Case Nos: CL-2023-000206 and CL-2023-000207 - [2025] EWHC 1591 (Comm)

Fecha: 26-Jun-2025

The Parties’ contentions

The Parties’ contentions

135.

Even if unsuccessful in relation to its case as to the so-called General Agreement, and in the event that the Court concludes (as I have) that the Guarantees were not cancelled by the General Agreement and there was no relevant estoppel or waiver, Guarantors deny that they have any liability under the Guarantees.

136.

Their case in this respect is that, for there to be a liability under either of the Guarantees, litigation in relation to that Guarantee had to be commenced during the Guarantee Period of that Guarantee. Here, the Guarantors point out, the present claims were not commenced until 14 April 2023, well after the expiry of both Guarantee Periods. There could therefore be no liability.

137.

The Owners’ case was that this was wrong for either of two reasons. In the first place, they contended that, on a proper construction of the Guarantees, clause 2.1.1(a) provided for a true guarantee of Charterers’ performance under the Charterparties, and the Guarantors’ liability arose upon Charterers’ failure to make due and punctual performance thereunder and without need for a demand under the Guarantee. Alternatively they submitted that, even if they were required to make a demand on the Guarantees, they were entitled to do so after the expiry of the Guarantee Period, provided that the demand related to a Guaranteed Liability that arose during the Guarantee Period.

138.

In somewhat more detail, the arguments were these. Guarantors pointed to Clause 3. They contended that, as the Guarantee was to remain in full force and effect for the duration of the Guarantee Period, the corollary was that, once the Guarantee Period ended, the Guarantee was no longer in full force and effect, which must mean that, after that point, the Guarantors were no longer liable under the Guarantee.

139.

The Guarantors’ case was that that meant that there was no liability, after that date, even if, under Clause 2.1.1(a), a liability under the Guarantee accrued without the need for a demand. Alternatively, the Guarantors contended that there was no liability under the Guarantee, whether pursuant to Clause 2.1.1(a) or (b), without a demand, and if there had been no demand before the end of the Guarantee Period, then there could be no liability. As part of this argument, it was said that Clause 2.1.1(a) had to be read with Clause 2.1.1(b): they were effectively one obligation, not two, and that a demand was a necessary feature of both parts of the dual obligation. Were that not the case, as Mr Farhan said in his attractive submissions, then the Guarantee would have no clear expiry date, which would be commercially inconvenient, as would the fact that the representations and warranties referred to in Clauses 5 and 6 would continue for an extended period. Further, unless read in this way, the requirement for a demand in Clause 2.1.1(b) is rendered entirely ineffective.

140.

For the Owners, reference was made to Shanghai Shipyard Co Ltd v Reignwood International Investment (Group) Company Limited [2021] EWCA Civ 1147, at [22]-[23], where Popplewell LJ said:

[22] Suretyship can be traced back to Old Testament times and before, and in the modern era has come to be known more commonly as a guarantee. A traditional guarantee by way of suretyship is an undertaking by the guarantor to be answerable for the debt or obligation of another if that other defaults. Traditional guarantees by way of suretyship are sometimes called “see to it” guarantees, following the dictum of Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331, 348 that the nature of the guarantor’s obligation was “to see to it that the debtor performed its own obligation to the creditor”. Where the debt or performance obligation arises under a contract between the obligor/debtor and obligee/creditor, the essential feature of such a guarantee, for present purposes, is that the liability of the guarantor depends upon there being a liability of the obligor/debtor. The guarantor’s liability is secondary, in the sense that it is contingent upon the obligor’s continuing liability and default. Such guarantees, however, sometimes describe the guarantor’s obligations as those of a primary obligor, to make clear that the default of the obligor gives rise to an independent and primary liability of the guarantor, who is liable and in breach of his obligation by the very fact of default by the obligor without more; hence the “see to it” characterisation of the guarantor’s obligation. I shall refer to such an instrument as a surety guarantee.

[23] Security for performance of a payment obligation may also be provided by an undertaking to pay a sum on demand, or within so many days of a demand, irrespective of whether the obligor/debtor is under a liability to make the payment. Such undertakings are also commonly termed guarantees, but their defining characteristic for present purposes is that they are payable on or by reference to an event, namely the demand, and without reference to the obligor’s liability. The demand may have to be in prescribed form, and/or may have to be accompanied by prescribed documents, but it is the demand which triggers the liability to pay. I shall refer to such undertakings as demand guarantees. Surety guarantees sometimes require a demand as a trigger for the payment obligation, in addition to the condition of obligor liability, so that the presence in the instrument of a requirement for a demand is not itself determinative; but a demand in surety guarantees is a variation of the standard suretyship arrangement under which the guarantor is a primary obligor and assumes liability simply by reason of the default of the obligor without the need for a demand against it; whereas a demand is of the very essence of a demand guarantee. The defining characteristic of a demand guarantee, for present purposes, is that the guarantor’s obligation to pay arises by reason of the demand, without the beneficiary having to establish a liability of the obligor.

141.

In the present case, Owners submitted, even if Clause 2.1.1(b) of the Guarantee was regarded as creating a demand guarantee, where a demand was a trigger for a liability to pay under the Guarantee, Clause 2.1.1(a) was a ‘see to it’ obligation. It was not unusual for Guarantees to include guarantee and indemnity obligations some of which are, and others of which are not, made conditional on the making of a demand: an example of where this was the case is Re Taylor; ex parte Century 21 Real Estate Corporation [1995] FCA 1335, a decision of Burchett J in the Federal Court of Australia. Given that Clause 2.1.1(a) is a ‘see to it’ obligation, a liability accrued under it when the Charterers failed to perform obligations under the Charterparties without the need for a demand on the Guarantees, and nothing in Clause 3 put an end to that liability at the end of the Guarantee Period. The result was analogous to that in Euler Hermes SA (NV) v Mackays Stores Group Ltd [2022] EWHC 1918 (Comm), where there was liability under the guarantee for deferred amounts outstanding at the termination of the guarantee notwithstanding that demand was only made after that.