Home Information Cases Wolsey Securities Ltd v Abbeygate Management Services Ltd (2007)

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Wolsey Securities Ltd v Abbeygate Management Services Ltd (2007)

Summary

In the circumstances, a joint venture agreement and a facility letter annexed to the agreement constituted one composite agreement. Therefore a guarantor was liable in respect of the obligations under both documents, even though the guarantee had only been contained in the joint venture agreement.

Facts

The appellant company (W) appealed against a decision ((2006) EWHC 1493 (Admin)) that the respondent company (M) was not liable for management charges arising under a joint venture agreement. W had sued M as the guarantors of a third company (S) under the agreement. The joint venture had been unprofitable and S was in liquidation. W had granted a loan to S under the terms of a facility letter annexed to the joint venture agreement. The issue before the judge below had been whether the joint venture agreement and the facility letter constituted one agreement or two separate agreements. M had accepted that if it was one agreement, it would be liable for the management charges. The judge had held that the agreements were two separate agreements and had made a declaration that M was not liable for the management charges. W argued that the joint venture agreement and the facility letter were one composite agreement, and that M had guaranteed any default of S under either document. M submitted that it had only guaranteed the obligations under the joint venture agreement in which the guarantee had been contained, and had not guaranteed any obligation of S under the separate agreement in the facility letter. M further argued that cl.2.12 of the joint venture agreement, which obliged S to repay to W "all monies that [W] shall have advanced", referred only to the amount of the initial loan and did not include the management charges as well.

Held

Since the facility letter had been annexed to the joint venture agreement, there was in truth only one composite agreement. However, the joint venture agreement and the facility letter had to be interpreted in light of each other. The guarantee was contained in the joint venture agreement, so it could be expected that it would apply to the obligations set out in that agreement rather than to those set out in the facility letter, but the joint venture agreement obligations had to be interpreted in accordance with the facility letter. Under cl.2.12, S was obliged to repay to W all monies that W "shall have advanced in pursuance of [W's] Facility". Under cl.4.3 of the facility letter W was entitled to debit to S's loan account "any management charge". It could be concluded that when W did debit any management charge to S's loan account, the amount in the loan account, including any management charge, was part of the advance that S was obliged by cl.2.12 to repay. To the extent that that repayment had not been made, M as guarantors were liable. M's argument that the wording of cl.2.12 referred only to the amount of the initial loan could not be correct; once management charges had been debited to S's loan account they must constitute "monies...advanced in pursuance of [W's] Facility". The judge had been wrong to make the declaration that he did. A declaration was substituted to the effect that management charges were in principle payable by S and thus by M, as guarantors, save to the extent that such charges had not been debited to S's loan account.

Appeal allowed

Court of Appeal
Auld LJ, Longmore LJ, Toulson LJ
Judgment date
3 May 2007
References

LTL 3/5/2007

Practice areas