Tarkin AG v Thames Steel UK Ltd

A guarantor’s liability under a continuing guarantee depends on the underlying obligations and the guarantee’s terms. Where a contract requires delivery immediately upon the buyer’s request, time is of the essence and the buyer may require performance after an earlier shipment date has passed if the contract remains on foot. A later request is not ineffective merely because the buyer’s motives are disputed. A term requiring reasonable or three weeks’ notice cannot be implied where it conflicts with the express delivery provisions. A guarantee clause protecting the guarantor against any variation of the guaranteed obligations prevents discharge by variation. Summary judgment is appropriate where the defendant has no real prospect of defending the claim and no compelling reason for trial exists.

The claimant paid US$5.8 million for the first tranche of steel scrap under a contract with Georgian Steel JSC. The defendant, its ultimate parent, guaranteed Georgian Steel’s due performance on a continuing and first-demand basis, subject to the guarantee being a secondary obligation. The steel was not delivered by the original shipment date, but the parties accepted that the contract remained in force.

In March 2009 the claimant instructed Georgian Steel to deliver the steel for shipment by the end of that month. Georgian Steel stated that it could not meet that schedule but would deliver later. The claimant treated that refusal as repudiatory, terminated the contract and claimed under the guarantee. The application concerned whether the defendant had a real prospect of defending the claim or whether there was a compelling reason for a trial.

1. The application for summary judgment was granted. The defendant had no real prospect of successfully defending the claim and the dispute concerning ownership of the defendant and access to further documents did not provide a compelling reason for trial.

2. The guarantee was a secondary obligation requiring the defendant to see to it that Georgian Steel performed its obligations, applying the principle explained by Lord Diplock in Moshe v Lep Air Services Ltd [1973] AC 331 at 348. The claimant therefore had to establish Georgian Steel’s repudiatory breach.

3. The contract required delivery immediately upon the buyer’s request and guaranteed delivery at a minimum rate of 800 metric tonnes per day. The use of immediately made time of the essence. The original date by which the buyer had to arrange shipment had passed, but the contract remained on foot and that date had been waived. The claimant remained entitled to request delivery immediately.

4. The March 2009 email was a contractual delivery request, not a mere enquiry. Georgian Steel’s replies made clear that it would not comply with the requested schedule. The claimant was entitled to accept that refusal as a repudiatory breach. Its motives were irrelevant, and it was not required to warn Georgian Steel in advance that termination would follow.

5. A term requiring three weeks’ or other reasonable notice could not be implied. Such a term would have to be implied when the contract was made and was inconsistent with the express provisions. The approach in Attorney General of Belize v Belize Telecom [2009] 1 WLR 1988 at [26]–[27] was applied.

6. The guarantee expressly provided that the defendant’s obligations would not be affected by any variation of the guaranteed obligations. That wording prevented discharge of the guarantee following continuation or variation of the underlying contract.

Not stated in the judgment.