Summary

Appeal by the second defendant ('SGG') from an order of Mitting J on 30 July 2001 by which he dismissed its application under CPR Part 24 for summary judgment against the claimant ('Actionstrength').

Facts

In May 1999 SGG, as employer, contracted with the first defendant ('Inglen') as main contractor for the construction of a float glass factory. Actionstrength subsequently entered into a labour-only subcontract with Inglen. Actionstrength encountered difficulties with late payments by Inglen and periodically threatened to pull its workforce off the site. In response to one such threat SGG orally agreed that, if Actionstrength would keep its workmen on the site, it would ensure that Actionstrength would receive the amounts due to it from Inglen, if necessary by redirecting amounts it was due to pay to Inglen for onward payment to Actionstrength. Inglen subsequently defaulted on its obligations to both SGG and Actionstrength. By this action Actionstrength sought to recover the amount due to it from both Inglen and SGG. SGG resisted the claim based on the oral agreement on the ground that the agreement constituted a guarantee by it of Inglen's liability to Actionstrength and was unenforceable, since there was no note or memorandum thereof for the purposes of s.4 Statute of Frauds 1677. Mitting J held that the oral agreement was capable of being construed as an acceptance by SGG of a primary obligation to Actionstrength. Actionstrength contended that the designation in the promise by SGG to pay monies out of a specific fund or source, namely monies due from it to Inglen, took the agreement outside s.4 of the Act.

Held

It was clear that SGG had agreed to take on a secondary liability to answer for the default of Inglen, who remained primarily liable. It followed that the agreement gave rise to a guarantee only. Since there was no note or memorandum of that agreement, the guarantee was unenforceable. The court could find no support for a distinction between a promise to answer for the debt of another out of general assets and a promise to pay out of a specific asset.

Appeal allowed. Claim against the second defendant struck out.

* The House of Lords received an application from Actionstrength seeking leave to appeal in this case. The Appeal Committee had been unable to make a unanimous decision to grant leave following a consideration of the applicant's petition and after inviting objections from the respondent. On 11 July 2002 the matter had therefore been referred to a hearing for determination.