But You Promised!

In a recent House of Lords' decision, Actionstrength Ltd v International Glass Engineering SpA and others 1 , the application of a 300 year old statute was approached on the basis that Parliament may have intended to cause injustice by allowing people to break promises which had been relied upon.

The decision related to the enforceability of a purported guarantee given orally. The appellant, Actionstrength was a labour-only subcontractor retained by a main contractor, Inglen, which in turn was retained by the respondent, St-Gobain to construct a plate glass factory in East Yorkshire. The matter proceeded on the assumption that a guarantee had been given to Actionstrength by St-Gobain in respect of a debt owed by Inglen to Actionstrength of about £197,000. In short, Actionstrength had threatened to withdraw its labour from the site unless the debt was paid. To avoid this, St-Gobain allegedly promised that if Inglen could not be persuaded to pay Actionstrength, St- Gobain would do so out of monies withheld from what was due to Inglen under the main contract. In reliance, Actionstrength continued providing labour until the debt had reached approximately £1.3 million. Actionstrength was still unable to obtain payment from Inglen and at this point, the labour was withdrawn and Actionstrength sued St-Gobain on the basis of the alleged guarantee of payment.

In response, St-Gobain argued that even if a promise had been given (which was denied), it was unenforceable by virtue of s.4 of the Statute of Frauds 1677 which states that no court action shall be brought 'Öto charge the defendant upon any special promise to answer for the debtÖof another personÖunless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewithÖ'.

Actionstrength's problem of course was that the guarantee upon which it relied had been made only orally and thereby fell foul of the Statute. Nevertheless, it argued that it would be unconscionable for St-Gobain to renege on its promise. However, the House of Lords disagreed and held that the alleged oral guarantee was not enforceable. The Court decided that Actionstrength could not rely on an estoppel (i.e. could not prevent St-Gobain from denying the truth of the assertion allegedly made to Actionstrength) since to admit an estoppel on the grounds that Actionstrength had acted to its detriment in reliance on the oral promise...