to or arises out of the indebtedness of Coin TV Limited to ING, which indebtedness was acquired by Homebuy Direct (UK) Limited pursuant to an agreement entered into between ING and Etchco 1133 Limited on 1 August 2002."

75. Miss Lucas submits that such a term should be implied on the basis that the parties would have agreed to such a term if it had been suggested by an officious bystander. She has referred me to the words of Steyn J in Mosvolds Rederi A/S v Food Corporation of India [1986] 2 L.R. 68, 70 cited with approval by Clarke J in the Rio Assu [1999] 1 L.R. 115 at 121:

"There is, however, another form of implication, which is more pertinent in the present case. It is not permissible to imply a term simply because the court considers it to be reasonable. To do so would amount to a process of rewriting contracts. See Liverpool City Council v Irwin [1978] A.C. 239. On the other hand, it is possible to imply a term, if the court or arbitrator, as the case may be, is satisfied that reasonable men, faced with the suggested term which ex-hypothesis was not expressed in the contract, would without hesitation say: "yes, of course, that is so obvious that it goes without saying."

76. Miss Windle, on behalf of ING, emphasises that a term can only be implied where it is necessary.
77. There is a close relationship between the process of construction and the process of implication (as Clarke J, in the Rio Assu points out at page 120), but the admissible background material must be the same for both processes. For similar reasons to those expressed in paragraphs 72 and 73 above I cannot accept that it is necessary for such a term to be implied.

Collateral contract

78. In the light of my finding in paragraph 69 above Mr Harwood's argument based on collateral contract must fail.

Rectification

79. Mr Harwood, having failed to establish the implication of the term set out in paragraph 74 above, seeks to have the guarantee rectified so as to include such a term.
80. To obtain rectification Mr Harwood must show, with convincing proof:

(1) that there was a common continuing intention that such a term should be a term of the guarantee;

(2) that the guarantee, as drawn up, did not include such a term.

See generally Chitty on contracts paragraphs 5-092 – 097 and Joscelyne v Nissen [1970] 2 Q.B. 86.

81. Mr Tagg was responsible for preparing the guarantee. It is his handwriting which appears on its first page. Accordingly, I consider that it is his intention which must be imputed to ING to determine whether ING had a continuing intention that such a term should be a term of the document.
82. Mr Harwood has failed to prove that Mr Tagg had an intention, at the time when the guarantee was prepared in about March 2003 and/or signed in September 2003, that such a term should be a term of the guarantee, or to put the matter more generally, that the guarantee should not apply to the Coin TV debt. There are essentially 3 reasons:

(1) the application forms prepared by Mr Tagg are inconsistent with any such intention. I have considered these in detail in the earlier paragraphs of this judgment.

(2) There is a complete absence of any documentary evidence suggesting that this had been his intention.

(3) The discussions in mid 2001 had taken place 2 years previously. They had become a matter of past history.

83. If I am wrong in concentrating upon the intention of Mr Tagg then Mr Harwood has equally failed to prove that any other relevant representative of ING had the necessary intention. There is no evidence that Mr Dramby, Miss Thurstans or Mr Derby (who was also a member of the UK Credit Committee) had such an intention. I cannot infer that any intention they had in mid 2001 remained their intention 2 years later. The Dutch Credit Committee was presumably comprised of representatives of ING's parent company. If the Dutch Credit Committee can properly be regarded as an agent of ING then it is clear that they intended that there should be a personal guarantee, and there is nothing to indicate that they intended it to exclude liability in respect of the Coin TV debt.
84. For completeness I should add that I am not satisfied that Mr Harwood had an intention, during the period from about March 2003 until the signing of the guarantee in September 2003, to exclude liability in respect of the Coin TV debt. I think that the truth is that events had moved on since mid 2001, his Group had undergone substantial reorganisation, and he was happy to give a personal guarantee without pausing to consider whether he could or should seek to have it limited in any respect.

Estoppel by representation and/or promissory estoppel

85. Mr Harwood contends that ING are estopped from contending that the guarantee applies to the liability of HDUK in respect of the Coin TV debt. He relies upon both estoppel by representation and promissory estoppel. Miss Lucas, in her final address to me, did not seek to abandon her argument upon estoppel by representation but she accepted that her principal submissions were in respect of promissory estoppel. I think that she was right to concentrate upon promissory estoppel because it is difficult to formulate any of the representations upon which she relied as being relevant representations of fact.
86. To establish a promissory estoppel Mr Harwood must show:

(1) that ING made a clear and unequivocal promissory statement intending it to be relied upon;

(2) that Mr Harwood relied upon it; and

(3) that he did so to his detriment, such that it would now be unconscionable to permit ING to resile from their statement.

