It is not often in a building case that the courts need to rely on a statute that is well over 300 years old. Recently, however, the House of Lords has had to consider the Statute of Frauds 1677 in the contemporary context of a labour-only subcontract.
The case Actionstrength Limited vs International Glass Engineering IN.Gl.En. SpA (3 April 2003) related to the giving of an oral guarantee. Actionstrength was a labour-only subcontractor retained by a main contractor ("Inglen"), which was in turn employed by Saint-Gobain to construct a plate glass factory in East Yorkshire. Actionstrength had difficulty obtaining payment from Inglen; considerable arrears had built up and it threatened to withdraw its labour from the site. There was a termination clause in the subcontract that would have entitled it to terminate if invoices were not paid on time. Termination would have been prejudicial to Saint-Gobain because it would have delayed their possession of the factory.
It was alleged that, in the course of meetings between Actionstrength and Saint-Gobain, the latter promised that if it could not persuade Inglen to meet its subcontract obligations of payment to Actionstrength, it would itself pay Actionstrength out of money withheld from what was due to Inglen under the main contract. It was said that Actionstrength relied on this promise to continue to provide labour to Inglen. By the time Actionstrength had completed its work, it claimed that Inglen owed it £1,3m; although it obtained a judgment against Inglen for that sum, Inglen was by then insolvent.
An employer who promises that they will ‘see you right’ is offering nothing unless it is in writing
Actionstrength sued Saint-Gobain on the basis of the alleged guarantee of payment.
Saint-Gobain relied on the Statute of Frauds 1677. Section 4 of that statute stated that no court action could be brought "whereby to charge the defendant upon any special promise to answer for the debt … of another person … unless 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 therewith."
Usually English contracts do not have to be in writing. Whatever the reasons in 1677 for requiring guarantees to be evidenced and signed in writing, it is rather doubtful whether they are relevant today. Against that, the Statute of Frauds in this respect stays on the statute book, although there have been recommendations (in 1937 and 1953) to repeal it.
The House of Lords decided in those circumstances that the alleged oral guarantee was not enforceable. The statute specifically says that no court action can be brought to enforce such an arrangement. Actionstrength could not even rely on the doctrine of estoppel (which prevents one from denying the truth of something one has already asserted): there had been no unambiguous representation by Saint-Gobain that the oral guarantee would be considered as enforceable or any assurance that they would not rely on the Statute of Frauds. Although this decision might seem to be hard on Actionstrength, who it is assumed acted in the belief that it was the beneficiary of an effective guarantee, certainty of the law is more important.
Robert Akenhead QC is a barrister specialising in construction law at Atkin Chambers. There is more on this case, at the Court of Appeal stage, in Tony Bingham's "Promises, promises" (26 October 2001, page 54).