LORD JUSTICE WALLER: This is an appeal from a Decision of HHJ Alton, sitting as a judge of the High Court in the Mercantile Court in Birmingham. On 21 April 2006, she gave a judgment, one aspect of which dismissed the claim of the appellant ("Caterpillar") to enforce a contract of guarantee as against the second and third defendants. By the terms of the contract of guarantee signed by the second and third defendants, those defendants undertook that they would on demand in writing pay or discharge to Caterpillar all monies and liabilities which shall be for the time being due owing or incurred by Caterpillar by the customer under the agreement. When one turns to the face of the document, the customer was identified as Goldcrest Plant and Groundworks Limited ("Goldcrest"), but the agreement was not identified at all.

Caterpillar sought to put in extrinsic evidence at the trial to establish that the agreement referred to was in fact six agreements entered into at the same time as the guarantee between Goldcrest and Caterpillar. The judge accepted at least to some extent that some extrinsic evidence could be placed before the court and was admissible, but she was of the view that Caterpillar had failed to establish that it was common ground as between the second and third defendants and Caterpillar that the agreement did refer to the six agreements. She appears in so concluding to have excluded certain parts of the evidence that had been placed before her. It would seem, on a fair reading of her judgment, that what Mr Richmond was submitting at the trial was that certain discussions and a letter could be placed before her as evidence as to what agreement was being referred to in the guarantee, and it looks as though she excluded that evidence.

Before us, both counsel have appreciated that there is no basic difficulty about the rule in relation to extrinsic evidence and have recognised that the true question is whether the evidence that was before the judge, identified objectively as the agreement referred to in the guarantee, the six agreements.

I ought to spell out a little of the factual background. Excel Plant Hire Limited (referred to during submissions as "Old Co") had obtained some sub-contract work on the Channel Tunnel. It had entered into six hire purchase agreements relating to plant with Caterpillar. In relation to one of those agreements, the fourth, the second and third defendants (they were husband and wife) had entered into a guarantee. That one guarantee had evidently been requested by Caterpillar, on the judge's finding, because the plant the subject of that fourth agreement was of significant value, and that value took Old Co over its credit limit.

The judge found that, in May 2002, the second defendant, Mr Khaira, telephoned Mr Hunt of Caterpillar saying that Old Co was in financial difficulties, and that it was Mr Khaira's wish as managing director of Old Co to novate or transfer the agreements for the hiring of the equipment to a new company, Goldcrest. Caterpillar, through a Mr Hunt, were in principle willing to allow the agreements to be novated, and during that conversation, it seems that Mr Hunt stated that, although the terms of the agreements for the hire of the plant would be the same, the consent to novate would only be given if the second and third defendants signed an all monies guarantee. Mr Hunt in fact gave evidence that he expressly referred to guaranteeing the six novated agreements, but the judge found that what Mr Hunt was likely to have said was that an all monies guarantee would be required.

The judge made the relevant findings in paragraph 28 of her judgment, where she says:

The judge concludes in relation to those discussions that they were only discussions taking place at a fairly early stage, but they were clearly important discussions and the foundation of what was to follow thereafter. What followed thereafter was certain correspondence. First, we have letters from Mr Khaira. It is not quite clear whether they are from the old company or the new company, but it matters not. They were almost certainly from Goldcrest. There are six letters, each refers to the lease agreement previously entered into with Old Co and suggests novation in favour of Goldcrest. It says nothing in those letters about any guarantee. But the response to that letter, which is sent to Mr Khaira as Managing Director of Goldcrest, comes from Caterpillar, and that letter is of some significance. It says:

The importance of the bullet points is that the first three bullet points clearly refer to all six agreements that are going to form the subject of a novation. The fourth bullet point equally reads naturally as applying to all six of the agreements that are to be novated. The fifth is dealing with arrears under two contracts. But the letter also has to be read in the context of the discussions that had been taking place, and the context of those discussions is that Mr Hunt had on any view made clear that there will be required an all monies guarantee if the novation is to go ahead, and on any view that must be distinguished from a guarantee relating to one agreement.

It is right to say that the judge did not accept that that letter brought home the fact that the guarantee should cover all six agreements. She dealt with that in paragraph 30 and 31 of the judgment. She said in paragraph 31 that she did not accept Mr Richmond's submission that the terms of the letter would of necessity have alerted the ordinary reader to the fact that a guarantee wholly different in scope to that previously given would be required:

With the greatest of respect to the judge, that appears to me to be placing this letter in an isolated position and looking at the letter alone. Even looking at the letter alone, as it would seem to me there are indications by virtue of what I have just said about the bullet points that the guarantee was intended to cover all six agreements. But it also has to be construed in the context of the discussions that have taken place, during which Mr Hunt has made it clear on any view that an all monies guarantee was required as a condition of applying the novation of six agreements, something very much in excess of a guarantee relating to one agreement.

The guarantee was then signed. There was some debate at the trial as to whether it was signed at the same time as the novated agreements or at a different time. The judge concludes that the guarantee was signed at the same time as the novation agreements. But it would not matter. Clearly the guarantee was signed in the context of the six agreements that were going to be signed novating the original contracts.