87. The alleged estoppel is founded on the discussions in mid 2001. I have found that Mr Harwood made it clear to ING that if one of his companies acquired the Coin TV business and took over the Coin TV debt he was not prepared to give a personal guarantee in respect of that debt, and that Mr Dramby and Mr Tagg indicated that they were prepared to proceed with the negotiations on that basis. However, I am not satisfied that there was ever a representation by ING, equivalent to a promise, that he would never be personally liable in respect of that debt, let alone that it was clear and unequivocal. As I have said previously, the discussions took place at an early stage in Mr Harwood's negotiations which were to lead, ultimately, to his acquiring the Coin TV business and taking over the debt. Also, I am not satisfied that there was any relevant reliance upon these early discussions. Mr Harwood signed the guarantee 2 years later, and much had happened in the mean time. I therefore reject the argument based upon promissory estoppel.
88. I also reject the argument based upon a representation of fact. In my view there was no relevant representation of fact made by ING in mid 2001 (or subsequently).

Estoppel by convention

89. Estoppel by convention can assist a party where he is unable to point to any representation which is capable of founding an estoppel by representation or a promissory estoppel, but where the conduct of the parties in their course of dealings is equivalent to such a representation. In the August Leonhardt [1985] 2 L.L.R. 28 Kerr LJ said at page 34,

"All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. It may be an express statement or it may be implied from conduct, e.g. a failure by the alleged representor to react to something said or done by the alleged representee so as to imply a manifestation of assent which leads to an estoppel by silence or acquiescence. Similarly, in cases of so called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representors' participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel."

90. In the present case, having failed to establish a promissory estoppel based upon the oral discussions in mid 2001, it is difficult to see how Mr Harwood can improve his prospects by alleging an estoppel by convention. I have found there were no relevant discussions about personal guarantees in the period subsequent to August 2001. Similarly, none of the dealings between Mr Harwood and ING in the period between August 2001 and September 2003 touched upon the inclusion or exclusion of the Coin TV debt from any personal guarantee, with the limited exception of the 1 August 2002 agreement. This agreement was silent on the point, and it would in any event be very difficult to derive an estoppel by convention from only 2 matters, namely the discussion in mid 2001 and the omission of any requirement for a personal guarantee in the 1 August 2002 agreement. I therefore cannot accept that there is the alleged estoppel by convention.
91. All of the defences relied upon by Mr Harwood in respect of the Coin TV matter fail, and Mr Harwood is accordingly liable under the guarantee in respect of the indebtedness of HDUK to ING.

The Shire claim

92. ING's claim under the guarantee is based upon the liability of VRG pursuant to eight hire agreements (in respect of vending machines and water coolers for VRG's staff) made between VRG and Shire. The benefit of these agreements were assigned by Shire to ING. Consequently the claim raises the question of whether the guarantee, on its proper construction, applies to debts incurred to third parties which have been subsequently assigned to ING.
93. I have cited clause 2.1 of the guarantee in paragraph 4 above, but I repeat it below, sub-divided into 3 parts which I have labelled (a), (b) and (c) for ease of reference:-

(a) in consideration of ING agreeing to make available facilities or other accommodation for so long as it may think fit to the Company the Guarantor hereby unconditionally and irrevocably guarantees to ING the due and punctual payment and discharge by the company of, and, if for any reason the Company does not make such payment or discharge, promises to pay or discharge or cause to be paid or discharged on demand of ING,

(b) all monies, obligations and liabilities whether actual or contingent now or hereafter due, owing or incurred to ING by the Company in whatever currency denominated whether alone or jointly and in whatever style, name or form and whether as principal or surety including all liabilities under guarantees or indemnities or any instruments whatsoever from time to time entered into by ING for or at the request of the Company,

(c) together with interest (as well after as before judgment) to the date of payment at such rates and upon such terms as may from time to time be payable by the Company (or which would have been so payable but for the liquidation or other incapacity of the company) commission, fees and other charges and all legal and other costs, charges and expenses incurred by ING in relation to the Company or this Guarantee on a full indemnity basis (all such sums together, the "Guaranteed Amounts" which expression shall include any part thereof)."

