BITUMEN INVEST AS V RICHMOND MERCANTILE LTD FZC

[2016] EWHC 2957 (Comm), Queen's Bench Division, Commercial Court, Sir Jeremy Cooke, 17 November 2016

Contracts - Guarantee - Whether guarantee an on-demand guarantee - Importance of transactional context - Summary judgment

The claimant shipowners applied for summary judgment against the defendant in respect of sums alleged to be due under a Deed of Guarantee dated 16 May 2008. The Deed formed part of a financing transaction, essentially a sale-and-leaseback between the defendant and its group of companies and the owner and its banks whereby the ship was sold to the owner and demise-chartered back to W, a subsidiary of the defendant, under a Barecon 2001 charter dated 7 May 2008. The issue was whether or not the Deed constituted an "on-demand guarantee", payable on the certification of sums due by the owners, or whether, before liability could arise under the Deed, the owners must establish the liability for hire of W. On owners? argument, summary judgment should be made as no set-off was permitted on the terms of the guarantee. The defendant admitted that demands had been made, but denied that this was an on-demand guarantee, so that unless W was in breach of the charter, no sums were due.