CE Energy DMCC v Alhaji Abdulrahman Musa Bashar

A guarantee is construed by reference to the instrument as a whole and its commercial context. References to a demand, unconditional liability or liability as principal obligor do not alone establish a demand guarantee. A suretyship guarantee may require proof of the principal debtor’s underlying liability, but not a prior judgment or arbitral award unless the contract so provides.

Contractual admissions, particularly irrevocable admissions integral to a payment agreement, may operate as binding contractual promises. A seller retaining title may claim the price under Sale of Goods Act 1979, section 49(2), where payment is due on an ascertainable date, including one fixed by reference to a future or contingent event, and the payment obligation is not concurrent with delivery.

CE Energy DMCC sought summary judgment in two related actions. In one, it claimed against Alhaji Abdulrahman Musa Bashar under a personal guarantee supporting payment obligations owed by Ultimate Oil & Gas DMCC. In the other, it claimed against Ultimate Oil & Gas for the price of a cargo supplied under a later spot contract.

The defendants relied on proposed amended defences concerning the nature of the guarantee, the effect of admissions in a payment agreement, retention of title, allocation of payments and liability for demurrage and interest. The central questions were whether the defences had a realistic prospect of success and whether the seller could recover the price while retaining title.

1. Summary judgment. The applicable test was that in Easyair Ltd v Opal Telecom [2009] EWHC 339 (Ch). A defence need only have a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial, although it may decide a short and determinative legal issue. The proposed defences had no realistic prospect of success.
2. Nature of the guarantee. The guarantee was a contract of suretyship, not a demand guarantee. Its essential promise was to secure Ultimate Oil & Gas’s performance of its payment obligations. The relevant indications included the focus on the company’s obligations and sums payable by it, the waiver of suretyship defences, the open-ended nature of the security and the commercial context of an individual owner guaranteeing company debts. The demand machinery governed the timing and mechanics of payment and did not convert the instrument into a demand guarantee.
3. The claimant therefore had to establish Ultimate Oil & Gas’s underlying liability, but it did not have to obtain a prior judgment or arbitral award. The guarantee expressly excluded any need to obtain an award or judgment first. Liability and adjudication of liability were distinct matters.
4. Contractual admissions. The irrevocable admissions in the payment agreement were contractual promises, not merely evidential admissions. They were integral to the payment mechanism and its purpose of establishing a binding basis for settlement. Ultimate Oil & Gas was contractually bound by them, and Mr Bashar was equally bound because he guaranteed its payment obligations and independently accepted the stated indebtedness.
5. Claim for the price. Although Sale of Goods Act 1979, section 49 was treated as a complete code under FG Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2013] EWCA Civ 1232, section 49(2) applied. Following Readie Construction Ltd v Geo Quarries Ltd [2021] EWHC 3030 (QB) and persuasive authorities, a day certain meant an ascertainable date. It could be fixed by a contingent event or by an act of a party or third party. The contractual notice of readiness identified such a date, and payment was not made concurrent with delivery.
6. The remaining arguments, including the alleged irrational allocation of payments and challenges to demurrage and interest, offered no realistic prospect of success. Summary judgment was granted against both defendants and permission to amend was refused. Costs and the form of order were reserved for further submissions.