Wuhan Guoyu Logistics Group Company Ltd v Emporiki Bank of Greece SA
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 22 June 2012 |
| Neutral Citation | [2012] EWHC 1715 (Comm) |
| Docket Number | Case No: 2011 FOLIO 1591 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 22 June 2012 |
[2012] EWHC 1715 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Christopher Clarke
Case No: 2011 FOLIO 1591
Jonathan Hirst QC and Sara Cockerill QC (instructed by Reed Smith LLP) for the Claimants
Sean O'Sullivan and James Hart (instructed by Ince & Co LLP) for the Defendant
Hearing date: 1 st June 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The question
The central question in the present case is whether a payment guarantee is a guarantee, properly so called, or a demand bond.
The facts
The claimants (hereafter "the Seller") jointly operate a shipyard in Yangzhou, People's Republic of China. On 29 November 2006 they entered into two Shipbuilding Contracts with Swissmarine Inc of Liberia or nominee, as Buyer. These contracts were for the construction of two 57,000 DWT bulk carriers, known as Hull No. GY402 and Hull No. GY404.
In November 2007 the Shipbuilding Contracts were novated to Kantara Navigation Limited and Tamassos Navigation Limited ("the Buyer") of the Marshall Islands, respectively.
The contract price for Hull GY 404 ("the Vessel") was to be US $ 41,250,000, payable in five instalments. Under Article 3 (b) of the Shipbuilding Contract for the Vessel ("the Shipbuilding Contract") the Second Instalment of US $ 10,312,500 was payable within 5 New York banking days of receipt by the Buyer of a Refund Guarantee in the form annexed as Exhibit "A" issued by the Seller's bank together with a certificate of the cutting of the first steel plate of the Vessel in the Seller's workshop. The Article provided that the Seller:
"shall notify with a telefax notice to the Buyer stating that the 1st 300 mt of steel plate has been cut in its workshop approved by the Buyer's representative and demand for payment of this instalment".
This phraseology leaves it unclear whether it is the workshop or the cutting that is to be approved.
Exhibit A contained the text of an irrevocable letter of guarantee – the Refund Guarantee—in respect of the repayment by the Seller to the Buyer of the 1 st to 4 th instalments of the price. Under Clause 7 of the Shipbuilding Contract payments were to be refunded in the event that the Contract was rescinded or cancelled in accordance with the terms of the contract. Exhibit A is headed "To be finally approved by the buyer's bank and seller's bank".
Exhibit B contained the text of an irrevocable letter of guarantee in respect of the payment by the Buyer to the Seller of the 2 nd instalment of the price, as required by Clause 6 of the Shipbuilding Contract. It has the same heading.
The defendant—Emporiki Bank of Greece S.A ("the Bank")—is a Greek bank, now almost entirely owned by Credit Agricole, which provided finance to the Buyer for its purchase of the Vessel under a facility agreement dated 27 November 2007.
On 20 November 2007 the Bank of China issued a Refund Guarantee on behalf of the Seller securing the first instalment for the Buyer. The Buyer paid this instalment.
By a Deed of Assignment dated 27 November 2007 the Buyer assigned to the Bank (a) all moneys and claims for moneys due to the Buyer under the Shipbuilding Contract at any time; and (b) the Refund Guarantee and any other guarantee given to the Buyer as security for money due to it under the Shipbuilding Contract.
Notice of the Assignment was given to the Seller on 27 November 2007 and an acknowledgment of the notice by the Seller was issued on 10 December 2007.
On 14 December 2007 the Bank issued what was described as a guarantee ("the Payment Guarantee") in respect of the second instalment of the price of the vessel under the Shipbuilding Contract. That instalment has not been paid.
The Payment Guarantee, which was transmitted by the Bank to the Bank of China, provides, inter alia, as follows:
"DETAILS OF GUARANTEE
Dear Sirs,
(1) In consideration of your entering into a Shipbuilding Contract dated 29th November 2006 ("the Shipbuilding Contract") with Tamassos Navigation Ltd as the buyer ("the BUYER") and WUHAN Guoyu Logistics Group CP LTD and Yangzhou Guoyu Shipbuilding CO., LTD as the seller ("the SELLER") for the construction of one (1) 57,000 Metric Tons Deadweight OEC known as YANGZHOU GUOYU SHIPBUILDING COMPANY LTD. HULL NO. GY404 ("the VESSEL"), we, EMPORIKI BANK OF GREECE SA, hereby IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee, as the primary obligor and not merely as the surety, the due and punctual payment by the BUYER of the 2nd installment of the Contract Price amounting to a total sum of United States Dollars 10,312,500.00 (Ten million three hundred twelve thousand five hundred only) as specified in (2) below.
