Abraaj Investment Management Ltd. v Bregawn Jersey Ltd.

On a summary judgment application, a claimant cannot recover the contractual price where delivery and payment are concurrent conditions and the claimant cannot deliver, unless the contract provides otherwise. A contractual arrangement may nevertheless support damages, an indemnity, equitable compensation, an account and tracing where the counterparty failed to perform the agreed purchasing function or misapplied funds held for a specific purpose. Restitution requires careful consideration where performance has been partial and the benefit received has not been restored. A guarantor may be liable for the principal’s non-performance and under a separate indemnity, provided the contractual demand requirements are met.

Abraaj financed a proposed art-investment venture under agreements involving Bregawn as purchasing agent, a proposed investment fund as buyer, and Mr Tuli as guarantor. The arrangements contemplated that artwork would be acquired with Abraaj’s funds and resold so that Abraaj could recover its advance.

The fund did not purchase the artwork, Bregawn failed to apply the funds to acquire or pay for the artwork, and some artwork was later delivered to Abraaj. Abraaj sought summary judgment against Bregawn for the price, repayment, damages, contractual indemnity, breach of fiduciary duty and trust, restitution, an account and tracing. It also sought judgment against Mr Tuli under the personal guarantee and indemnity.

The central issues were which remedies were available on the admitted facts and whether there was any real prospect of defending the claims or another compelling reason for trial.

1. Summary judgment. The court was satisfied that the relevant claims had no real prospect of successful defence and that there was no other compelling reason for a trial, although quantum required assessment.
2. Contractual price and loan. Under section 28 of the Sale of Goods Act 1979, delivery and payment are concurrent conditions unless otherwise agreed. Because Abraaj could not deliver the artwork and had not offered to do so, it could not recover the price as a debt. The original US$1.2 million loan had been cancelled by agreement and incorporated into the contemplated purchase price. It could not be recovered as a debt, but the failure to provide the purchasing services gave rise in principle to damages, including the unpaid sums expected to be recovered on resale.
3. Bregawn’s contractual and equitable liability. Bregawn’s failure to apply Abraaj’s funds to the purchase of artwork constituted a breach of the purchasing agency agreement. Its contractual indemnity covered losses arising from that breach. Bregawn also appeared liable for breach of fiduciary duty and breach of trust because it had received funds for the specific purpose of acquiring artwork and had not accounted for their use. Judgment was given on those claims, with damages or equitable compensation to be assessed and credit allowed for artwork delivered to Abraaj. Bregawn was required to account for the funds and any resulting profit. Abraaj was entitled to a declaration that it could trace its monies into assets purchased with them, subject to further orders identifying particular assets.
4. Restitution. Although Bregawn had been enriched at Abraaj’s expense, the delivery of some artwork created a real issue as to whether the consideration had wholly failed. The restitution claim therefore required a trial.
5. Mr Tuli. Mr Tuli was liable under the guarantee for Bregawn’s failure to perform its purchasing obligations. The written demand also sufficiently engaged the separate indemnity, despite not expressly demanding payment of losses in those terms. Judgment was entered for damages and an indemnity, both to be assessed.
6. Interest was left for determination when money judgments were obtained. Abraaj was awarded indemnity costs under the contractual indemnity provisions. Counsel were directed to prepare draft orders.