International Finance Corporation v Punj Lloyd Ltd & Anor (Note Of Judgment)

On an application for summary judgment, a defendant must show a real prospect of successfully defending the claim. Mere speculation that further scrutiny might reveal an error is insufficient.

A guarantee may make the guarantor immediately liable when the principal debtor fails to pay, although contractual wording may require a demand before the obligation arises. Where a demand is required, it must follow the relevant notice and failure to pay. The court may admit late evidence where the opposing party suffers no prejudice and has had a fair opportunity to address the issue.

International Finance Corporation sought summary judgment against Punj Lloyd Limited and Punj Lloyd Upstream Limited for unpaid loan debts, interest and fees. The First Defendant had guaranteed the Second Defendant’s loan obligations.

The defendants did not positively contest liability for the principal sums, but disputed the calculation of the amounts claimed and argued that the demand under the Guarantee Agreement was invalid because it had not followed the notices of default and acceleration.

The court therefore had to determine whether the defendants had a real prospect of defending the loan claims or the guarantee claim.

1. Summary judgment test. The relevant question was whether the defendants had no real prospect of defending the claims. Speculation that further examination might disclose an additional calculation error did not amount to a real prospect of success. The contractual provisions making the claimant’s interest calculations final, absent manifest error shown to the claimant’s satisfaction, further supported judgment on the interest claim.
2. Quantum. The claimant had proved its entitlement to the principal sums and the amounts claimed. One error had resulted in an overcharge of approximately US$4,000–US$5,000 in default interest. The court deducted that amount, while allowing the remaining claims for interest, fees and charges.
3. Guarantee Agreement. Section 2.01(b) was ambiguous. Its better construction was that the guarantor became immediately liable when the company failed to pay, whether or not a demand was required. An alternative construction, requiring a demand before liability arose, was at least arguable. Section 2.03(c) did not eliminate that possible requirement.
4. For the purpose of the application, the court accepted that, on the alternative construction, the demand had to be received after notice of default and acceleration. The additional evidence was admitted because the issue had been pleaded, the defendants had ample opportunity to provide evidence, and no prejudice was caused.
5. The evidence established receipt of the acceleration notice on 13 August 2015 and receipt, or deemed receipt, of the guarantee demand on 17 August 2015. The demand therefore followed the notice and the Second Defendant’s failure to repay. The guarantee claim had no real prospect of successful defence.
6. Summary judgment was entered for the claimant under the Loan Agreements and Guarantee Agreement, subject to the default-interest adjustment. The defendants were ordered to pay £75,000 in costs.