Экзамен зачет учебный год 2023 / The-independence-principle-of-letters-of-credit-and-demand-guarantees-150-373

analysis.6’ However, it is submitted that neither of these cases affords any support for that analysis. In the first, the Australasian Conference Association case, as has been indicated,62 the High Court ofAustralia decided unanimously that the issue as to which party (as between the issuer and the account party) was entitled to the surplus in the hands of the beneficiary had to be determined by reference to the underlying contract and it concluded, by a majority, that under the contract in that case it was the account party rather than the bank that was entitled to the surplus. In other words, the account party was entitled to the surplus because

57[2008] CSOH 44 at [23].

58Benjamins Sale o fGoods (7th edn, Sweet & Maxwell, London) para 23-288.

59(1978) 141 CLR335.

60(1979) 141 CLR443.

61See, e.g. Benjamins Sale o fGoods (7th edn, Sweet & Maxwell, London) para 23-289.

62See discussion in paras 12.05 to 12.07.

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that is what was provided for in the terms of the underlying contract not because the benefi­ ciary committed a breach of that contract by calling on the bond and receiving an amount which exceeded his actual loss.

12.38There was no suggestion that the beneficiary committed a breach of the underlying contract in demanding the full amount of the guarantee. On the contrary, after examining the relevant provisions of the underlying contract, Gibbs A.C.J. concluded that ‘[t]he combined effect of these provisions was that the [beneficiary] was entitled to call on the [issuer] to honour its undertaking to pay the money’.6364Nowhere in the judgment is there any suggestion that the account party’s entitlement to the surplus was based on the beneficiary’s breach of the under­ lying contract in making the demand for the stipulated amount which later turned out to exceed the amount of his actual loss.

12.39That the rationale of the decision in the.Australasian Conference case is that the account party was entitled to the surplus not because the demand of the beneficiary was in breach of con­ tract but because the underlying contract indicated that that was the intention of the parties is further supported by the statement ofGibbs J. in the subsequent case of WoodHallLtd v. The PipelineAuthority.™ There, Gibbs J., with whose judgment Barwick C. J. and Mason J. agreed, explained that in the Australasian Conference case it ‘was held that since the guarantee was given for the purposes of a provision of the building contract it was right to conclude that the parties to the guarantee mutually contemplated and agreed that the moneys whenprovided by the bank would be dealt with as the building contract required’.65 In the Wood Hall case the underlying transaction was one for the construction of a pipeline. Bank guarantees and reten­ tion guarantees were provided as substitutes for cash security and retention of moneys under conditions G4 and G24 respectively of the contract. When the work was almost complete the employer demanded payment from the bank under the guarantees. Tire account party commenced proceedings to restrain the bank from making payment to the employer on the ground that the employer was not entitled, under the terms of the underlying contract, to call on the guarantees. The High Court of Australia rejected the contention that the demand was made in breach of die underlying contract. It was held that the beneficiary was entitled to call on the bond but that once paid, the ‘money must be held as security for the [account party’s] due and faithful performance of the [underlying contract] ’.66 The decision in this case affords no support for the view that the account party’s right to recover any surplus is based on the idea that the beneficiary’s demand is in breach of the underlying contract because the amount demanded and received turned out to be more than the beneficiary’s loss.

C. Term implied into demand guarantee

12.40A further legal route that has been suggested for the account party’s claim is that of a term implied into the performance bond to the effect that the issuer shall recover the surplus on behalf of the account party. Even if such a term is implied into the performance bond it will only be effective to allow the issuer to recover the money from the beneficiary. For the account party to recover the money from the issuer, it may be necessary to imply another term into the contract between the issuer and the account party to the effect that if the account party

63(1979) 141 CLR 335,351.

64(1979) 141 CLR 443.

65Ibid., at 454. Emphasis added.

66Ibid.

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III. Where Utere is no Express Provision

has already reimbursed the issuer, any surplus recovered by the issuer will be held for the benefit of the account party. This view was advanced recently in the Scottish case of

