Berghoff Trading Ltd & Ors v Swinbrook Developments Ltd & Ors

For summary judgment, the applicant must show that the claim or counterclaim has no real prospect of success and that there is no other compelling reason for a trial.

Where finance documents make each party both a joint and several primary obligor and a guarantor, one co-obligor cannot ordinarily claim an indemnity from another on the basis that it was merely a surety. The court must construe the agreements as a whole, having regard to their contractual structure and business sense.

A repayment right under a partnership resolution may pass with accrued partnership rights on a sale, or be released by a deed transferring the partnership interest. A freezing order generally serves no purpose once the relevant company is in liquidation, although it may be continued where substantial issues remain concerning asset dispositions or the location of assets.

The claimants sought summary judgment on Rosserlane Consultants Ltd’s counterclaim. The counterclaim alleged that Caspian Energy Group LP owed Rosserlane the amount of loan indebtedness repaid from proceeds of a forced sale.

The alleged liability was advanced on three bases: indemnity under the law of guarantee, restitution, and a debt or repayment obligation arising from a written resolution made by Rosserlane as Caspian’s general partner. The parties relied on the Loan Agreement, Security Agreement, Participation Agreement, Sale Agreement and Deed of Assumption.

The defendants also sought continuation of a freezing order obtained in support of the counterclaim. The central issues were whether the counterclaim had a real prospect of success and whether the freezing order should remain in force.

1. Summary judgment. The claimants established that the counterclaim had no real prospect of success. There was no other compelling reason for the matter to proceed to trial because the relevant contractual background was agreed and no further factual matrix would assist construction. Summary judgment was therefore entered on the counterclaim.
2. Guarantee and restitution claims. Although the Loan Agreement described Caspian as borrower and Rosserlane as guarantor, its operative provisions defined the borrower and guarantors as obligors. Clauses 10 and 19 made the obligations to repay and guarantee the debt joint and several. Each entity was therefore both a primary obligor and a guarantor. Rosserlane could not contend, as between itself and Caspian, that it was only a surety while Caspian was the primary debtor.
3. The Security Agreement reinforced that conclusion by requiring each chargor, including Caspian and Rosserlane, to pay the secured liabilities as primary obligor and not merely as surety. Under the Participation Agreement, the sale proceeds were paid to the bank for application against the debt. That repayment discharged both parties’ liabilities and gave Rosserlane no right to indemnity or restitution.
4. Resolution claim. The court could not conclude summarily that the resolution was incapable of constituting a binding promise by Caspian, particularly because it was governed by Scots law and supported by a Scottish legal opinion. However, any repayment right had either passed to the claimants as an accrued benefit or right of Rosserlane as general partner under the Sale Agreement, or had been released by the Deed of Assumption. It therefore could not support Rosserlane’s counterclaim.
5. The court accepted that the alleged repayment obligation was contrary to the scheme and business sense of the Loan Agreement, but that point alone would not have justified summary judgment. The freezing order was discharged. In any event, although liquidation normally removes the purpose of a freezing order, it would have been continued here because there were substantial unresolved issues concerning the sale of assets, an alleged preference, and possession of promissory notes.

not stated in the judgment.