Key takeaways
Court tests realistic prospect of defence
Summary judgment hinges on credible arguments from defendants.
Personal guarantees under close scrutiny
Clear principles guide enforcement of contractual obligations.
Oil contract disputes highlight legal risks
Commercial parties must assess exposure before litigation.
Realistic or fanciful? Court decides whether defendants have a realistic prospect of defending claims under a personal guarantee and for price under an oil spot contract
CE Energy DMCC -v- Bashar; CE Energy DMCC -v- Ultimate OIL AND GAS DMCC [2025] EWHC 297 (Comm)
This decision is interesting for the Court’s discussion of the nature of a personal guarantee, namely whether and when it is an on-demand bond or a contract of suretyship. It is also useful for the Court’s consideration of the principles applicable to a seller’s action for the price of goods under s.49 Sale of Goods Act (SOGA) 1979.
In summary
Between 2022 and 2023, the claimant CE Energy DMCC (CEE) sold gasoil and jet fuel to Ultimate Oil and Gas DMCC (UOG) under five spot contracts. By January 2024, various claims had arisen and LCIA and DIAC arbitration proceedings were commenced. Subsequently, CEE entered into a payment agreement with UOG, whereby UOG agreed to pay off the outstanding debt in instalments and CEE agreed to supply two more spot cargoes, for which UOG would pay. Mr Bashar, who owns UOG and is its chairman, agreed to provide a personal guarantee to support UOG’s obligations.
UOG did not pay the agreed amounts in full. CEE did not, therefore, supply the second additional spot cargo and the arbitrations between UOG and CEE in relation to the pre-2024 sales were re-activated.
In addition, CEE commenced two sets of court proceedings. The first set of proceedings was against Mr Bashar under the personal guarantee for the sums owed by UOG. The second set of proceedings was against UOG for the amount due under the spot contract made after the payment agreement.
CEE sought and obtained summary judgment in respect of both claims. The Court found that UOG’s liability pursuant to the payment agreement had been established and that, therefore, Mr Bashar was liable under the guarantee.
The contractual and factual background
Between November 2022 and February 2023, CEE and UOG concluded five spot contracts for gasoil and jet fuel. UOG paid for the cargo delivered under those contracts, but CEE maintained that interest on late payments was not fully paid and there was also outstanding demurrage in respect of certain shipments. The outstanding claims under these spot contracts remained subject to DIAC arbitration and were not substantively dealt with by the Court.
On 25 April 2023, the parties concluded a term contract, under which CEE agreed to sell UOG three cargoes of around 62,000 mt gasoil. The first two cargoes were delivered but CEE subsequently validly terminated the term contract because the first cargo had not been paid for in full, and there was demurrage outstanding. The claims under the term contract remained subject to LCIA arbitration and were not substantively dealt with by the Court.
On 14 January 2024, CEE and UOG entered into a payment agreement. Among other things, the payment agreement: recorded that UOG irrevocably admitted that certain amounts were due; summarised the overall financial position; recorded that CEE was willing to consider entering into further spot contracts in consideration of UOG paying the amounts outstanding to CEE; provided for post-dated cheques; and provided for a personal guarantee from Mr Bashar.
Also on 14 January 2024, Mr Bashar gave his personal guarantee. Clause 2 of the guarantee document provided as follows:
"2.1 In consideration of CEE entering into the Payment Agreement, [Mr Bashar] irrevocably and unconditionally:
2.1.1 guarantees to CEE the punctual performance by UOG of all of UOG's payment obligations to CEE under the Payment Agreement, the Sale Contracts, New Spot Cargo 1 and New Spot Cargo 2;
2.1.2 undertakes with CEE that whenever UOG does not pay any amount when due under the Payment Agreement, [Mr Bashar] shall immediately on demand pay that amount as if the Guarantor were principal obligor, without any need whatsoever for CEE to have to obtain an award or judgment against UOG first; and
2.1.3 This Personal Guarantee shall stand null and void after all amount due (or falling due) under the Payment Agreement, the Contract [sic., sc "the Sale Contracts"], the New Spot Contract 1 and the New Spot Contract 2 have been received in full by CEE."