94. Mr Harwood contends that on its proper construction the guarantee only applies to monies, obligations and liabilities due in respect of facilities made available by ING to any of the named companies (each of which is defined as being within the meaning of "Company"). One of these companies was VRG. It is not disputed that the debts in question were "due" or "owing" to ING by VRG even though they had not been "incurred" by VRG to ING, and that they were therefore within the expression "due, owing or incurred to ING by the Company" in part A of the clause. Mr Harwood's case is that the assigned debts were not due or owing in respect of the facilities made available by ING. An alternative way of expressing this contention is to say, adopting the language of Bingam J in Bank of India v Patel [1982] 1 L.R. 506 at 512, that the debts do not arise out of the mutual relations of ING and VRG as lender and customer.
95. The following features of the guarantee are relevant:

(1) Clause 2.1(a) refers to the consideration being "ING agreeing to make available facilities or other accommodation for so long as it may think fit to the Company".

(2) Clause 2.1(b) includes "liabilities under guarantees or indemnities or any instruments whatsoever from time to time entered into by ING for or at the request of the company".

(3) Clause 2.1(c) refers to "interest (as well after as before judgment) to the date of payment at such rates and upon such terms as may from time to time be payable by the Company".

(4) Clause 2.1(c) also refers to "commission, fees and other charges and all legal and other costs, charges and expenses incurred by ING in relation to the company or this Guarantee".

(5) Clause 6.1 provides that:

"The Guarantor hereby confirms that it has not taken and will not without the prior written consent of ING take any security whatsoever from the Company in respect of the guarantor's obligations under this guarantee. Any such security so taken shall be held in trust by the guarantor for ING as security for the guarantor's liability hereunder and shall be deposited by the guarantor with ING accordingly."

(6) Clause 9.1 provides that:

"The Guarantor shall pay to ING on demand interest (as well after as before judgment) on the amount for the time being due from the Guarantor under this Guarantee to ING and which remains unpaid from the date of demand for payment made hereunder by ING until actual payment at the rate of five per cent (5%) per annum over Finance House Base Rate calculated on a daily basis."

(7) Clause 13.2 provides that:

"The Guarantor may by giving written notice to ING terminate its liability in relation to Agreements made between the Company and ING after the date such notice is received. Any such notice shall take effect only when it is received by an officer of ING and shall not affect the Guarantor's liability hereunder for any sums due or to become due from the Company to ING under any agreement or arrangement made on or prior to the date upon which such notice is received by ING".

96. The last of these features is the most persuasive. Clause 13.2 shows that the parties clearly intended that the guarantor should be able to revoke the future liability with effect from the date of receipt of his notice of termination. The expression "liability in relation to agreements made between the Company and ING" shows that it was the intention of the parties that liability could only arise in relation to agreements made between the company and ING. It cannot have been the intention of the parties that the guarantor could terminate his liability "in relation to agreements made between the company and ING after the date such notice is received", but, for example, remain liable in respect of agreements made between the company and a third party after the date such notice is received, which were then subsequently assigned to ING. Consequently this clause is a strong pointer in favour of Mr Harwood's construction.
97. Clause 6.1 also points in favour of Mr Harwood's construction. Suppose that the company has incurred two debts, one to ING and one to a third party and that the guarantor has given two guarantees, one to ING in the terms of the present guarantee, and another to the third party but expressed to be non-assignable. Suppose further that the guarantor has taken security from the company in respect of his liability under the second guarantee. On ING's interpretation an assignment of the second debt from the third party to ING would render the guarantor liable under the ING guarantee such that, by clause 6.1, the security would be required to be held in trust by the guarantor for ING. This would be a very surprising conclusion since, on the hypothesis I am considering, the third party never had any security for its debt, and the security taken by the guarantor had been taken for its own benefit in respect of the second debt. This example, in my view, suggests that ING's interpretation cannot be correct, and that the parties could not have envisaged assigned debts coming within the scope of the guarantee.
98. The first feature, relating to the expression of the consideration, also provides some help to Mr Harwood's construction. In National Bank of Nigeria v Awolesi [1964] 1 WLR 1311 Lord Hodson, giving the advice of the Privy Council, said at page 1315:

"It is true that the way in which consideration for a contractual obligation is expressed is not conclusive but it is relevant in construing the terms of the contract itself."

I therefore think that Mr Harwood can derive some assistance from the fact that the consideration was expressed to be "ING agreeing to make available facilities or other accommodation for so long as it may think fit to the company." This was an indication that the parties were intending the guarantee to cover liabilities of the company to ING arising out of their mutual relations.

