DCW Updates
DCW Monthly: December 2024
We’re thrilled to share the newest edition of DCW’s premium monthly content. This month’s highlights include: * Five
DCW Litigation Digest
Shinetec (Australia) Pty Ltd. v. The Gosford Pty Ltd. [2024]
Contractor Shinetec (Australia) and parent company Shanxi Construction Investment Group (standby applicant) appealed dismissal of claims against beneficiary The Gosford.
14 min read
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Shinetec (Australia) Pty Ltd. v. The Gosford Pty Ltd.
[2024] NSWCA 174 [Australia]
Type of Lawsuit: Contractor and parent company (standby applicant) appealed dismissal of claims against beneficiary.
Topics: Abuse of Process; Appeal; Breach of Contract; Comity; Fraud; Injunction; Interpretation; ISP98 Official Commentary; ISP98 Rule 1.06; ISP98 Rule 1.07; ISP98 Rule 1.08; ISP98 Rule 2.01; ISP98 Rule 5.01; ISP98 Rule 6; ISP98 Rules 6.11-6.13; Receivership; Standby LC; Transfer by Operation of Law
Parties:
• Plaintiff/Appellant/Contractor – Shinetec (Australia) Pty Ltd.
• Respondent/Defendant/Cross-Plaintiff/Principal/Beneficiary – The Gosford Pty Ltd.
• Second Appellant/Contractor Parent/Applicant – Shanxi Construction Investment Group Co. Ltd.
• Cross-Defendant/Issuer – Bank of China Ltd., Shanxi Branch
• Advising Bank – Macquarie Bank Ltd.
Underlying Transaction: Financing and construction of property development in New South Wales.
LC: AUD 37 million ISP98 standby letter of credit; silent on choice of law. Chinese law applied as having closest connection.
Decision: The New South Wales Court of Appeal, Leeming, Kirk and Ward, JJ., dismissed an application to adduce new evidence and dismissed the appeal.
Rationale: Appeal dismissed. Affirming trial court decisions: (1) Absent claim of fraud or unconscionability, alleged false standby demand statements insufficient to void demand as against beneficiary; (2) Where no express choice of law, Chinese law applied as legal system of closest connection to standby; (3) ISP98 Rules on transfer by operation of law not applicable where demand was made for named beneficiary by its receivers and officers and was supported by advising bank authentication; (4) In light of facially compliant demand and no evidence of fraud, issuing bank must honour; and (5) Where foreign proceedings suspend bank undertaking to honour, judgment of local court stayed pending resolution of parallel proceedings.
[2024] NSWCA 174 [Australia]
Type of Lawsuit: Contractor and parent company (standby applicant) appealed dismissal of claims against beneficiary.
Topics: Abuse of Process; Appeal; Breach of Contract; Comity; Fraud; Injunction; Interpretation; ISP98 Official Commentary; ISP98 Rule 1.06; ISP98 Rule 1.07; ISP98 Rule 1.08; ISP98 Rule 2.01; ISP98 Rule 5.01; ISP98 Rule 6; ISP98 Rules 6.11-6.13; Receivership; Standby LC; Transfer by Operation of Law
Parties:
• Plaintiff/Appellant/Contractor – Shinetec (Australia) Pty Ltd.
• Respondent/Defendant/Cross-Plaintiff/Principal/Beneficiary – The Gosford Pty Ltd.
• Second Appellant/Contractor Parent/Applicant – Shanxi Construction Investment Group Co. Ltd.
• Cross-Defendant/Issuer – Bank of China Ltd., Shanxi Branch
• Advising Bank – Macquarie Bank Ltd.
Underlying Transaction: Financing and construction of property development in New South Wales.
LC: AUD 37 million ISP98 standby letter of credit; silent on choice of law. Chinese law applied as having closest connection.
Decision: The New South Wales Court of Appeal, Leeming, Kirk and Ward, JJ., dismissed an application to adduce new evidence and dismissed the appeal.
Rationale: Appeal dismissed. Affirming trial court decisions: (1) Absent claim of fraud or unconscionability, alleged false standby demand statements insufficient to void demand as against beneficiary; (2) Where no express choice of law, Chinese law applied as legal system of closest connection to standby; (3) ISP98 Rules on transfer by operation of law not applicable where demand was made for named beneficiary by its receivers and officers and was supported by advising bank authentication; (4) In light of facially compliant demand and no evidence of fraud, issuing bank must honour; and (5) Where foreign proceedings suspend bank undertaking to honour, judgment of local court stayed pending resolution of parallel proceedings.
Factual Summary:
To support[[1]] its performance and funding obligation for The Gosford Pty Ltd.’s (Principal/Beneficiary) construction project, Shinetec (Australia) Pty Ltd (Contractor) had its parent company, Shanxi Construction Investment Group Co. Ltd. (Contractor Parent/Applicant)[[2]] apply for and cause Bank of China Ltd., Shanxi branch (Issuer) to issue a AUD 37 million ISP98 standby letter of credit in favour of Principal/Beneficiary. The standby was advised, albeit on a “Letter of Guarantee” form, by Macquarie Bank Ltd. (Advising Bank) and would expire on 31 July 2021. Within the full copy of the “Letter of Guarantee” advice, the type was stated as “Performance”. The Judgment provided copies of the standby and presented demand.
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Related Litigation:
• Shinetec (Australia) Pty Ltd. v. The Gosford Pty Ltd., [2023] NSWSC 1405 [Australia] (dismissing applicant claims alleging invalid demand and granting beneficiary cross-claims against issuing bank; beneficiary judgment stayed pending litigation in China) (“Trial Judgment”).
• Shinetec (Australia) Pty Ltd. v. The Gosford Pty Ltd., [2023] NSWSC 1405 [Australia] (dismissing applicant claims alleging invalid demand and granting beneficiary cross-claims against issuing bank; beneficiary judgment stayed pending litigation in China) (“Trial Judgment”).
The standby required a written demand stating that Contractor was in default, in what respects, and the amount claimed. Additionally, the standby required that “any such demand in original should be presented to us [Issuer] through your bank [Advising Bank] confirming that the signatures thereon are authentic with their confirmation by authenticated SWIFT.” While no choice of law was stated, the trial Judge applied Chinese law concluding that legal system had the closest connection to the standby. That finding was not challenged on appeal.
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Cases Referenced:
• Heytex Bramsche GMBH v Unity Trade Capital Ltd., [2022] EWHC 2488 [England]
• Griffin Energy Group Pty Ltd. v. ICICI Bank Ltd., [2015] NSWCA 29 [Australia] (detailed analysis of ISP98 rules and standard standby practice)
• United City Merchants (Investments) Ltd. v. Royal Bank of Canada, [1983] 1 AC 168 [England]
• Heytex Bramsche GMBH v Unity Trade Capital Ltd., [2022] EWHC 2488 [England]
• Griffin Energy Group Pty Ltd. v. ICICI Bank Ltd., [2015] NSWCA 29 [Australia] (detailed analysis of ISP98 rules and standard standby practice)
• United City Merchants (Investments) Ltd. v. Royal Bank of Canada, [1983] 1 AC 168 [England]
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