SFL Ace 2 Company Inc v DCW Management Limited (Formerly Allseas Global Management Limited)

A guarantee may be binding without a separate guarantee instrument where the contractual wording, read objectively in its commercial context, shows an immediate promise to answer for the principal debtor’s obligations. Wording that a charterer is to be guaranteed by a named company can constitute such a promise and need not amount to an unenforceable agreement to agree.

For the purposes of Statute of Frauds section 4, an approved exchange of emails may provide a sufficient signed memorandum, even where it contains no detailed guarantee machinery. A party’s inability or refusal to perform a charter on its agreed terms may amount to repudiation. In assessing mitigation, a claimant need not accept a proposed variation that would surrender existing contractual rights.

The claimant, owner of the container ship MV Green Ace, claimed debt and damages against the defendant, formerly Allseas Global Management Limited. The claim arose from the charterers’ alleged repudiation of a 20–24 month charter and the defendant’s alleged guarantee of the charterers’ obligations.

The defendant contended that no binding guarantee had been concluded, that any guarantee was unauthorised or unenforceable under section 4 of the Statute of Frauds, and that it should be rectified. It also disputed repudiation, quantum and mitigation. The central issues were whether the recap emails created an immediately binding guarantee, whether the statutory writing requirement was satisfied, whether the charter was repudiated, and whether the claimant acted reasonably to mitigate its loss.

1. Binding guarantee. The recap emails, construed objectively against the negotiations and commercial purpose, evidenced an immediate agreement that Allseas Global Management Limited would guarantee the charterers’ obligations. The wording did not make the guarantee contingent on later agreement of terms or execution of a further document. A guarantee operates on the terms of the principal debt, so detailed additional terms were unnecessary.
2. Authority. A reasonable person would have understood Mr Ambrose’s approval of the updated recap to approve the transaction on behalf of both the charterers and the defendant. His role in the negotiations and the absence of any qualification supported that conclusion.
3. Statute of Frauds. The emails were written and approved by an authorised representative. They therefore constituted a sufficient signed memorandum for section 4 of the Statute of Frauds. Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd and Anr provided clear support and was binding.
4. Rectification. The defendant failed to establish unilateral mistake. Even if Mr Ambrose misunderstood the effect of the wording, the claimant had no knowledge of that mistake. The requirements identified in Thomas Bates & Son v Wyndhams Ltd were therefore not met. The court declined to determine whether Mr Ambrose was in fact mistaken.
5. Repudiation. The charterers’ email stating that they could not accept the vessel on the current charter terms clearly conveyed to a reasonable person that they could not and would not perform the charter according to its terms. It was repudiatory. The contractual 96-hour withdrawal period would otherwise have made withdrawal for non-payment premature, but that did not affect termination based on repudiation.
6. Loss and mitigation. There was no available market for a replacement charter of the relevant duration. Loss was accordingly measured by comparing the income that would have been earned under the charter with the net income from replacement fixtures. The claimant was not unreasonable in rejecting proposals that would have surrendered contractual rights and whose financial feasibility was uncertain. The defendant failed to prove a failure to mitigate.
7. The claimant was entitled to recover USD 27,406,062.39 under the guarantee. The parties were directed to draw up an order, with consequential matters reserved.