99. The other features enumerated above, whilst less persuasive, are fully consistent with Mr Harwood's interpretation.
100. There is nothing in the background material to indicate that the parties ever contemplated assigned debts (unassociated with the mutual relations between ING and the companies) coming within the scope of the guarantee. The evidence shows that the dealings between ING and VRG (and indeed other companies controlled by Mr Harwood) related to block discounting agreements. There is no evidence of any assigned debts being expressly included in any personal guarantees.
101. It should also be noted that the composite guarantee, dated 31 March 2003, which was signed by seven companies, including HDUK, contained an express reference to assignment. By clause 2.1 the guarantor guaranteed the due performance of all the Obligations, and Obligations was defined in clause 1.1 as meaning:

"All monetary and other obligations whether actual or contingent now or hereafter due, owing or incurred to ING by the Company in whatever currency denominated whether alone or jointly and in whatever name or form and whether as principal or surety and whether arising in or by contract, tort, restitution or assignment including (but not limited to):

(a) All obligations under any instrument whatsoever from time to time entered into by ING with, for or at the request of the Company;

. . . ."

The composite guarantee formed part of the same transaction as the personal guarantee of Mr Harwood. Both documents bore the same date, although it is unclear whether the composite guarantee was signed in September 2003 at about the same time as the personal guarantee. I am satisfied that it is permissible to refer to the composite guarantee when construing the personal guarantee notwithstanding the fact that there was not an identity of parties: see Lewison, The Interpretation of Contracts, Third Edition at paragraph 3.03 and the recent decision of Cresswell J in Encia Remediation Ltd v Canopius Managing Agents Ltd [2007] EWHC 916 (Comm) at paragraphs 183 and 184. The significance of referring to the composite guarantee is that ING were alive to the possibility of obligations arising by assignment, and had made express reference thereto in the composite guarantee, but had chosen not to do so in the personal guarantee. On balance I think that this is a small pointer in favour of Mr Harwood's construction, although I decline to express any view as to whether the wording in the composite guarantee would be effective to bring assigned debts (unassociated with the relations between ING and the company concerned) within the scope of such composite guarantee.

102. My provisional view, before referring to any authorities, is that it was not within the presumed contemplation of the parties that the guarantee would apply to assigned debts (unassociated with the relations between ING and the companies) such as the debts assigned by Shire.
103. I have been referred to several Australian authorities and one English authority. The first in time of the Australian authorities is Re Clark's Refrigerated Transport Pty Ltd 1982 VR 989, a decision of Brooking J in the Supreme Court of Victoria. The issue was whether a mortgage of book debts to secure a loan of $200,000 extended to cover a debt of the mortgagor to a third party which had been subsequently assigned to the mortgagee. The mortgage charged the book debts as security for inter alia,

"each and all sums of money in which the mortgagor may now or hereafter be indebted or liable or contingently liable to the mortgagee on any account whatever…"

104. Brooking J held that the mortgage did not extend to cover the assigned debt. He held that on its true construction the clause relied upon was confined to debts or liabilities arising from some transaction between the mortgagor and the mortgagee. He reached this conclusion for essentially two reasons. First, considering the matter generally and without regard to the detailed provisions of the documents, he thought that when a person gives an "all obligations" mortgage he does not ordinarily contemplate that the property the subject of the security will secure not only his present and future obligations to the mortgagee but also any debt or liability of his which may be assigned by a third person to the secured creditor. He said at p. 995:

"It does seem strange that a man may lock up his counting-house and go home for the night, in the comfortable knowledge that his only secured creditor is his banker, to whom he owes a trifling sum secured by the usual boundless bank instrument, and unlock the door in the morning to find that, by virtue of assignments of the large but unsecured debts owed by him to his fellow merchants, and indeed to the butcher, the baker and the candlestick maker, all his unsecured debts have gone to feed his banker's insatiable security, so that every one of his debts is now secured."

Second, he found in the particular documents indications that no such extension to assigned debts was intended.