(2) The Instalment guaranteed hereunder, pursuant to the terms of the Shipbuilding Contract, comprises the 2nd installment in the amount of U.S. Dollars 10,312,500.00 (Ten million three hundred twelve thousand five hundred only) payable by the BUYER within five (5) New York banking days after completion cutting of the first 300 MT of steel plate in your Seller's workshop and written notice thereof along with certificate of cutting of steel plate countersigned for approval by the Buyers representative.
(3) We also IRREVOCABLY, ABSOLUTELY and UNCONDITIONALLY guarantee, as primary obligor and not merely as surety, the due and punctual payment by the BUYER of interest on the second Installment guaranteed hereunder at the rate equal to the three months US$ LIBOR quoted on page no.3750 of Telerate, 2 days before the date from which interest becomes effective, plus 1% margin, from and including the first day after the date of installment in default until the date of full payment by us of such amount guaranteed hereunder.
(4) In the event that the BUYER fails to punctually pay the second Installment guaranteed hereunder or the BUYER fails to pay any interestthereon, and any such default continues for a period of twenty (20) days, then, upon receipt by us of your first written demand stating that the Buyer has been in default of the payment obligation for twenty (20) days, we shall immediately pay to you or your assignee the unpaid 2nd Installment, together with the Interest as specified in paragraph (3) hereof, without requesting you to take any or further action, procedure or step against the BUYER or with respect to any other security which you may hold.
(5) We hereby agree that at your option this Guarantee and the undertaking hereunder shall be assignable to the Bank of China Limited, Hubei Branch, 65 Huangshi Road, Wuhan City, Hubei 430013, the People's Republic of China……
….
IN WITNESS WHEREOF, we have caused this Letter of Guarantee to be executed and delivered by our duly authorised representative the day and year above written."
The first cutting of steel for the Vessel is said by the Seller to have taken place on 18 April 2009. No representative of the Buyer was present and there is a dispute as to whether the steel cutting took place at all.
On 29 April 2009 the Bank received a Refund Guarantee issued by the Bank of China in respect of the Second Instalment. It was not entirely in the form of Exhibit B. The Seller says that that is because it was in the form agreed in respect of the first instalment with logical amendments (save for a single erroneous reference in a subsidiary paragraph to the first, which, the Seller submits, should obviously signify the second, instalment) and that it should be regarded as being in agreed form.
Initially the Seller declined to make any change in the Refund Guarantee. But after correspondence the Seller agreed to make the corrections requested by the Buyer. However, it is the Seller's case, disputed by the Buyer, that any such agreement was only intended to form part of a possible deal whereby the payment date of the Second Instalment would be revised to 30 June 2009, which was never, in fact, made. No Refund Guarantee in the altered form has been issued.
On 11 May 2009 the Seller sent to the Buyer, inter alia, an invoice for the Second Instalment dated 4 May 2009 and a written demand for payment together with a certificate that the steel cutting for the Vessel had been done at 10:58 a.m. on April 18 2009 at the Seller's shipyard. The certificate appears to have been signed by each of the claimants and by a Bureau Veritas surveyor. It was not signed by any representative of the Buyer. It is the Buyer's case that they were given inadequate notice to enable them to be present on that date.
Demand for payment under the Payment Guarantee was made on 22 June 2011. The demand recited that 300 mt of steel plates had been cut by 28 April 2009.
There is an issue between the Seller and the Buyer as to whether the Second (and the Third) Instalments are due. The Buyer contends in respect of the Second Instalment (a) that there is no proof that the first 300 mt of steel for the Vessel has, in fact, been cut; (b) that the condition of approval by the Buyer of such cutting has not been met; and (c) that the Seller has not provided in respect of the Second Instalment the Refund Guarantee required by the Shipbuilding Contract, namely a Guarantee in the form finally approved by the banks of the Buyer and the Seller. These issues, and others, are to be determined at an arbitration due to be heard in September.
The Shipbuilding Contract has come to an end; but the means by which it has done so is in dispute. Both the Seller and the Buyer claim that the other party was in repudiatory breach and that they have...
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