The claimant owners claimed under a Deed of Guarantee signed by Richmond which guaranteed the liabilities of Windrush Intercontinental SA ("charterers") under a bareboat charter with owners. The bareboat charter was on "hell or high water" terms, meaning that hire was payable in all circumstances, without any set-off, counterclaim or off-hire, until expiry or termination of the charter or receipt of insurance proceeds following a total loss of the vessel.
Owners contended that the guarantee was an "on demand" guarantee; that they had made the required demands for sums due from charterers under the bareboat charter; and that Richmond had failed to pay under the guarantee.
Unsurprisingly, Richmond denied that the guarantee was an "on demand" guarantee, and that charterers were in breach of the bareboat charter. In addition, Richmond denied that some of the costs claimed related to any breach of the charter and contended that they were entitled to set off sums due from owners to charterers under related contracts which were part of the financing of the vessel.
Sir Jeremy Cooke entered summary judgment for the owners in respect of the sums demanded under the guarantee. In his view, the wording of the Deed of Guarantee made plain that it was an "on demand" guarantee. The "key feature" was that:
Richmond had expressly undertaken to make payment on demand of any amount certified by owners by written notice to be due from charterers, and there was no room in the wording for Richmond to dispute liability or quantum. The Deed further provided that payment should be made "in full, free and clear of any deductions, withholdings, set-offs or counterclaims of any nature whatsoever". That wording meant that no defence of any kind was available. Payment was triggered on certification and (in the absence of any fraud) Richmond was liable to pay the sums certified.
There is authority to the effect that, outside the banking context, unless the document is described as a "performance bond" or an "on demand bond", there is a strong presumption against it being such. This guarantee, however, formed part of a financing transaction in the form of a sale and bareboat charter arrangement. As such, presumptions applicable to non-banking transactions were given much less weight. The bareboat charter and the guarantee were intended to ensure the cash flow for what was, in effect, a loan, which is why both expressly provided for payment to be without set-off, counterclaim or deduction.