AES-3C Maritza East 1 EOOD v Credit Agricole Corporate and Investment Bank
| Jurisdiction | England & Wales |
| Judge | The Hon Mr Justice Ramsey |
| Judgment Date | 31 January 2011 |
| Neutral Citation | [2011] EWHC 123 (TCC) |
| Docket Number | Case Nos: HT-10-493 and HT-11-24 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 31 January 2011 |
[2011] EWHC 123 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr. Justice Ramsey
Case Nos: HT-10-493 and HT-11-24
Richard Wilmot-Smith QC and Adam Robb (instructed by Eversheds LLP) for the Claimant
John Higham QC (instructed by White & Case LLP) for the First Defendant
David Friedman QC and Thomas Crangle (instructed by Herbert Smith LLP) for the Second Defendant
Hearing date: 27 January 2011
Introduction
In these proceedings the claimant ("AES") seeks summary judgment against the defendant bank ("Calyon") in respect of two demands made on an on-demand bond, Performance Bond No E04123 ("the Bond"), provided to AES under a contract for the construction of a power plant in Bulgaria. The contractors under that engineer, procure and construct contract with AES ("the EPC Contract") are two Alstom Group companies, Alstom Power Systems GmbH ("Alstom") and Alstom Bulgaria EOOD. Because any liability of Calyon to pay under the Bond will be subject to an indemnity from Alstom it is evident that Alstom have an interest in these proceedings. In France Alstom have applied for and been successful in obtaining interim injunctions preventing Calyon from making payment to AES under the Bond.
Preliminary matters
Alstom applied under CPR 19.2 to be joined as a defendant to these proceedings. At the commencement of the hearing I granted that application on the basis that it was desirable for Alstom to be a party so that the court could take account of Alstom's position to resolve all matters in dispute and it was convenient to deal with issues between Alstom and the existing parties.
At the commencement of the hearing I also granted AES permission to apply for summary judgment prior to filing of acknowledgement of service. Under CPR 24.4(1) such permission should have been obtained before the issue of the application but, when making the applications for summary judgment, AES included an application for permission to "serve" the summary judgment applications prior to acknowledgement of service. Given that all parties, including Alstom, had put in evidence which dealt with the summary judgment application and had filed detailed skeleton arguments, it was evidently appropriate that the necessary permission should be given under the overriding objective in the CPR so that the hearing of the summary judgment applications could proceed. I indicated that if any problems arose because of this abridgment of time such matters could be dealt with by way of case management. In the event no such problems occurred.
Finally by way of preliminary matters, Alstom submitted that a decision on Calyon's liability to make payment under the Bond should not be dealt with by way of summary judgment because of concerns that such a procedure may be perceived by the French Courts as being a default procedure rather than a trial on the merits. It is clear that an application under CPR Part 24 is a decision on the merits and, as provided by CPR 24.2 the Court may give summary judgement against a defendant if it considers that the defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial. In the event AES submitted that, on the point of construction of the Bond raised by the first demand, I should make a final decision and, in the event, I have been able to do so.
Background
The power station project for which the Bond was provided is situated in Galabovo, Bulgaria. When completed it will comprise a lignite-fired facility with two units, known as Units 1 and 2, each of 300MW net capacity. The power generated will be sold to a Bulgarian electricity authority.
The EPC Contract was originally executed by the parties on 7 April 2006 but has been amended on a number of occasions. The current amended target dates for Unit 1 Performance Acceptance and for Unit 2 Performance Acceptance are now 25 September 2010 and 25 October 2010 respectively. Alstom did not achieve Performance Acceptance of the Units by those dates and AES demanded payment of Late Completion Payments in respect of Unit 1 and Unit 2 on a monthly basis commencing in October 2010.
The Bond was dated 16 April 2006 and has been subject to a number of amendments which are not material. It contained the following provisions:
(1) By Clause 2:
" Subject to Clauses 6 below, the Bank irrevocably undertakes that, on receipt of a demand from the Company which satisfies the requirements of Clause 4 below, but without any further condition, it will pay the amount specified in the demand to, or to the order of, the Company and that the payment will be made on and with value within three Banking Days after the date on which the Bank receives the demand."
