Shipbuilding Disputes - Refund Guarantees



Some salient examples of the continuing saga, more or less:

Sea-Cargo Skips As v State Bank of India [2013] EWHC 177
Held: Invalid demand

Wuhan Ocean and Nantong v Schiffahrts-Gesellschaft [2012] EWHC 3104 (Comm)
Held: Failure to extend validity of refund guarantee within a reasonable time is a breach of innominate term. Buyers entitled to damages but not the right to terminate the shipbuilding contract (which they purported to do so).

Rainy Sky S. A. v Kookmin [2011] UKSC 50
Held: Even if there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. (Buyers’ contented that the bonds guaranteed repayment of pre-delivery instalments under Article XII.3 in the case of any insolvency).

WS Tankship II BV v Kwangju Bank Ltd [2011] EWHC 3103
Held: That the refund guarantees were “demand” guarantees rather than “see to it guarantees” which attracted primary liability.

Meritz Fire and Marine Insurance v (1) Jan de Nul NV [2010] EWHC 3362 (Comm)
Held: That regardless of whether or not the APGs are performance bonds, the shipbuilding contracts gives the defendants the right to terminate the contracts and demand repayment on an insolvency event including “the dissolution…or liquidation of” the Builder. The APGs guaranteed repayment of the advance payments upon a demand with a signed statement certifying that their demand for refund “is made in accordance with clause 17…and that the Builder has failed to make the refund”.

Carey Value Added SL v Grupo Urvasco SA 2010 EWHC 1905 (Comm)
Held: Appropriate language and rebuttal of presumption - Claimant’s application for summary judgment under a Deed of Guarantee and Indemnity was dismissed on the basis that (a) the instrument did not contain language appropriate to a demand bond; (b) as it was a transaction outside the banking context, the presumption, against the interpretation of the instrument as a demand bond had not been rebutted; (c) the respondent has a real prospect of successfully defending the claim. 

Sea Emerald SA v Prominvestbank [2008] EWHC 1979 (Comm).
Held: Lack of authority (actual, ostensible or by ratification) to sign refund guarantees on the bank’s behalf.

Stocznia Gdynia SA v Gearbulk Holdings Ltd [2008] EWHC 944 (Comm)
Held: That Buyer, having affirmed the three contracts and recovered monies plus interest from the refund guarantor in accordance with the provisions of the contracts is precluded from claiming damages at common law. This has now been reversed by the Court of Appeal. [2009] EWCA Civ 75

Clough Engineering Limited v Oil and Natural Gas Corporation Limited [2008] FCAFC 136, FEDERAL COURT OF AUSTRALIA (22 July 2008)
Held: That there was no contention that ONGC had made a fraudulent claim and that the banks liability under the guarantees was “absolute and unequivocal” as they were required to pay “without any demur, reservation, contest or protest and/or without any reference to the contractor”. They held that notwithstanding the existence of a dispute between the Parties, ONGC was entitled to invoke the guarantee.

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