Longulf Trading (UK) Ltd v Niyazi Onen Gida SAN AS & Anor

A claimant conducting a trial in the defendants’ absence must present the case fairly, including points which may assist the defendants. The court must examine the claim rather than treat the hearing as a formality.

A guarantee given in writing for contractual consideration is enforceable where the relevant act was requested by the guarantor and the parties understood that it was to be remunerated. A surety remains liable for contractual variations where the guarantee provides for continuation or the surety consents, even without fresh consideration.

A demand under a guarantee must identify the sums claimed and provide the contractual calculation or certificate. A reservation of rights does not demand future sums or trigger liability for them. A contractual procurement fee was a primary obligation, not a penalty, and the agreed default interest was enforceable.

The claimant sought payment from two guarantors under a written guarantee securing the payment obligations of Dardanel under a procurement agreement. The defendants had been served in Turkey and had instructed solicitors, but filed no defence or evidence and did not attend the trial.

The court therefore tried the claim in their absence. The issues included the validity and consideration of the guarantee, the effect of amendments to the underlying procurement agreement, the existence of payment defaults, the validity and scope of the claimant’s demand, and entitlement to principal, procurement fees, contractual interest, legal expenses and statutory interest.

The claim was determined at first instance on the evidence and submissions presented by the claimant.

1. One-sided trial. The claimant had to present the case fairly and draw attention to points which might benefit the absent defendants. The court adopted the approach described in CMOC Sales & Marketing Limited v Persons Unknown and 38 Others [2018] EWHC 2230 (Comm) and tested the claim rather than rubber-stamping it.
2. Guarantee. The guarantee was written and signed. Although it was not a deed, sufficient consideration existed because the procurement agreement was entered into at the guarantors’ request on the understanding that the guarantee would be provided. The guarantee was therefore valid and effective.
3. A surety may be discharged by a prejudicial variation of the principal contract unless the guarantee provides otherwise or the surety consents. Here, the guarantee preserved liability despite amendments, and the guarantors signed amendments ratifying the variations. Their consent was effective without fresh consideration.
4. The claimant established the principal debt, the contractual events of default, and valid written demands accompanied by the required certificates and calculations. The guarantors were liable for the principal outstanding, after crediting payments, in the sum of US$2,300,170.
5. The procurement fee was a primary contractual obligation and was not a penalty. The agreed 15 per cent default interest was also enforceable because it protected the claimant’s legitimate interest in prompt payment and was not out of all proportion to that interest. The principles in Cavendish Square Holding BV v Makdessi [2016] AC 1162 were applied.
6. The demand did not trigger liability for procurement fees or interest accruing after the demand because those sums were not calculated or demanded. The claimant could make a further demand. The claimant was entitled to contractual interest accrued up to the demand, specified legal expenses, and statutory interest at US$ LIBOR plus 1 per cent up to judgment, subject to electing between statutory interest and a further contractual demand.