Neutral Citation: [2016] EWHC 1460 (Comm)
Claim No. CL-2015-000720
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT 

B E T W E E N:

	INTERNATIONAL FINANCE CORPORATION	Claimant	
	- and -		
	(1) PUNJ LLOYD LIMITED 
(2) PUNJ LLOYD UPSTREAM LIMITED	
Defendants	

_________________________________________

NOTE OF JUDGMENT OF LEGGATT J 
(HEARING: 6 MAY 2016)
_________________________________________

The Application
1.	This is an application made by the Claimant, International Finance Corporation, for summary judgment in relation to unpaid debts owed to it by the two defendants, Punj Lloyd Limited and Punj Lloyd Upstream Limited. The Claimant loaned approximately US$20,000,000 to the First Defendant under a Loan Agreement dated 4 March 2008, and US$25,000,000 to the Second Defendant in two tranches under a Loan Agreement dated 6 June 2008, though the second tranche was ultimately not drawn down.
2.	The First Defendant is the parent of the Second Defendant, and on 6 June 2008 entered into a Guarantee Agreement guaranteeing performance by the First Defendant of the Second Defendant's obligations under its Loan Agreement.
3.	Over the course of 2014 and 2015, the Defendants failed to make various payments under the Loan Agreements. The Claimant's case is that in August 2015 it issued notices under the terms of the Loan Agreements which had the effect of accelerating repayment of the full outstanding amounts then owed. In addition, the Claimant contends that it issued a demand under the Guarantee Agreement. It is common ground that the Defendants did not pay the sums claimed or any further sums to the Claimant after that date.
4.	This action was begun on 6 October 2015. On 23 December 2015, a Defence was served. The Defence raised no positive defence in relation to the principal sums claimed. The Defence did not admit the Claimant's calculation of interest and fees. A positive defence was pleaded in relation to the Claimant's purported demand under the Guarantee Agreement.
Claim for principal sums
5.	On 24 March 2016, the Claimant issued this application for summary judgment, supported by the witness statement of an officer of the Claimant which explained how the amounts claimed had been calculated. No evidence was served in response by either Defendant. Ms Smith QC for the Defendants does not formally admit but equally does not dispute the Defendants' liability to repay the principal sums owed under the Loan Agreements. The Claimant has proved its entitlement to the principal sums claimed, and on any view must therefore be entitled to summary judgment in relation to those principal sums. 
 (1) Quantum
6.	Two points have been argued on behalf of the Defendants by Ms Smith who has done a valiant job of seeking to make bricks with very little straw. Her first point relates to quantum. The Claimant's witness statement at paragraph 16 points out the fact that, in reviewing the claim, two small errors have been detected in the calculation of it. The first is an error that was made in the allocation of part payments made by the First Defendant in February 2013. These part payments were wrongly deducted from the principal amount outstanding, when instead they ought to have been deducted from a fee which had become due. The second error was that an incorrect rate of default interest had been applied for a particular period with the result that too much default interest had been claimed for that period. However, the net effect of these errors was in fact favourable to the Defendants. In its application and witness statement, the Claimant has indicated that it is not seeking judgment for the amount which it says is in fact owed, but is instead content to continue claiming the lower amount previously claimed.
7.	It seems to me that, strictly speaking, while the Claimant quite properly took the approach that it did in relation to the allocation of part payments, it ought to have made an adjustment for the roughly US$4,000 or US$5,000 which it overcharged the First Defendant in default rate interest. I consider that this adjustment ought to be made to the quantum claimed. 
8.	This, however, does not take the First Defendant very far in the context of a total claim for a sum of over US$15,000,000. The larger argument that Ms Smith sought to advance was that the Claimant has failed to demonstrate to the standard required that it is indeed entitled to the full amount claimed. Her suggestion was that, if two errors have been identified previously, there may exist other errors in relation to the Claimant's calculation of the claim.
9.	That point goes nowhere in relation to the claim for interest. No error has been found in relation to the calculation of interest itself; only in relation to default rate interest. In addition, the Loan Agreements include clauses stating expressly that the Claimant's calculation of interest shall be final unless the Defendants show to the Claimant's satisfaction manifest error in that calculation. On any view, there has been no manifest error made, let alone one that has been shown to the Claimant's satisfaction. Ms Smith's point also does not apply to the other fees and charges.  The Defendants have not asked for any further information on these matters or suggested that they do not understand the calculations or have any reason to believe that there has been an error. I recognise that one exchange took place in April 2015 in relation to jeopardy expenses. This item was explained at the time by the Claimant, and there was no subsequent suggestion by the Defendants that the explanation given was inadequate. 