(2) By Clause 4:
" The Bank shall have no liability in respect of a demand which does not satisfy all the following requirements:
…
(b) the demand contains a statement (or statements) to the effect (or substantially to the effect) that either:
(i) the Contractor has failed to comply with its obligations in accordance with [the EPC Contract];
…
(f) the demand contains any notice to or claim against Contractor relating to the respective breach of its obligations to which the demand refers."
(3) By Clause 7:
" This Bond is independent of [the EPC Contract] and shall remain in full force and effect notwithstanding any initial or subsequent illegality or invalidity, termination, disclaimer or discharge of [the EPC Contract] or any reconstruction, reorganisation or liquidation of the Contractor or any form of judicial, quasijudicial or nonjudicial arrangement or suspension of payments which discharges, reduces or otherwise affects the obligations of the Contractor under [the EPC Contract]."
(4) By Clause 8:
" Subject to Clauses 4 and 6 above, more than one demand may be served under this Bond."
(5) By Clause 10:
" This Bond is not a contract of suretyship but an undertaking to make payments against presentation of conforming demands."
(6) By Clause13:
" This Bond is subject to the Uniform Rules for Demand Guarantees of the International Chamber of Commerce (Publication No 458), except that Article 20(a) of those Rules is hereby excluded and Article 10(a) of those Rules, which allows the Bank a reasonable time to examine a demand and to decide whether to pay or refuse a demand, shall apply within the time limits fixed by this Bond for payments by the Bank."
(7) By Clause 14:
" This Bond is governed by English law and the courts of England shall have non-exclusive jurisdiction to settle any dispute connected with it."
AES say that by 20 December 2010 Alstom had failed to achieve Performance Acceptance by the amended target dates and that it was inevitable that Alstom would fail to complete Unit 1 by 25 December 2010 and was forecast to fail to complete Unit 2 before the end of 2010. As a result AES say that on 20 December 2010 they made and were entitled to make a demand on the Bond by a letter addressed to Calyon ("the First Demand"). That demand was in the following terms:
" Pursuant to Clause 2 of the Performance Bond we hereby demand payment of €93 million (ninety-three million Euros).
The Contractor has failed to comply with its obligations in accordance with [the EPC Contract], including the following breaches:
• The Date of Unit 1 Performance Acceptance was not achieved at the latest on the Guaranteed Unit 1 Performance Acceptance Date or by the Target Unit 1 Performance Acceptance Date;
• The Date of Unit 2 Performance Acceptance was not achieved at the latest on the Guaranteed Unit 2 Performance Acceptance Date or by the Target Unit 2 Performance Acceptance Date; and
• Late Completion Payments have not been paid when due.
In accordance with Clause 4(f) of the Performance Bond, we attach and incorporate the following notices and claims relating to the breach of the Contractor's obligations referred to above:…"
Attached to the First Demand were letters and demands for Late Completion Payments on Unit 1 from 26 September 2010 until 30 November 2010 and Unit 2 from 26 October 2010 until 30 November 2010. Those letters attached invoices which totalled some €27 million.
The First Demand then contained the following paragraph:
" For the avoidance of any doubt:
• neither the Date of Unit 1 Performance Acceptance not the Date of Unit 2 Performance Acceptance has been achieved at the date of this demand; and
• the Warranty Period has not expired.
We reserve the right, as permitted by Clause 8 of the Performance Bond, to serve more than one demand."
Following the First Demand no payment was received from Calyon. By a letter sent on 24 December 2010 Calyon stated that they had recently received correspondence from lawyers acting for Alstom who informed Calyon that they disputed the validity of the demand and were seeking a court order to stop Calyon from making payment.
Alstom applied to the Tribunal de Commerce de Nanterre and by order number 10.2342 dated 28 December 2010 it was ordered that, until a further hearing of the Tribunal de Commerce on 2 February 2011, Calyon was prevented from paying AES under the Bond. This injunction replaced an earlier one dated 27 December 2010 number 10.2340 which is in similar terms but where AES's name was incorrect.
On 31 December 2010 AES issued a first set of proceedings and the application for summary judgment in respect of the sum demanded by the First Demand.
On 7 January 2011 Calyon wrote to AES stating...
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