Spiersbridge Properly Developments Ltd v. M uir Construction Ltd.67 A building contract required the contractor to procure a performance bond for the benefit of the employer. The employer demanded and received payment under the bond. The contractor claimed that it was obliged to and had reimbursed the bank pursuant to the terms of a counter-indemnity it gave the bank. The contractor also claimed that the grounds on which the employer (ben­ eficiary) called on the bond were erroneous and without foundation in that it, the contractor, was not in breach of contract as alleged. On this basis it contended that the employer was obliged to account to it for the sums received under the bond. There was a dispute between the parties as to whether the contractor was in breach of the building contract as alleged and, if so, as to the amount of any damages to which the employer was entitled. That dispute had not yet been determined. However, the parties were also in dispute as to whether, assuming the employer was ultimately found to be entitled to less than the amount it was paid under the

case the court identified some of the issues on which there will be uncertainty. These include the questions whether the bank is to be left on its own to sue, or whether it will be under the instructions of the account party as a kind ofdominus litis? What terms will be implied as regards expenses? Will the bank be held liable to the account party for its conduct of the litigation? Will the court imply into the banking contract reciprocal obligations on the account party to cooperate in the litigation, to provide documents and witnesses, to act diligently, etc.? How will claims to privilege and confidentiality be dealt with?678

67[2008] CSOH 44.

68Ibid., at [17].

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12.44One may add that the complications involved in this two-stage process will only increase in an international transaction involving two banks, where it will become a three-stage process.

12.45Moreover, as already indicated,69 courts should be and are generally reluctant to imply terms into performance bonds since it is desirable that banks and other financial institutions deal­ ing with them should be able to determine the extent of the issuer’s liability on the face of the document. Therefore, just as the courts will not imply a term into the performance bond to enable the issuer to recover (for its own benefit) any excess from the beneficiary, so too they should be reluctant to imply a term into the performance bond to enable the issuer to recover on behalfof the account party.

D. Term implied into the underlying contract

12.46The legal route adopted by the English courts is that of a term implied into the underlying contract. In the absence of clear words to the contrary, a term is implied into the underlying contract to the effect that any surplus in the hands of the beneficiary will be repaid to the account party. This implied term route was first advanced by Morison J. in his very thoughtful judgment in Cargill International 5Л v. Bangladesh Sugar &Food Industries Corporation70 where he held that the ‘basis upon which recovery can be made in respect of an overpayment is, I think, contractual rather than quasi contractual. It seemjs] to me that it is necessary to imply into the contract that moneys paid under the bond which exceeded the [beneficiary’s] actual loss would be recoverable by the [account party]’.71723Morison J.’s decision was approved by the Court of Appeal in the CargillInternationalcase*1and also in Corndel Commodities Ltd v. Siporex Trade SA.13More recently, in Tradigrain v. State Trading Corporation ofIndia,74 Christopher Clarke J. concluded that the Cargill cast is authority for the proposition that there is an implied term (which we may refer to as the Cargill implied term) in the contract of sale that the buyer will account to the seller for any amount that has been paid under a performance bond to the extent that the amount paid exceeds the true amount of the buyer’s loss.

12.47When the term was first implied in the Cargillcase Morison J. said that it was implied either as a matter of necessity or on the basis that the implication of such a term was so obvious that its incorporation in the contract went without saying. However, today the Cargill implied term may be regarded as one implied by law75 since it is now a general rule of law that in all contracts (requiring one party to procure a performance bond for the benefit of the other) a Cargill- type term will be implied, unless the implication of such a term would be contrary to the clear words of the contract.76

12.48 It is submitted that the Cargill implied term route should be preferred (as opposed to the other suggested legal routes) because it avoids the practical and legal difficulties raised by the other legal routes advanced and it is consistent with the fundamental principle of

69See discussion at paras 12.22 to 12.23 above.

70[19961 2 Lloyd’s Rep. 524, 530.

71Ibid., at 531. Morison J. said that the term is to be implied either as a matter of necessity or on the basis that the implication of such a term was so obvious that its incorporation in the contract went without saying.

72 CargillInternational SA v. Bangladesh Sugar & Food Industries Corp [1998] 1 WLR 461.

73[1997] 1 Lloyds Rep. 424.

74[2005] EWHC 2206 (Comm) at [26].

75cf. M alik v. Bank ofCreditand Commerce InternationalSA [1998] AC 20,34, 35; Alt Shipping Corporation v. ShipyardTrogir [\.99%\ 1 Lloyds Rep. 643,65 1.

76cf. Tradigrain v. State Trading Corporation o fIndia [2005] EWHC 2206 (Comm) at [26].

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IV. Where There is no Contractual Relationship

independence of the performance bond obligation. Since the beneficiary is entitled to the performance bond in accordance with the terms of the underlying contract, it is right that the question whether or not he retains any overpayment under the bond should be deter­ mined by the same contract. Where the underlying contract contains an express term as to how any surplus is to be dealt with, effect is given to the term. It is not too much to say that

in the absence of an express term a term should be implied into the contract.