10.	The test to be applied by the Court on a summary judgment application is whether the Defendant has no real prospect of defending the claim. At best, all that can be suggested on the Defendants' behalf is pure speculation that it might, if subjected to extensive scrutiny, be found that there was some further error in calculation or reason that the matter ought to proceed to trial. But pure speculation does not equal a "real prospect of success". I am therefore satisfied, in relation to the claims made under the Loan Agreements, that the Claimant has made good its entitlement to receive the full amount claimed, subject to the US$4,000-US$5,000 adjustment I have noted.
(2) Validity of the demand under the Guarantee Agreement
11.	I will now turn to the second point taken by Ms Smith, which relates to the Guarantee Agreement. This turns, in the first place, on the meaning of Section 2.01(b) of the Guarantee Agreement. Under that clause, the Guarantor (that is, the First Defendant), guaranteed due and punctual payment of the Guaranteed Obligations in the following terms:
"The Guarantor hereby irrevocably, absolutely and unconditionally... undertakes with IFC that whenever the Company does not pay any amount of the Guaranteed Obligations when due the Guarantor will immediately and in any event, forthwith upon demand by IFC, pay that amount to IFC..."
12.	There was disagreement about the correct interpretation of the phrase, "immediately and... forthwith upon demand by IFC." Ms Smith submitted that the effect of those words is that, before liability arises, there must be a demand made on the Guarantor and such demand can only be made once the amount demanded has fallen due under the Loan Agreement. She submitted that the evidence in this case does not demonstrate that, when the demand was made under the Guarantee, the full amount owed under the Loan Agreement had become payable. This submission was based first of all on the relevant provision of the Loan Agreement between the Claimant and the Second Defendant dealing with acceleration of the Loan, namely Section 6.01 dealing with Acceleration after Default.  This states:
"If any Event of Default occurs and is continuing (whether it is voluntary or involuntary, or results from operation of law or otherwise), IFC may, by notice to the Borrower, require the Borrower to repay the Loan or such part of the Loan as is specified in that notice. On receipt of any such notice, the Borrower shall immediately repay the Loan (or that part of the Loan specified in that notice) and pay all interest accrued on it and any other amounts then payable under this Agreement. The Borrower waives any right it might have to further notice, presentment, demand or protest with respect to that demand for immediate repayment."
Secondly, Ms Smith relied on the fact that the notices of default and acceleration and the demand under the Guarantee Agreement were both sent to the Defendants on 13 August 2015. These notices and demand are stated as having been sent by fax and by courier. These are two of the permitted methods of service under the Loan Agreement and the Guarantee Agreement. On the evidence, they were also sent by email, but this is not a permitted method of service, so I discount that.  The point was taken by Ms Smith that the Particulars of Claim do not specifically allege that the demand under the Guarantee Agreement was received after the notices of default and acceleration which were sent at the same time, nor did the Claimant's witness statement contain evidence to prove that fact. 
13.	Ms Smith argued that, although the acceleration clause provides for repayment immediately, the word "immediately" needs to be construed as allowing some small time at least between sending the notice of default and acceleration to the Second Defendant, and sending the demand under the Guarantee Agreement to the First Defendant as Guarantor, in order to give the Second Defendant an opportunity for payment to be made. Ms Smith relied upon the fact that the notice of default and acceleration itself required the payment to be made within four business days, and submitted that this should be treated as an appropriate time for this purpose in the context of an application for summary judgment.
14.	I agree with Ms Fatima QC's submission for the Claimant that there is an air of unreality about this argument. Even by the standards of the technical arguments sometimes made in relation to claims under guarantees, this is at the extreme end of the spectrum. There is no doubt that the Claimant has in fact made a number of later demands under the Guarantee Agreement, not least by bringing these proceedings, and is therefore entitled to payment from the First Defendant as Guarantor of the guaranteed obligations.
