CIMC Raffles Offshore (Singapore) Ltd & Anor v Schahin Holding SA

A guarantee’s anti-discharge wording must be construed in the context of the instrument as a whole. Wording that a guarantee extends to variations may preserve liability against discharge without necessarily enlarging the defined guaranteed obligations. The purview doctrine may prevent even broad wording from covering a change outside the original guarantee’s reasonable scope. Where the wording, commercial purpose and factual matrix are disputed, and the scope question is closely linked to whether later amendments discharge the guarantee, summary judgment is inappropriate. A clause describing the guarantor as a primary obligor does not automatically turn a guarantee into an indemnity or remove the purview issue.

The builder obtained summary judgment in the Commercial Court against the guarantor under a deed of guarantee and indemnity. Blair J held that later amendments to the shipbuilding contracts had not discharged the guarantee, but permitted a trial on whether the guarantee covered the substantially increased liabilities created by those amendments: [2012] EWHC 1758 (Comm).

The guarantor appealed against judgment for the originally guaranteed sums. The builder cross-appealed against the decision to allow a trial concerning the larger sums. The central issues were the construction of the guarantee, the scope of its anti-discharge provisions, and whether the later amendments fell within the guarantee’s general purview.

1. Disposition. The Court of Appeal allowed the guarantor’s appeal and dismissed the builder’s cross-appeal. The issues were to proceed to a single trial.
2. Construction of the guarantee. The words in section 2 that the guarantee would extend to variations had to be read with the section as a whole. The section was principally directed to preventing a variation from discharging or impairing the guarantor’s existing liability. The defined Guaranteed Obligations in section 1(a) were prima facie limited to the deferred instalments under the pre-guarantee amendments. The proviso to section 1(b) reinforced that limitation, and the guarantee was not an all-monies guarantee.
3. Purview doctrine. The court reviewed Trade Indemnity Company Limited v Workington Harbour and Dock Board [1937] AC 1, The Nefeli [1986] 1 Lloyd’s Rep 339, The Kalma [1999] 2 Lloyd’s Rep 374 and Triodos Bank NV v Dobbs [2005] EWCA Civ 630. The authorities showed that wide anti-discharge wording might not cover an arrangement outside the original guarantee’s general purview. The judgment left open whether this was purely a matter of construction, a rule of law reflecting equitable protection of guarantors, or two related doctrines.
4. Primary-obligor wording. Section 1(c) was not decisive. It merely reflected the ordinary position that a guaranteed party need not sue the principal debtor first. Section 1(b) appeared powerful against the Holme v Brunskill doctrine, but whether it also excluded the purview doctrine remained reasonably arguable. Primary-obligor wording did not automatically convert the guarantee into an indemnity.
5. Summary disposal. The construction issues, the scope of the anti-discharge provisions and the purview question were closely connected. The commercial background and factual matrix were disputed, and the legal issues were not straightforward. It was therefore inappropriate to determine either appeal summarily.

• Court of Appeal (Civil Division): Allowed the guarantor’s appeal and dismissed the builder’s cross-appeal. Directed that the intertwined construction and purview issues proceed to a single trial.
• High Court of Justice, Queen’s Bench Division, Commercial Court: Blair J held that the guarantee had not been discharged by the later amendments and entered summary judgment for at least the originally guaranteed sums, while allowing a trial on the larger liability: [2012] EWHC 1758 (Comm).