IV. W H ERE TH ERE IS NO CONTRACTUAL

RELATIONSHIP

Although the Cargill implied term is an appropriate legal response to the problem of over­ 1 2 .4 9 payments in most cases, it is incapable of providing a satisfactory answer in cases where there

is no contractual relationship between the beneficiary and the account party. Consider, for example, a case where the underlying contract for the sale of goods requires the performance bond to be issued for the benefit of a third party bank, as security for a financing facility provided by the bank to the buyer who has used it to make an advance payment to the seller. In such a case, there is no contractual relationship between the account party (the seller) and the beneficiary of the performance bond (the third party bank). Therefore, if there is any over­ payment to the beneficiary, the account party cannot recover it on the basis ofa Cargillimplied term. Consequently, unless the law can impose liability on the beneficiary on a different basis, he will retain the surplus as a windfall gain. This is hardly a result which can be viewed with much satisfaction. In the Tradigrain v. State Trading Corporation o fIndia,11for example, Christopher Clarke J. explained that a beneficiary who receives an overpayment must return it. ‘Otherwise they will retain a windfall in the form of money to which they were not entitled’.7879In view of the limitations of the Cargill implied term, can liability be imposed on the beneficiary on some other basis as a response to the windfall problem?

1. Term Implied into the Demand Guarantee?

77[2005] EWHC 2206 (Comm).

78Ibid., at [26].

79[2008] EWCA Civ 819.

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contract with an English purchasing company (AMJ) concerning a series of consignments of cotton on FOB terms. The contract required AMJ to make advance payment to U in respect of 90 per cent of the value of the cotton, with the balance of the payment to be by letter of credit against documents of title. To make the advance payment, AMJ obtained a pre-export finance facility from a syndicate ofbanks for which the defendant bank (S) was the agent and issuing bank. In the ordinary way, the sale contract would have required Us bank to issue a performance bond in favour of AMJ as security for U’s performance of the sale contract. However, since the advance payment was to be made using funds provided by the syndicate, the sale contract specifically called for a guarantee to be issued by U’s bank in favour ofAMJ s nominated bank. And, when issued, the advance payment guarantee (APG) took the form of a direct undertaking by U’s bank to S.

1 2 .5 2 The guarantee provided for the amount payable to be automatically reduced by the value of each consignment of cotton delivered to AMJ. Under a security deed AMJ assigned to S all its rights under the sale contract and in the cotton, although AMJ was free to deal with and sell the cotton in the ordinary course of its business. AMJ was also required to remit the entire proceeds of the sale of the cotton to a ‘Transaction Account’ at S from which it would be distributed to the members of the syndicate (including S itself) and to AMJ insofar as the sub-sale had made a profit.

1 2 .5 3 After some consignments of cotton were delivered by U, disputes arose between U and AMJ about U ’s performance of the contract. S made a demand on the guarantee and received the full amount then outstanding. However, at the time of the demand AMJ had succeeded, with the assistance of S, not only in obtaining control of some of the con­ signments of cotton in respect of which the demand had been made but had sold some to its own customers and the proceeds of sale had been paid into the Transaction Account at S. In other words, when S received full payment under the guarantee it effectively received the value of the goods twice; once in the form of the proceeds of sub-sale which had been remitted into the Transaction Account and once in the form of a recovery of the price under the guarantee. This situation had come about because the parties failed to operate the con­ tractual arrangements in the manner intended, which would have ensured that there was no overpayment. At an arbitration, in which AMJ admitted obtaining possession of some amounts of the disputed cotton, arbitrators found a balance in favour of U in the sum of about US$ 8 million. However, U was unable to recover the money from AMJ because it went into liquidation. U then obtained an assignment from its bank of the bank’s claims under the APG and commenced proceedings against S to recover the overpayment. U ’s primary claim based on fraud failed because the evidence fell far short of the standard necessary to establish fraud.

1 2 .5 4 An alternative claim was that itwas an implied term oftheAPG that in the event drat any demand under it was ultimately found to have exceeded the loss suffered by AMJ and/or S or was other­ wise found to have been excessive, S should repay to U the surplus. The surplus in this casewas said to be die extent to which S received both the proceeds ofthe APG and the proceeds of the cotton to which it related. It was contended that the term should be implied into the instrument in this case because it was given not for the benefit ofa party to the underlying contract (the buyer) but rather to its bank. It was said that such a term was to be implied by law or as necessary in order to give business efficacy to the contract or to reflect the obvious intentions of the parties. It was also argued that if the term were not implied the bank, S, would obtain

288

under the counter-guarantee but he is not a party to the underlying contract between the account party and the beneficiary of the performance bond. If there is an overpayment under the counter-guarantee, the Cargill implied term will not be able to provide the basis for a claim by the account party. The question then arises whether the account party can recover the surplus on the basis of a term implied into the counter-guarantee (as opposed to the underlying contract).

