Associated British Ports v Ferryways NV & Anor

Factual and Procedural Background

The dispute concerns a written agreement (the Letter Agreement) entered into on 1 September 2003 between Company A (ABP) and Company B (MSCB), a corporate group associate of Ferryways, a Belgian company operating a ferry service between The City of Ostend and The City of Ipswich. Ferryways had entered into a series of agreements with Company A, including a First Agreement (dated 5 January 2000) and a Second Agreement (dated 1 September 2003), relating to port services and throughput obligations at Ipswich.

The Letter Agreement was intended to secure Company A's position by providing recourse against Company B for obligations incurred by Ferryways under the Second Agreement. Disputes arose between Company A and Ferryways from 2004 onwards, culminating in a supplementary Time to Pay Agreement in 2006. Company A sought to recover sums due under the Second Agreement from Ferryways and under the Letter Agreement from Company B. The trial judge (Judge Field) found in favour of Company A against Ferryways but dismissed the claim against Company B. The sole issue on appeal concerned the correct legal characterisation of the Letter Agreement as either a guarantee or an indemnity, impacting whether the Time to Pay Agreement discharged Company B's liability.

Legal Issues Presented

1. Whether the Letter Agreement constitutes a guarantee or an indemnity.
2. The legal consequences of this characterisation for the liability of Company B, particularly whether the Time to Pay Agreement discharged Company B's obligations.
3. Whether the Letter Agreement could alternatively be characterised as a legally binding letter of comfort imposing primary liability.

Arguments of the Parties

Appellant's Arguments (Company A)

• The Letter Agreement imposes a primary liability on Company B, particularly under limb (i) of the Letter Agreement, which requires Company B to ensure that Ferryways "at all times" has sufficient funds to meet its obligations.
• The trial judge erred by treating limb (i) as secondary liability and by subsuming it under limb (ii), thereby rendering limb (i) surplusage.
• The trial judge incorrectly relied on the precedent of Motemtronic v Autocar.
• The trial judge failed to construe the document as a whole, ignoring key features such as the representation of group membership, the acknowledgement of reliance by Company A, and the significance of the document being termed a "letter" rather than a "guarantee".
• Alternatively, the Letter Agreement should be construed as a legally binding letter of comfort imposing primary liability on Company B.

Respondent's Arguments (Company B)

• The Letter Agreement is a guarantee imposing secondary liability, not an indemnity imposing primary liability.
• The Time to Pay Agreement discharged Company B's liability under the Letter Agreement as it would under a guarantee.
• The Letter Agreement does not impose a primary continuing obligation as claimed by Company A.
• The document is not a legally binding letter of comfort but rather a guarantee within the meaning of the Statute of Frauds 1677.

Table of Precedents Cited

Court's Reasoning and Analysis

The court focused on the distinction between guarantees and indemnities, particularly the nature of primary versus secondary liability, and the formal requirements under the Statute of Frauds 1677. The Letter Agreement's terms were scrutinised, especially the two limbs imposing obligations on Company B to ensure Ferryways had sufficient funds and fulfilled its liabilities.

The court agreed with the trial judge that both limbs imposed secondary liability characteristic of guarantees, not primary liability characteristic of indemnities. The phrase "at all times" in limb (i) was not sufficient to transform the obligation into a primary liability because the obligation was defined by reference to Ferryways' duties "as and when they fall due," indicating a contingent, secondary liability.

The absence of a clause protecting the guarantor from discharge upon giving time to the debtor was considered neutral. The court rejected the appellant's argument that the document was a binding letter of comfort imposing primary liability, distinguishing between legally binding contractual obligations and moral or comfort undertakings.

Precedents such as Motemtronic v Autocar were acknowledged but found not decisive, serving only as supportive context. The court emphasised the primacy of construing the document's language and overall context rather than relying on labels or isolated phrases.

Ultimately, the court found no error in the trial judge's construction of the Letter Agreement as a guarantee whose liability was discharged by the Time to Pay Agreement.

Holding and Implications

The court DISMISSED the appeal, upholding the trial judge's decision that the Letter Agreement constituted a guarantee imposing secondary liability on Company B.

The direct consequence is that Company B's liability under the Letter Agreement was discharged by the Time to Pay Agreement between Company A and Ferryways. No new precedent was established; the decision reaffirms established principles distinguishing guarantees from indemnities and clarifies the approach to interpreting letters of comfort and related contractual documents.