Caratti v Zhou

The case of Caratti v Zhou involved a dispute regarding a guarantee and indemnity agreement. The appellant, Caratti, had guaranteed the payment of an amount payable by a company upon the redemption of preference shares. The respondent, Zhou, claimed that Caratti was liable for the redemption payment as the company had failed to redeem the shares within the defined period. The central legal issues were whether Caratti's guarantee secured performance of the company's contractual obligation on default or payment of an amount irrespective of breach of a contractual obligation by the company, and whether a demand for payment that misstated the amount payable constituted a valid demand under the guarantee. The Court of Appeal held that the guarantee was triggered by a demand for payment, regardless of the accuracy of the amount specified in the demand. The Court found that the letter of 28 February 2014, which misstated the amount payable, was nonetheless a valid demand that triggered Caratti's liability under the guarantee.

The Court of Appeal examined the terms of the guarantee and the nature of the demand required to trigger Caratti's liability. The guarantee stipulated a demand for payment of the redemption amount, without specifying any particular form or content for the demand. The Court held that the demand did not need to specify the exact amount of the redemption payment, and that a miscalculation of the amount did not invalidate the demand. The Court noted that the letter of 28 February 2014, while stating the wrong amount, was nonetheless a demand that Caratti pay the redemption payment as specified in the guarantee. The Court concluded that the letter was a valid demand that triggered Caratti's obligation to pay the redemption amount to Zhou. The Court also found that Caratti's defence did not challenge the validity of the demand on the basis of the incorrect amount, and that the trial judge's conclusion on this point was reasonable.

The Court of Appeal upheld the trial judge's decision that Caratti was liable to pay the redemption amount to Zhou. The Court found that the guarantee was triggered by the demand in the letter of 28 February 2014, and that the misstatement of the amount did not invalidate the demand. The Court rejected Caratti's argument that the guarantee only applied if the company was in breach of its contractual obligation to redeem the shares. The Court held that the guarantee was triggered by the demand for payment, regardless of whether the company was in breach of its contractual obligation. The Court of Appeal therefore dismissed Caratti's appeal and affirmed the trial judge's decision that Caratti was liable to pay the redemption amount to Zhou.