ULTRABULK A/S V JAGATRAMKA

[2017] EWHC 2792 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Teare, 9 November 2017

Guarantee - Personal guarantee in respect of company’s liabilities under agreement - Whether primary or secondary liability

The claimant, U, was a Danish company engaged in the operation of ships. The defendant was the chairman and managing director of G. On 2 July 2013 U and G entered into an arrangement for the latter to pay outstanding indebtedness of US$4,259,397 plus interest in instalments. G had made payments of US$1.95 million under that arrangement. By a personal guarantee issued on the same day, the defendant stated that he was aware of the outstanding liabilities and guaranteed that if G did not pay the sum by 31 December 2013, he would on U's first written demand pay a sum equivalent to the liabilities plus interest. On 16 June 2015 U demanded that sum plus interest, and subsequently commenced these proceedings. The defendant defended the claim on the basis that he had not had lawyers but had relied on U's lawyers who drafted the guarantee; that the guarantee was a comfort letter rather than an enforceable agreement; that the guarantee was issued in breach of Indian law and was void, invalid or unenforceable; that U was aware that the guarantee was void and failed to inform the defendant of that fact; that he had no capacity to sign and execute the guarantee; that his assets were in India and that Indian law did not permit any remittance against a guarantee that was void; and that G had paid a sum towards the guaranteed liabilities and that his liability should be reduced accordingly.