80.See discussion in paras 12.22 to 12.23.

81[2008] EWCA Civ 819 at [22].

82Ibid., at [20].

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Claims Against the Beneficiaryfo r Overpayments

B. Technical & Guarantee Co v. Patterson

12.58In Technical & General Guarantee Co Ltd v. Patterson,m Mr Lancelot Henderson Q.C., sitting as a DeputyJudge of the High Court, expressed the view that ifat the end of the day the beneficiary of a counter-indemnity has suffered no loss*84 then it would be necessary to imply into the counter-indemnity an obligation to repay the money received.85 In that case the underlying contract was a building contract. At the request of the contractor, a guarantee company issued a performance bond to the employer in return for a counter-indemnity given to the guarantee company by the contractor. By the counter-indemnity the contractor undertook to place the guarantee company on demand in cleared funds sufficient to cover any actual and contin­ gent liability arising out of the performance bond. In addition, the defendant, who was a director of the contractor company, gave the guarantee company a personal guarantee, by which he undertook to pay on first demand all moneys owing or payable by the contractor to the guarantee company. The contractor having gone into liquidation, the guarantee com­ pany demanded payment under the defendant’s personal guarantee at a time when the employer had not yet demanded payment under the performance bond. The question was whether the defendant was liable under the personal guarantee even though a demand had not yet been made under the performance bond issued by the guarantee company.

12.59One reason advanced for the view that the defendant’s liability had not yet arisen was that if he were to pay and it later turned out that no demand was made under the performance bond there would be no way of recovering die money paid, since there was no provision for refund under the guarantee. However, Lancelot Henderson Q.C. rejected that contention, holding that in such a case a term requiring a refund should be implied into the guarantee. In other words, in a situation where the Cargill implied term could not apply, the Deputy Judge was prepared to impose on the beneficiary a liability to repay by means of a term implied into the payment instrument in order to reverse the windfall gain which the beneficiary would other­ wise enjoy.

12.60However, it is not clear whether this view remains good law in light of the subsequent decision of the Court of Appeal in the Uxinterimpex case. But the fact that the Deputy Judge was moved to resort to a term implied into the guarantee is an indication of the sense of potential injustice that can result if the beneficiary is allowed to retain his windfall gain.

2.Restitution

12.61Another possible basis of liability is unjust enrichment. It may be argued that the account party has a right to repayment of the surplus by means of a claim in restitution to reverse the beneficiary’s unjust enrichment. The beneficiary may be said to be unjustly enriched at the expense of the account party who will normally be under a liability to reimburse the bank.86 This argument is fortified by the fact that, as indicated above, one policy reason for the ben­ eficiary’s liability under the Cargill implied term is to reverse the beneficiary’s windfall gain.

33 Ch D, 12 February 2003.

84As where the beneficiary of the counter-indemnity demands and receives payment under it in anticipation of a demand for payment by the beneficiary of the performance bond and in the event no such demand for payment is made.

85At [22] and [24].

86Or to reimburse any bank that has reimbursed the paying bank.

290

unjust enrichment. Morritt L.J. said that a ‘payment by a third party under a mistaken belief which gives rise to unjust enrichment of the defendant may be recoverable by the person at whose ultimate expense it was paid if that person is also acting under the same mistake as the third party’.93 Applied to the context of the account party’s claim, this means that a payment by a third party, the bank, which results in unjust enrichment by the beneficiary (the amount of the overpayment) may be recoverable by the account party if it was paid at the ultimate expense of the account party. This may be the case where, as in Khan, the claimant has already reimbursed the third party who made the payment. It may therefore apply to the account party who has already reimbursed the paying bank. However, if this is so, it means that the account party may be able to bring a claim in restitution for unjust enrichment only in cases where the account party has already reimbursed the bank. Restitution for unjust enrichment will not be available in cases where the account party has not yet reimbursed the bank.94

37 Banque Financiere de la Cite v. Parc (Battersea) Ltd [1999] 1 AC 221, 227 (Lord Steyn), 234 (Lord Hoffmann). See also Portman Building Society v. Hamlyn TaylorNeck [1998] 4 All ER202, 206, per Millett L.J.