105. The next case was Skylink International Courier Pty Ltd v Grellman, 21 September 1987, a decision of Needham J in the Supreme Court of New South Wales. Again the issue was whether a mortgage extended to cover a debt owed by the mortgagor to a third party which was subsequently assigned to the mortgagee. The mortgage was expressed to cover inter alia "all other moneys now or hereafter to become owing or payable to the Mortgagee by the Mortgagor either alone or jointly with any other person on any account whatsoever …" Needham J held that the assigned debt was not covered. He reached this conclusion by examining the other provisions in the mortgage and by observing that a provision for the payment of interest on "the moneys hereby secured" strongly suggested that moneys owed originally by the mortgagor to a third party, but assigned to the mortgagee, would not come within the expression "the moneys hereby secured". He said:

"It seems to me that the provision in Cl 12(c) for the payment of interest on "the moneys hereby secured" tends strongly against any suggestion that moneys owed originally by the mortgagor to a third party, but assigned to the mortgagee, would come within the expression "the moneys hereby secured". It would, in my opinion, be extraordinary if the mortgagor owed money to a third party under which interest was not payable but upon assignment by that third party to the mortgagee the sums due originally to the third party but now to the mortgagee attracted the provision for interest."

106. The third Australian authority was McVeigh v National Australian Bank, V 200 of 1999, a decision of the Federal Court of Australia given on 28 February 2000. The defendant bank had provided facilities to a company, and Mr and Mrs Piccollo had given the bank a guarantee supported by a mortgage over their home. The main issue was whether the guarantee and mortgage applied to certain facilities granted by the bank (after the initial facility and indeed after Mr Piccolo had been made bankrupt). The court held that the guarantee and mortgage, which both contained "all moneys" clauses, applied to the further facilities. The importance of the case lies not in the result but in the analysis that led to that conclusion. Kenny J stated at paragraph 83:

"Equally, it is accepted that "all moneys" clauses in guarantees and mortgages are to be "confined in their operation by reference to the context in which they appear and by reference to the commercial purpose which they were intended to serve in",

and he referred to the observations of Gleeson CJ in Fountain v Bank of America National Trust & Savings Association (1992) 5 BPR 11,817 at 11,819-11,820. At paragraphs 84 and 85 he said:

"There is no need to accept the entirety of the approach (and the guidelines) proposed by Young J in Estoril Investments Pty Ltd v Westpac Banking Corp (1993) 6 BPR 13,146 and other cases, in order to accept the proposition that, in many cases, an "all moneys" clause will not be construed to secure a debt of a fundamentally different character from the debt specifically contemplated by the parties at the time of entering the contract. In construing such a clause, a court confines its operation by reference to its context and commercial purpose. It is essentially those considerations which, in my view, lie at the heart of such cases as Estoril; Australia & New Zealand Banking Group Ltd v Comer (1993) 5 BPR 11,748 per Young J; and Jageev Pty Ltd v State Bank of New South Wales (No. 2) (unreported, SC(NSW), Sperling J, 26 March 1996); and which are consistent with the comments of Lindgren J in Radin v Commonwealth Bank of Australia [1998] FCA 1361 at pars 200-202.

Having regard to the context of the "all moneys" clause in the guarantee in this case (or, for that matter, in the mortgage) and to its commercial purpose as disclosed in the other transaction documents, I can readily accept that the clause would not secure tortious liability, or, indeed, some other liability disparate in kind to that arising from the provision of financial accommodation."

Similarly, Finkelstein J said at paragraph 42:

"For example, it could not be said that it was the parties common intention that [the bank] could call upon the guarantors to pay an amount equal to the damages [the bank] might have sustained in consequence of some deceit practiced by the company. Nor could [the bank] require the guarantors to make good the company's share of any partnership losses in the unlikely event that [the bank] and the company undertook a partnership venture. In the particular context, imposition of such liabilities does not accord with the common intention of the parties although those liabilities do fall within the general words of [the relevant clause of the guarantee]."

107. The only English authority which counsel have been able to find which sheds any light upon this issue of construction is Kova Establishment v Sasco Investments [1998] 2 B.C.L.C. 83, a decision of John Martin QC sitting as a deputy judge of the High Court. The Plaintiff, Kova, was a trustee for members of the Menon Family including 3 brothers. In 1993 the brothers had borrowed £244,000 from ANZ Grindlays Bank and this loan had been assigned to the defendant Sasco. In 1994 Kova obtained a loan from Sasco and gave Sasco a guarantee in the following terms:

"In consideration of you at our request making a loan to us of £250,000 and taking an assignment of a debt owed jointly and severally by [the Menon brothers] . . . . (jointly and severally "the Borrowers") to ANZ Grindlays Bank Plc of a principal amount of £250,000 plus interest and costs we hereby agree as follows:

(1) In consideration as aforesaid we guarantee payment or discharge to you on demand in writing (free of any deduction, set off or counterclaim) of all monies and liabilities which shall for the time being be due and owing or incurred by the Borrowers whether actually or contingently and whether solely or jointly with another person including interest, costs or other lawful charges and expenses including any further advances made by you to the Borrowers . . . ."

