This was an appeal against a master鈥檚 order for summary judgment in favour of Wolsey Securities Ltd. Wolsey brought an action against Abbeygate Management Services (Hampton) Ltd as guarantors of Abbeygate Securities Ltd under a joint venture agreement made between the three parties.
Wolsey had granted a loan facility to Abbeygate Securities for the purpose of constructing a development. The loan facility letter was annexed to the joint venture agreement. In the joint venture agreement Abbeygate Management guaranteed to Wolsey that Abbeygate Securities would carry out its obligations under the joint venture agreement and agreed to indemnify Wolsey in the event that Abbeygate Securities did not.
The development was unprofitable and Abbey Securities went into liquidation. Wolsey issued proceedings against Abbeygate Management claiming outstanding payments in relation to the loan facility and certain management charges. Abbeygate Management contended that while management charges were due from Abbeygate Securities under the facility letter they were not due from Abbeygate Securities under the joint venture and were hence outside the guarantee.
Wolsey argued that the joint venture agreement and facility letter were one agreement and so the payment of the management charges was an obligation of Abbeygate Securities under the joint venture agreement and was therefore caught by the guarantee.
The issue was whether for the purpose of the guarantee the joint venture agreement and facility letter were two separate agreements.
Reference
The Court found that the joint venture agreement and facility letter were two separate agreements and that Abbeygate Management had not therefore guaranteed that Wolsey would receive the management charges in the event of a loss. The judge held that if the joint venture had made a loss the management charges were Wolsey鈥檚 risk. Accordingly, the appeal was allowed.
*Fuil case details
Wolsey Securities Ltd vs Abbeygate Management Services (Hampton) Ltd (formerly Abbeygate Management Services Ltd) 2006, High Court of Justice (Queen鈥檚 Bench Division), The Honourable Mr Justice Jacky [2006] EWHC 1493 (QB)
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Postscript
This decision highlights the importance of ensuring that the term of any guarantee covers all of the obligations that are intended to be covered. It is easy to see how difficulties may arise where there are two or more agreements in place with different obligations. However, in such instance it is essential that clarification is sought as to exactly what is being guaranteed.
