Guarantee – Delivery – Liability – Defendant signing personal guarantees and sending by e-mail – Claimants calling on guarantees – Defendant denying liability – Whether defendant’s conduct constituting delivery of deed – Whether representations made to defendant constituting promises engaging principle of promissory estoppel – Claim allowed
On 27 November 2016, the defendant signed four personal guarantees of the obligations of a company to repay to the claimants sums that would fall due under funding agreements referable to loans totalling £1.5m (plus interest). The defendant then scanned the signature pages and e-mailed the scans to the claimants. The draft guarantees sent by the claimants to the defendant and by the defendant to the claimants included signature blocks for both beneficiary and guarantor and they also included a representation and warranty that “the obligations expressed to be assumed by [the guarantor] under this deed are legal, valid, binding and enforceable obligations”.
When the claimants called on the defendant’s guarantees, he denied liability. The defendant contended that the guarantees were never delivered by him to the claimants, who were estopped from claiming under the guarantees by reason of certain assurances he was given on their behalf.
The claimants brought proceedings to recover the sums allegedly due. The issues for determination were: (i) whether the defendant’s conduct constituted “delivery” so as to bind the defendant to the guarantees or a gesture of goodwill to the claimants with a view to becoming bound at a later meeting which never took place; and (ii) whether statements made by the claimants’ representative (V) to the defendant constituted promises engaging the principle of promissory estoppel, alternatively representations of fact which bound the claimants not to enforce the guarantees at all or after 31 March 2017.
Held: The claim was allowed.
(1) Since the defendant signed the guarantees and transmitted the signature pages to a representative whom he knew would receive them on behalf of the claimants, he plainly delivered them. The defendant’s argument that greater formality was required and would be expected in the form of passing across the complete document with an original signature was not realistic in the current age of instant communication. If A sent to B a scanned copy of A’s signature on an identified document, then subject to any contrary context, A indicated to B an intention to be bound by the terms of that document. In the present case, the context was confirmatory, not contrary. It was possible to deliver a deed in escrow rather than unconditionally, but there was nothing in the facts of this case to support such an escrow. There was not enough in the communications between the parties to impose escrow conditions on the guarantees: Bibby Financial Services v Magson and others [2011] EWHC 2495 (QB) distinguished.
What mattered was not the subjective intentions of either party but the objective assessment of what the defendant did: whether a reasonable recipient in the position of the claimants would have understood the defendant to have delivered the guarantees unconditionally, rather than in escrow. A person who had executed a document containing on its face, as the guarantee did in the present case, a clear statement that it has been executed and delivered as a deed, and who then sent that document to the other party without any expressed indication that the document was being delivered otherwise than as a deed, could not set up some private mental reservation or uncommunicated intention as the basis of a contention that the document was in fact delivered not as the deed it purported to be but merely in escrow. The guarantees were delivered unconditionally, as indicated on the face of the document that the defendant signed, had witnessed, scanned and sent to the claimants: D’Silva v Lister House Development Ltd [1970] 1 All ER 858, [1971] Ch 17 and Bank of Scotland v Henry Butcher & Co [2003] EWCA Civ 67 considered.
(2) On the evidence the court had found that the representations relied on by the defendant in support of his submissions on promissory estoppel were not made. The court was satisfied that the defendant understood that by signing the guarantees and scanning the signature pages, he was indicating that he intended to be immediately bound by them. There was nothing inequitable about the conduct of the claimants in claiming under the guarantees in the light of the statements which were made.
Authority in England and Wales was strongly to the effect that promissory estoppel required the pre-existence of a legal relationship between the promisor and promisee. A relationship between the promisee and somebody else would not suffice on the law as so far recognised. A basis on which it might be open to higher courts to broaden that approach would be the development of a single overarching principle of estoppel as discussed, but not adopted, by the Court of Appeal in Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274. However, the facts of the present case illustrated a limit to any development in that direction. Even if the law might develop further in terms of broader equitable restraints on conduct, it did not cover a case like the present, even if the court had accepted the defendant’s case on the facts in full: Harvey v Dunbar Assets Plc [2017] EWCA Civ 60 followed. Thorner v Major [2009] 2 EGLR 111 considered.
(3) If the defendant had succeeded on the facts, the court would have found that the claimants’ representative had promised not to enforce the guarantees and the defendant had relied on that promise in deciding to enter into the guarantees. The reliance alleged was entry into the very legal relationship which the promise was said to have varied. There was an inherent contradiction between the promise not to enforce certain terms and the act done in supposed reliance on it. In contrast to the position in the classic promissory estoppel cases, there was no concern in such a situation about the potentially unjust effect of the strict rules of the law of contract requiring consideration to support a promise. There was no pragmatic benefit to expanding the application of the doctrine of promissory estoppel to cover such cases.
Siward Atkins QC (instructed by Hugh Cartwright and Amin) appeared for the claimants; Madeline Dixon (instructed by Cole Francis Ltd) for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Umrish Ltd and others v Gill
