Wuhan Guoyu Logistics Group Company Ltd Anor v Emporiki Bank of Greece SA
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice Rimer,Lord Justice Longmore |
| Judgment Date | 19 December 2013 |
| Neutral Citation | [2012] EWCA Civ 1629,[2013] EWCA Civ 1679 |
| Docket Number | Case No: A3/2012/1745(A),Case No: A3/2012/1745 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 2013 |
[2012] EWCA Civ 1629
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Rimer
And
The Right Honourable Lord Justice Tomlinson
Case No: A3/2012/1745
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE CHRISTOPHER CLARKE
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jonathan Hirst QC & Ms Sara Cockerill QC (instructed by Reed Smith LLP) for the Appellants
Mr Nigel Tozzi QC & Mr James Leabeater (instructed by Ince & Co LLP) for the Respondent
Hearing dates: 18 th October 2012
The central question in the present case is whether a payment guarantee is a guarantee, properly so called, or an "on demand bond", as it is called in banking terminology. Christopher Clarke J has held that it is a guarantee properly so called and that it is therefore open to the defendant bank to argue that no payment became due under the contract containing the obligation guaranteed and that the bank is therefore not itself liable under the guarantee.
The Facts
The claimants ("the Seller") jointly operate a shipyard in Yangzhou in the 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.
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 1 st 300 mt of steel plate has been cut in its workshop approved by the Buyer's representative and demand for payment of this instalment." (sic)
The judge said that 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 to the shipbuilding contract 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, which provided finance to the Buyer for its purchase of the Vessel under a facility agreement dated 27th November 2007.
On 20th November 2007 the Bank of China issued a Refund Guarantee on behalf of the Seller securing any repayment due in respect of the first instalment for the Buyer. The Buyer paid this instalment.
By a Deed of Assignment dated 27th 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 27th November 2007 and an acknowledgment of the notice by the Seller was issued on 10th December 2007.
On 14th 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 Buyer had not, in fact, received a contractual Refund Guarantee for the 2 nd instalment by 14 th December 2007 but that cannot affect the true construction of the Payment Guarantee issued by the Bank.
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 29 th November 2006 ("the Shipbuilding Contract") with Tamassos Navigation Ltd as the buyer ("the BUYER") and WUHAN Guoyu Logistics Group CPM LTD and Yangzhou Guoyu Shipbuilding Co. Ltd as the seller ("the SELLER") for the construction of one (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 instalment 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 instalment 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 Instalment 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 instalment 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 Instalment guaranteed hereunder or the BUYER fails to pay any interest thereon, 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 Instalment, 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……
….
(7) Our obligations under this Guarantee shall not be affected or prejudiced by any disputes between you as the SELLER and the BUYER under the Shipbuilding Contract or by the SELLER's delay in the construction and/or delivery of the VESSEL due to whatever causes or by any variation or extension of their terms thereof or by any security or other indemnity now or hereafter held by you in respect thereof, or by any time or indulgence granted by you or any other person in connection therewith, or by any invalidity or unenforceability of the terms thereof, or by any act, omission, fact or circumstances whatsoever, which could or might, but for the foregoing, diminish in any way our obligations under this Guarantee.
…
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 18th April 2009. No representative of the Buyer was present and there has been a dispute as to whether the steel cutting took place at all.
On 29th 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 A. 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 30th June 2009, which was never, in fact, made. No Refund Guarantee in the altered form has been issued.
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