The first new spot contract was for about 15,000 mt of industrial gasoil in one lot, delivery ex-ship offshore Lome, Togo, in late January 2024. Payment was to be made by:
"full settlement latest 45 calendar days from NOR Lagos (NOR=1) to seller's nominated bank account in AED … without any discount, withholding, abatement, set-off or counterclaim … For the avoidance of doubt payments received shall be allocated towards payment for the product supplied under this contract and other outstandings inline with clause 6.6 of the payment agreement dated 14 January between buyer and seller."
On the parties’ agreed reading of this provision, full settlement was due by 19 March 2024.
Certain payments were made between March and April 2024, which CEE allocated to the various contracts on which outstanding sums remained. The balance said to be due was approximately United Arab Emirates Dirham (AED) 125 million (around US$33 million). Of that, some AED 31 million related to the price under the new spot contract. Importantly, the sum that was due under the payment agreement partly overlapped with any sums due under the original spot contracts and term contract.
There are ongoing criminal proceedings in Dubai against UOG/Mr Bashar for dishonoured post-dated cheques. Those proceedings were not, however, relevant to the issues addressed by the English Commercial Court.
The Commercial Court decision
The Court considered whether the guarantee provided by Mr Bashar was either:
A demand guarantee, such that Mr Bashar was obliged to pay any sum demanded by CEE in good faith, irrespective of UOG’s actual liability; or
A contract of suretyship (or “see-to-it guarantee”), such that CEE could only recover from Mr Bashar if it proved that UOG was liable under the payment guarantee.
Mr Bashar argued that neither of these alternatives applied here. Rather, he contended that the guarantee required that UOG’s liability had to be established by award or judgment before he could be called on to perform. In which case, the parties would have to await the outcome of the arbitrations and the Court’s judgment on the new spot contract.
Having considered the relevant authorities, as well as the commercial context and the language used in the guarantee wording, the Court concluded that this was a contract of suretyship. Therefore, CEE had to establish that UOG was in default of an obligation that Mr Bashar had guaranteed.
However, the Court disagreed with Mr Bashar’s contention that CEE had to establish that UOG had been adjudged to be liable. The existence of liability, and adjudication of liability were not the same thing. What Mr Bashar had promised was not that UOG would meet any award but that it would discharge a liability to pay certain sums.
The Court further stated that Mr Bashar’s personal guarantee extended to two different categories of obligation:
Existing obligations under the previous spot contracts, the term contract and the payment agreement; and
Future obligations that would arise under either of the new spot contracts or under the payment agreement and the new spot contracts.
The payment agreement contained promises to pay specified proportions of outstanding sums at particular dates. It also contained in its recitals a succession of very precise and express admissions about what was irrevocably due under the previous contracts. Mr Bashar was, therefore, liable for these sums. Mr Bashar and UOG had no realistic prospect of defending the claims against them.
Action for the price of the goods
A discrete issue arose in respect of the new spot contract in respect of which liability had not been fixed by admissions in the payment agreement.
S.49 SOGA 1979 provides as follows:
"(1) Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.
(2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract."
There is appellate authority to the effect that s.49 provides the exclusive remedy for the price of goods, the effect being that where property in the goods has not passed to the buyer, for example due to a retention of title clause, the seller may not be able to bring such an action.
However, s.49(2) carves out an exception where the price is “payable on a day certain irrespective of delivery” and the buyer wrongfully does not pay. On the authorities, the Court held that:
“day certain” did not require a specific date to be expressly stated, so long as the relevant date can be ascertained by reference to a contingent or future event; and
“irrespective of delivery” did not mean that delivery should not have taken place if payment was to be due.
In this case, under the new spot contract, the time for payment was fixed by reference to the giving of notice of readiness which was the NOR which would be given when the first of the daughter vessels that offloaded cargo from the vessel that had carried it offshore arrived to begin discharge at Lagos. That notice would likely occur following delivery ex-ship but it was not linked to it.
On the law as it stands, this would be both a “date certain” and “irrespective of delivery”. It would be a date certain because it was ascertainable from the occurrence of an event defined in the contract, though not specified as a fixed date. And it would be irrespective of delivery because it would not be bound to coincide with delivery, and because moreover nothing in the contract made payment conditional upon delivery having occurred.
Comment
The issue arising out of s.49 was described as complex and interesting. Nonetheless, the Court felt justified in granting summary judgment because it simply followed a recent decision – Readie Construction -v- Geo Quarries [2021] EWHC 3030 QB – which itself “swims in the stream of the recent cases”.