83 Tlie general rule is subject to a number of exceptions that we need not go into here.

89See, e.g. H ill v. Van Erp\V))\\ 188 CLR 159 (High Court ofAustralia).

90In such a case, the payment will be considered to be at the account party’s expense so that he can maintain a restitutionary claim against the beneficiary. See, e.g. Stevenson v. Mortimer (1778) 2 Cowp. 805; Holt v. Ely

(1853) 1 E & В 795.

91See the discussion above at paras 12.32 to 12.34.

92[2001] BPIR95.

93Ibid., at 104.

94Unless the doctrine in Khan is extended to include the claimant who has not yet paid.

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B. Is the beneficiary’s enrichment unjust?

12.64 Moreover, even if the approach in Khan extends to the account party’s claim where he has not yet reimbursed the bank, there is still a difficulty with the other requirement for an unjust enrichment claim, namely that the enrichment must be unjust. The question of what is ‘unjust’ depends not on the idiosyncratic idea of what a particular judge considers to be unfair but rather on what is legally unjust as demonstrated by the authorities.95 Recognized unjust factors include:96 mistake, duress, undue influence, unconscionable dealing, and failure of consideration. In Khan, the payment was unjust because it was made under mistake and the claimant, acting under the same mistake, reimbursed the payer. In the case of the account party’s claim it is difficult to identify the possible unjust factor. The payment by the issuer (the bank) is not made under a mistake. It is made in accordance with the bank’s obligation under the instrument.97 The account party who reimburses the bank does not do so under a mistake. He does so, in the ordinary case, in accordance with his obligations under his counter-guarantee or indemnity to the bank. There is also no duress, undue influence, unconscionable dealing, necessity, failure of consideration, or any other recognized unjust factor.

12.65It is true that the categories of unjust factors are not closed98 and new unjust factors could be recognized in the future through the usual incremental development of the common law. And it may be that if English law of unjust enrichment decides to abandon its attachment to unjust factors and adopt the civilian model of a condictio indebiti (a claim for the recovery of money on the ground that it was not due)9910it will be possible for the beneficiary’s liability to repay any overpayment to be based on unjust enrichment. But, as the authorities now stand, a claim based on unjust enrichment requires an unjust factor and it is difficult to see the unjust factor on which the account party’s claim could be based.

12.66The same is true of a claim by the issuer instead of the account party. In the recent case of

Sucden FinancialLtd v. Fluxo-cane Oversears L td'00an individual, Mr Garcia, issued a perfor­ mance bond to secure the liability of his own companies to sugar brokers. There was a clause in the bond to the effect that a notice of default given by the brokers shall be conclusive evi­ dence of Mr Garcia’s liability under the bond. When a dispute arose between the company and the sugar brokers, the brokers made a demand for payment under the bond. Beatson J. held that Mr Garcia was liable to pay. In his application for permission to appeal he argued, inter alia, that if the demand was wrong he would have no remedy, since the only indemnity

95DeutscheMorgan Grenfell Group Pic v. Inland Revenue Commissioners [2006] UKHL49; [2007] 1 AC 558 at [150]—[158]

96See, e.g. the list given by Lord Mansfield in Moses v. M acferlan (1760) 2 Burr 1005.

97And the instrument itselfwould have been issued pursuant to the account party’sobligation under the under­ lying commercial contract. Thus, in Lane-Mtdlins v. Warrenby Pty Ltd [2004] NSWSC 817 at [56], Nicholas J. rejected an argument based on unjust enrichment saying that a payment validly made to a beneficiary under a demand guarantee cannot be said to be a benefit ‘unjustly received. No question of unjust enrichment can arise where the [beneficiaries] are paid the moneys which the Plaintiffarranged to be provided to them unconditionally.’

98See, e.g. CTN Cash and Carry Ltd v. Gallaher Ltd [1994] 4 All ER714, 720, per Sir Donald Nicholls V-C.

99In Deutsche Morgan Grenfell Group Pic v. IRC [2007] 1 AC 558 at [358], Lord Walker expressed a ‘tenta­ tive inclination to welcome any tendency of the English law of unjust enrichment to align itselfwith the civilian model. However, if the civilian model is adopted in the form of the pyramid suggested by Professor Birks, Unjust Enrichment (2nd edn, OUP, 2005) 116, then it will not do away with the need for careful analysis of particular unjust factors at the base of the pyramid.

100 [2010] EWCA Civ 249.

2 92