Bitumen Invest AS v Richmond Mercantile Ltd FZC

A guarantee is construed according to the instrument as a whole and the objective commercial context. Language requiring payment against the beneficiary’s certification of sums due, within a short period, together with an express exclusion of set-off, deductions, defences and counterclaims, may make the instrument an on-demand guarantee. The beneficiary need not first establish the underlying debtor’s liability, absent fraud. Labels such as “guarantee”, “indemnity”, “primary obligor” and “surety” are relevant but not determinative. Ancillary provisions cannot deprive clear operative payment provisions of meaning.

The claimant sought summary judgment against the defendant under a deed of guarantee securing the obligations of Windrush Intercontinental SA under a demise charter of a vessel. The defendant accepted that certified demands had been made and remained unpaid, but argued that the deed was a traditional “see to it” guarantee. It contended that the claimant first had to establish Windrush’s liability under the charter and raised set-off and other defences.

The central issue was whether, on its true construction and in the context of the wider financing transaction, the deed required payment on demand or merely guaranteed performance of the underlying obligations.

1. Summary judgment. Under [2016] EWHC 2957 (Comm), an issue includes a point of law such as the construction of a guarantee. The court may determine it summarily where the defence has no real prospect of success and there is no compelling reason for trial.
2. Construction and commercial context. The deed, demise charter and sale arrangements formed part of a financing transaction. The commercial context supported an instrument designed to preserve the cash flow representing repayment of the effective loan. Any presumption associated with non-banking guarantees was therefore readily displaced by clear wording.
3. Payment trigger. The decisive provision required Richmond to pay on demand any amount certified in writing by the owners as due as a consequence of Windrush’s failure to fulfil its charter obligations. Certification necessarily addressed the existence of the relevant indebtedness as well as quantum. The provision was inconsistent with requiring prior adjudication of Windrush’s liability.
4. No defences or set-off. The clause requiring payment free of deductions, withholdings, set-offs and counterclaims meant that certified sums had to be paid without such defences, absent fraud. The wording in the deed referring to sums falling due and obligations becoming due could not qualify the specific payment mechanism in the certification provision.
5. Ancillary provisions. The references to primary obligor, guarantee and indemnity, and provisions protecting the guarantor against matters affecting liability, were no more than pointers or ancillary provisions. They could not control the clear effect of the principal payment provisions. The different dispute-resolution clauses modestly reinforced the conclusion that the deed was autonomous.
6. Order. The claimant obtained summary judgment for the certified sums, amounting at the hearing to £319,798.64, US$2,912,335.78 and NOK1,156,774.33, subject to updating. The claimant was also entitled to the declarations sought. Costs followed the event.