Kova also charged its freehold property in respect of the 1994 loan and "any further monies which may become due and owing from time to time by [Kova] and/or the Borrowers to [Sasco] including but without limitation monies due under the Guarantee". Clause 4(1) of the charge provided that upon demand being made interest should be payable before and after judgment at 4% over National Westminster Bank Plc base rate on so much of the total debt as was from time to time outstanding.

108. In 1992 one of the brothers had taken a loan from a Mr Zaid, and in 1995 the benefit of this debt was assigned by Mr Zaid to Sasco. The issue before the court was whether this assigned debt was secured by the charge and covered by the guarantee. It was held that it could not have been within the contemplation of the parties that debts owed to a third party should become subject to the charge and guarantee by assignment. The feature which the court regarded as most persuasive was the requirement in clause 4(1) of the charge that interest be paid at a defined rate. The court referred to the remarks of Needham J in Skylink International Courier Pty Limited v Grellman, (quoted in paragraph 105 above).

John Martin QC applied this reasoning and said at page 89:

"If it is possible to bring any debt incurred by any of the Menon brothers under the cloak of the guarantee and charge merely by taking an assignment, then it is possible to change unsecured debts into secured ones and alter the rate of interest without any consent on the part of the Menon brothers, still less on the part of Kova. Vulnerable though Kova no doubt is as guarantor of future liabilities of the Menon brothers capable of being incurred without Kova's consent, they would at least have to be incurred with the consent of the Menon brothers themselves; and given the connection between Kova and the brothers, that it at least some protection. No such protection can apply to a loan, obtained originally on the basis that it was unsecured, which becomes subject to the security by an assignment. I do not consider that it can be said to have been the intention of the parties that Kova should be placed in that position, and I decline to construe the facility letter, guarantee and charge as having that effect."

109. These four authorities confirm that, when determining the scope of an "all moneys" clause, whether in a guarantee or a mortgage, the function of the court should simply be to ascertain the presumed intention of the parties. They also illustrate the type of provisions which may give an indication of the presumed intention of the parties. There is nothing in these authorities to detract from my provisional view expressed in paragraphs 96 - 101 above. On the contrary the authorities confirm my approach to the question.
110. There is one aspect of the Kova case which I feel that I should comment upon. Kova was concerned with both a charge and a guarantee. Two reasons were given for concluding that the charge did not apply to the assigned debt – first, the unlikelihood that the parties would have contemplated that an unsecured debt could, by assignment, become a secured debt and, second, the unlikelihood that the parties would have contemplated a change in interest rate. The first of these reasons has no application to the present case, because Mr Harwood had not given any charge over his own assets. The second of these reasons might have applied to the guarantee given by Kova although, as I read the report, the only provision for interest was in the charge and not the guarantee. Nevertheless the court's construction of the guarantee could properly have been influenced by its construction of the charge. In the present case clause 9.1 of the guarantee provided for interest to be paid at a defined rate (5% per annum over finance house base rate) "from the date of demand for payment." I think that the inclusion of this provision in the guarantee is essentially a neutral point, which does not carry any real indication that assigned debts were not to be covered. If VRG had borrowed money directly from ING at a rate of, say, 2% over finance house base rate, and subsequently defaulted, the guarantor would nevertheless have been liable to pay at the higher rate after the date of demand. I see no reason why such a change in rate provides any indication about the parties' intentions in respect of assigned debts.
111. On analysis, I have not found the decision in Kova as supportive of Mr Harwood's case as might have been expected. This is because Kova was concerned with a charge as well as a guarantee, whereas here there is only a guarantee. A conclusion that an "all monies" clause does not extend to assigned debts is probably more readily reached in the case of a mortgage than in the case of a guarantee.
112. Nevertheless, for the reasons which I have given in paragraphs 96 – 101 above I am clearly of the view that it was not within the presumed contemplation of the parties to the guarantee signed by Mr Harwood that it would apply to assigned debts, such as the debts assigned by Shire. I consider that on its true construction the guarantee only applied to liabilities arising out of the mutual relations of ING and any of the 4 named companies.
113. The claim against Mr Harwood in respect of Shire therefore fails.

Conclusion

114. There will be judgment for ING in respect of the Coin TV liability. I will hear submissions from the parties as to the precise amount for which judgment should be entered.