There was some debate at the trial as to whether Mr Hunt had made a representation that the terms would be as before. The first defendant's case at the trial was that this representation had been made from the outset and that what he had understood from the representation was that that meant that the guarantee would be needed only in relation to one of the novated agreements. Of course, that would have to be the one that replaced the fourth agreement under the old arrangements. The judge dealt with that and she accepted not only Mr Hunt's evidence that his intention, when he used the phrase which he had, was to refer only to the novated agreements and not to the guarantee, but she found that that is the meaning which Mr Khaira would have understood. In other words, that what was being represented was very close to what was said in the letter of 19 June -- that the terms would be the same as the old novated agreements, but nothing was being said which could lead Mr Khaira to believe that only a guarantee of one of the agreements would be required.

As I said, the contract of guarantee was signed and, as I have already indicated, it is the terms on the back which in one sense give rise to the difficulty because the guarantee on its front is an all monies guarantee. It identifies the customer and it has no box identifying any particular agreement. It is then signed by Mr Khaira and by his wife. It might well have been thought that if Mr Khaira thought that what he was doing was signing an agreement which was to relate to one individual contract -- the novated agreement in relation to the fourth -- that he would have made sure that he filled in on the front the one contract which he and his wife were guaranteeing, but he did not do so. It is right in that context to say that the judge said of Mr Khaira: that he was demonstrably a resourceful and quick-witted man who understands financial and restructuring matters. So he is a businessman who would understand very much what he was doing.

The judge sets out the terms of the guarantee in paragraph 67 of her judgment. I have already quoted the most important term and it is unnecessary to quote the whole of those terms in this judgment. But the point is that the terms refer to the agreement specified overleaf, and there was none. It seems that the terms that were being adopted on this occasion on the back of this guarantee were exactly the same terms that had been on the back of the guarantee of the fourth agreement. That former guarantee on its face was a single account guarantee, and on its face contained a box identifying the agreement. In that context therefore the terms on the back made complete sense. But on this document -- the all monies guarantee -- there is no box identifying any agreement, and thus the term referring to the agreement specified overleaf does not make sense. The question for the court was whether a document signed in a commercial context, clearly intending to guarantee something, had a meaning or whether it did not have a meaning. The judge accepted that extrinsic evidence was admissible for the purpose of identifying the subject matter of the contract. It was, however, her view that only certain extrinsic evidence was admissible, and it was her view that such evidence as was admissible did not produce with sufficient certainty a consensus as between parties as to what the subject matter of this guarantee was. She dealt with the matter at paragraphs 76, 77 and 78 of her judgment, which read as follows:

The debate today started by seeking to identify what evidence the judge was excluding. It seems reasonably clear that she was excluding the discussions and letters to which I have referred. As I indicated earlier, the true issue that has now been identified as between the parties is not as to whether that evidence is admissible -- it is accepted that it is admissible and should have been admitted by the judge -- the question in reality is whether what that evidence establishes so far as Caterpillar is concerned (because the onus is on them) is a clear consensus, objectively ascertained, that the subject of this guarantee was the six novated agreements and nothing else. There could be a contest as to whether, if it does not refer to the six, does it refer to the one, the fourth; or is the result, as the judge found, that the contract is totally unenforceable for uncertainty?

In my view, the evidence which I have been through demonstrates beyond peradventure that it must have been plain to the second defendant, Mr Khaira, that what was being required in order for the novation to be consented to by Caterpillar was something much broader than a single account guarantee. Indeed, it must have been plain by the words "all monies" that it was possibly to be wider even than the six novated agreements which were being negotiated at the time. In truth, it is only by virtue of looking at the terms on the back of the document that one would be driven to the conclusion that there must be a limit on the all monies guarantee, otherwise it would simply guarantee all monies due from Goldcrest to Caterpillar.

But once one reaches that situation and once one reaches the position (i) that there was not going to be a consent to any novation without an all monies guarantee, (ii) that the letter of 19 June and the bullet points (clearly the first four of them) all refer to six agreements, (iii) that the context of the signing of the guarantee was the six novated agreements and Mr Khaira not putting into the box one agreement, in my view it could not have been clearer to Mr Khaira and to Caterpillar, objectively assessed, that the intention was that the six novated agreements should be the subject of the guarantee.

In paragraph 78 of the judgment, the judge, when finally dealing with this aspect, places reliance on the fact that it is Mrs Khaira, who was not a party to the discussions, who would not receive the letter of 19 June, that she would not be in the same frame of mind as, as I have indicated, Mr Khaira was. No separate point has in fact been taken by her on this appeal. But in case it is thought that it has been overlooked, I should simply say that she had a point at the trial which related to seeking relief on the basis that she had been persuaded into an unconscionable bargain. That was a point that the judge decided against her.

As regards the negotiations and the identifying of the subject matter, it is clear that Mr Khaira would be acting on Mrs Khaira's behalf, and so far as the identity of subject matter is concerned, as I would see it she has no separate case from that of her husband.

In the circumstances I would allow the appeal and I would give judgment for Caterpillar in a sum that hopefully can be agreed, against the second and third defendants.

LORD JUSTICE TUCKEY: I agree.

LORD JUSTICE JACOB: I also agree.