Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]
Canada's Court of King’s Bench of Alberta denied injunction application of LC Applicant who sought to enjoin Beneficiary demand on standby LC.
![Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]](/content/images/size/w30/2024/08/pacific-atlantic-pipeline-case-2023.jpeg)
Coastal Gaslink Ltd. [2023]
2023 ABKB 736 (Can. Alta. K.B. Dec. 22, 2023) [Canada]
Type of Case: Applicant sought to enjoin Beneficiary demand on standby LC.
Topics: Arbitration; Autonomy (Independence) Principle; Contract Formation; Fraud; Good Faith; Injunction; Standard of Proof; Standby LC
Parties:
• Plaintiff/Contractor/Applicant – Pacific Atlantic Pipeline Construction Inc.
• Second Plaintiff/Contractor Owner – Bonatti, S.p.A.
• Defendant/Principal/Beneficiary – Coastal Gaslink Ltd.
• Issuer – HSBC Bank Canada
Underlying Transaction: Construction of liquid natural gas pipeline.
LC: Standby LC for CAD 117,162,384. Choice of law and practice rules not mentioned.
Decision: The Court of King’s Bench of Alberta, Whitling, J., denied the injunction application.
Rationale: Absent strong prima facie showing of fraud or of an express agreement by beneficiary to refrain from demanding sums under a letter of credit, anti-beneficiary injunction cannot issue under Canadian law; no breach of duty of honest performance (good faith) where demand for sums under standby made by beneficiary with bona fide belief.
Factual Summary:
To support its obligations for a gas pipeline project in British Columbia, Pacific Atlantic Pipeline Construction Inc. (Contractor/Applicant) applied for and caused HSBC Bank Canada (Issuer) to issue a CAD 117,162,384 standby letter of credit in favour of Coastal Gaslink Ltd. (Principal/Beneficiary).[[1]] Contractor/Applicant, a wholly owned subsidiary of Bonatti, S.p.A. (Contractor Owner), was engaged by Principal/Beneficiary in 2012 to build certain sections of the liquid natural gas pipeline (the Contract). Construction, however, “experienced significant challenges” due to the pandemic, which included a five-month suspension of work pursuant to a Public Health Order.
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