Rubicon Vantage International Pte Ltd v Krisenergy Ltd (Rev 1)

An on-demand obligation in a parent company guarantee must be construed from the words chosen by the parties once it is accepted that the instrument creates autonomous liability. A presumption applicable to the classification of an instrument as a demand bond or a see-to-it guarantee does not determine the scope of an admitted on-demand obligation.

Where a guarantee provides for payment of disputed amounts up to a stated cap, a dispute as to liability includes a dispute as to quantum. A demand clause requiring calculations and supporting documents ordinarily requires their actual provision, where reasonably necessary to assess the demand, rather than a statement that they exist.

Rubicon chartered a floating storage and offloading facility to Kegot, a wholly owned subsidiary of Krisenergy. Krisenergy gave a parent company guarantee securing Kegot’s obligations. Rubicon made demands for sums arising from four invoices, while the underlying liability remained disputed.

The parties agreed that the guarantee had both secondary obligations and autonomous on-demand obligations. The central issues were whether the autonomous obligation applied only where Kegot’s liability was admitted, what constituted a compliant demand under clause 3, and whether the demands complied with that clause.

1. Construction of the on-demand obligation. The court rejected the suggested extension of the Marubeni Hong Kong v Mongolian Government presumption. That presumption concerns whether an instrument creates autonomous obligations or merely a see-to-it obligation. Once autonomous liability is accepted, the extent of that liability must be determined from the contractual language without an antecedent presumption for a narrow construction (paras 13–18).
2. Clause 4 applies where the demanded amounts are undisputed both as to liability and quantum. Clause 5 applies to the balance where there is a dispute as to liability. That expression includes a dispute as to quantum. Krisenergy was obliged under clause 5 to pay disputed claims up to the maximum of US$3 million, whether the dispute concerned the whole claim or only part of it (paras 19–27).
3. Validity of demands. Clause 3 was grammatically defective and had to be construed commercially, applying the approach in Rainy Sky SA v Kookmin Bank. A compliant demand had to include the calculation of the sums and any supporting documentation reasonably required to assess the demand. The documents need not establish the underlying claim fully, but had to enable Krisenergy promptly to determine what was claimed, ask Kegot whether it was admitted or disputed, and form a provisional view that the claim was bona fide (paras 28–40).
4. The first and second demands complied with clause 3. The first demand included invoices, calculations and supporting invoices sufficient to assess the claim. The court also found that Krisenergy had not formally admitted liability, but that issue was unnecessary to the result (paras 41–53).
5. Both demands were valid and Krisenergy was obliged to pay the sums demanded. The appropriate form of order, including whether judgment should be based on the first or second demand, was left for further argument (para 54).