15.	I will nevertheless deal with the argument on its legal merits. It is true that there is some ambiguity in section 2.01 about when payment is due to be made under the Guarantee Agreement. On one reading of section 2.01(b) – which, in my view, is the better reading – the Guarantor is immediately liable to make payment as soon as the company fails to make payment, with or without any demand under the Guarantee. An alternative construction, which is at least arguable, is that a demand under the Guarantee is necessary before any obligation to pay arises. However, under section 2.03(c), the Guarantor's obligations can be discharged only by performance, and are not subject to prior notice.  Section 2.03(c) states
"The Guarantor's obligations under this Agreement can be discharged only by performance and then only to the extent of such performance. These obligations are not subject to any prior notice to, demand upon or action against the Company or to any prior notice to the Guarantor with regard to any default by the Company."
16.	Ms Fatima relies if necessary on that clause, but says that, given that notices were in fact received by the Second Defendant on 13 August 2015 (by fax) and by the First Defendant as Guarantor on 17 August 2015, such reliance is not required.
17.	Ms Smith may have the better of the argument on the correct interpretation of this clause. It seems to me that, if section 2.01(b) is construed in her favour, section 2.03(c) would not have the effect of undoing this. I am prepared to accept for the purposes of today that it is necessary to show that the demand following failure to pay was received subsequent to the notice.
18.	Further evidence was submitted by the Claimant to show when the notices of acceleration and default and demands under the Guarantee were sent and received. Although the application was made late, I think it is right in the circumstances to admit that evidence. The point about the need for acceleration prior to notice of demand being given was included in the Defence, but it is fair to say that it was not made with the same clarity with which it has been expressed this afternoon. It was by no means obvious that store was being placed by the First Defendant on the precise timing of the notices.
19.	I also bear in mind that Clifford Chance made it very clear in its 14 January 2016 letter what the Claimant's case is on the Guarantee. No letter was sent in response to explain the Defendants' case.  The First Defendant has had ample opportunity to submit evidence itself on the timing point. I find that no prejudice is caused to the Defendants by my allowing evidence to be admitted which demonstrates precisely when the notices and demand were sent and received. 
20.	The new documents submitted by the Claimant show that the notice and demand were both sent by fax at 19:39 on 13 August 2015. They were also sent that day by courier. The evidence shows that both the notice and the demand were delivered by courier at 09:37 on 17 August 2015. There is no reason to doubt that the fax and the documents sent by courier were indeed received. The precise timing of receipt on each day does not matter. The evidence clearly shows that the notice of default and acceleration was sent by fax and was received on 13 August 2015. It also shows that a demand was received or alternatively is to be treated as received at or shortly after 09:37 on 17 August 2015. 
21.	On any reasonable view, the 'scintilla' of time Ms Smith relies on cannot extend as far as the difference of over three days between 13 and 17 August. I accordingly think it clear that a demand was made under the Guarantee Agreement a material time after notice had been given and the Second Defendant had failed to repay. 
22.	In these circumstances there is no real prospect that the Claimant's claim under the Guarantee Agreement could be successfully defended. It is right, therefore, that I give summary judgment for the Claimant under the Guarantee Agreement in the same amount as in the primary claim.
Costs

23.	[After hearing submissions in relation to costs] I take the point made by Ms Fatima that the Defendants knew that the meter was running on this matter. However, that does not mean that the Defendants should pay the Claimant's full costs if those costs are too high. It is difficult to assess the appropriate costs to be awarded here without the associated narrative. While I accept Ms Fatima's argument that the Claimant has attempted to minimise costs by involving senior lawyers only where necessary and by having much of the work on the matter done by an Associate, I am not satisfied that all the costs claimed are defensible for the purpose of a summary assessment.
24.	I will order the Defendant to pay £75,000 in respect of the Claimant's costs.
25.	I ask the Claimant to draw up a further version of the Order, and for counsel on both sides to liaise with one another in relation to agreeing the draft Order.