CIMC RAFFLES OFFSHORE (SINGAPORE) LTD AND ANOTHER V SCHAHIN HOLDING SA

[2013] EWCA Civ 644, Court of Appeal, Civil Division, Lady Justice Arden, Lord Justice McCombe and Sir Bernard Rix, 7 June 2013

Contracts - Shipbuilding - Summary enforcement of a guarantee - Purview doctrine

The respondent ship builder operated a shipyard in China. In 2006 the buyers of the oil rigs at issue entered into shipbuilding contracts with the builder for the construction of two semi-submersible drilling rigs. The contract price for each rig was US$234 million. The rigs were purchased for the purpose of letting to Petrobras SA under long-term charters. A guarantee was given by a holding company for the sums due on delivery of two drilling rigs to their buyers, being two companies within the holding company's group. The guaranteed party was the builder of the rigs, and the guarantee was concerned with payment of the sums due on delivery under variations of the building contracts designed to take account of the failure of the builder to build the rigs on time. After the guarantee was made, the sums due on delivery were substantially increased by further agreement between the builder and the buyers, and the delivery dates were also delayed. The sums due on delivery were payable in 12 instalments over a period of one year from delivery, and the later increase was because more of the contracts' stage payments were postponed to the time of delivery. This was the builder's suit to enforce its guarantee, claiming not merely the sums originally guaranteed, but the substantially larger sums ultimately due under the latest variation of the shipbuilding contracts. The guarantor submitted that the guarantee had been discharged by reason of the changes in the buyers' obligations made without its consent, and in any event did not cover the larger liability. The builder argued that the guarantee expressly extended to such variations, and was also so worded as to impose primary liability on the guarantor and thus to avoid all doctrines designed to protect a secondary party such as a guarantor from being prejudiced by material changes to the underlying contract. Blair J at first instance in an unreported judgment had declined to give summary judgment, holding that the guarantee had not been discharged and that the guarantor was liable at least for the lesser sums due under the originally guaranteed variations of the building contracts; but that the question of any larger guaranteed liability would have to go to trial because matters of factual background were relevant to that question. Both parties appealed.