GTLK Malta Four Limited v Pola Maritime Limited & Ors

Summary judgment is appropriate where the evidence and submissions permit a proper decision on a short point of law or construction, and the defendant has no real prospect of success or other compelling reason for trial. The court must avoid a mini-trial and should not rely on speculation that further evidence may emerge.

In a finance charter, contractual allocation of the risk of loss of use may leave no room for frustration. A clause guaranteeing quiet enjoyment is read with the agreement’s other risk-allocation terms. A broadly worded guarantee and indemnity may remain effective even where the underlying obligation is unenforceable, invalid or illegal.

The claimant sought summary judgment against four guarantors for liabilities arising under guarantees of Pola Logistics Limited’s obligations under long-term bareboat charters. After sanctions designations affecting the claimant’s parent, Pola Logistics stopped paying hire and served notices alleging that the charters had been terminated or frustrated. The claimant later terminated for non-payment, demanded payment under the guarantees and sought US$12,902,156.02 plus interest from all four defendants and US$29,134,156.98 plus interest from the first three.

The parties disputed the charters’ risk allocation, the effect of sanctions on performance and payment, the construction of the guarantees, and whether the charterer’s termination notices could succeed. Related issues were also raised in an LMAA arbitration. The central question was whether the defendants had a real prospect of establishing a defence to the guarantee claims or another compelling reason for trial.

1. The summary judgment application was determined under CPR Part 24. The court accepted that it must avoid a mini-trial and must consider evidence reasonably expected at trial, but a bare assertion that something may turn up is insufficient. It may decide a suitable point of law or construction where it has the necessary evidence and the parties have had an adequate opportunity to address it. The evidence about practical use of the vessels and the precise effect of sanctions was not suitable for final factual determination on this application. Even assuming the defendants’ factual case, however, the legal and contractual issues could be determined and further evidence was speculative. Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and Okpabi v Royal Dutch Shell Plc [2021] 1 WLR 1294 informed that approach.

2. The charters formed part of a finance arrangement and had to be read in their commercial context and alongside the suite of transaction documents. Clause 38.10 allocated to Pola Logistics the risk of the vessels’ unavailability or inability to be used, in terms broad enough to cover sanctions. Where a contract provides for the relevant event or allocates its risk, the doctrine of frustration has no application. Clause 42’s quiet-enjoyment covenant did not extend to matters whose risk the charterer had assumed. The defendants therefore had no real prospect of establishing breach of that covenant or valid termination on that basis. For completeness, the amended clause 28(b) replaced the common-law right to terminate for breach with an indemnity.

3. The charters were not shown to have been frustrated when the sanctions were imposed. The court applied the multi-factorial approach in The Sea Angel [2007] 2 All ER (Comm) 634. At that point, five to eight years remained, Pola Logistics had purchase options, and licences could permit transactions through blocked accounts. Although sanctions affected performance, the defendants had no real prospect of showing that performance had become radically different. The court also found no real prospect of establishing supervening illegality that frustrated the whole charters: illegality affecting a payment obligation suspended that obligation rather than discharging the entire agreement, as explained in Banco San Juan Internacional Inc v Petroleos de Venezuela SA [2020] EWHC 2937 (Comm) and Celestial Aviation Services Ltd v Unicredit Bank GMBH [2024] 1 Lloyd’s Rep 215.

4. The guarantee wording was broad. Clauses 2(c) and 5(f) created an independent primary indemnity and did not distinguish between obligations that became unenforceable later and those that were unenforceable when payment was demanded. The court approved the broad construction of unenforceability in IDBI Bank Ltd v IDH International Drilling Holdco Ltd [2021] EWHC 1908 (Ch) and applied the reasoning in Gulf Bank K.S.C v Mitsubishi Heavy Industries Ltd [1994] 2 Lloyds Rep 145. The defendants had no real prospect of showing that the guarantees failed to respond to frustration or termination, or that liability was limited to accrued obligations.

5. The application was granted. The parties were invited to draw an order reflecting summary judgment for the claimed amounts and interest.