REFUND GUARANTEES

1st Edition, 2015

Aids to construction of demand instruments and guarantees

Introduction
5.1 The nature of the refund guarantee to be provided and the obligation to be assumed by the guarantor is of considerable importance to both
the builder and the buyer for the reasons explained in paragraphs 2.37 to 2.41.
5.2 As a matter of English law the nature of a refund guarantee instrument is to be determined as an issue of construction or interpretation
and must ultimately depend upon the words actually used by the parties in any given case, to be construed in accordance with the general
principles and against the relevant factual background as explained in Chapter 4.
5.3 Some useful guidance can be found in the authorities considered below as to the approach which the courts have adopted when asked to
determine the nature of refund guarantees.
5.4 However, it should always be borne in mind that ultimately the court’s task is to ascertain and give effect to the intention of the parties
and thus differences in the factual background, the wording or the context can lead to different results even where similar wording is used.

Demand guarantee or ‘see to it’ guarantee?

Wuhan
5.5 In the case of Wuhan Guoyu Logistics Group Co Ltd v Emporiki Bank of Greece SA,1 Longmore LJ, giving the leading judgment of the
Court of Appeal (with which Rimer and Tomlinson LJJ agreed), approved the guidance given by Paget 2 that where an instrument:
(i) relates to an underlying transaction between the parties in different jurisdictions;
(ii) is issued by a bank;3
(iii) contains an undertaking to pay ‘on demand’ (with or without the words ‘first’ and/or ‘written’); and
(iv) does not contain clauses excluding or limiting the defences available to a surety; it will almost always be construed as a demand guarantee.
5.6 Longmore LJ held that the words ‘will almost always’ amount to a presumption which was justified by the Court of Appeal decisions in
Howe Richardson v Polimex,4 Edward Owen v Barclays Bank5 and Esal (Commodities) Ltd v Oriental Credit Ltd.6
5.7 He noted that in Siporex v Banque Indosuez,7 Hirst J was able to refer to those cases as ‘the strongest authority in favour of the
proposition that the bank guarantor is not and should not be concerned in any way with the rights and wrongs of the underlying transaction’.
5.8 He also noted that the presumption (which is known as ‘Paget’s presumption’) was approved by the Court of Appeal in Gold Coast Ltd
v Caja de Ahorros.8
5.9 In Wuhan, the court was asked to decide the central question whether a payment guarantee was a guarantee properly so-called, or an ‘on
demand bond’ as it is called in banking terminology. Emporiki Bank of Greece (“the Bank”) issued what was described as a ‘Payment
Guarantee’ guaranteeing to pay the second instalment in favour of the builder. The second instalment became payable under the shipbuilding
contract when the seller notified the buyer that the first 300 metric tonnes of steel plate had been cut in its workshop approved by the buyer’s
representatives.
5.10 The relevant provisions of the guarantee were as follows:
‘DETAILS of GUARANTEE
…
(1) In consideration of your entering into … the Shipbuilding Contract …, 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 …
(2) The Instalment guaranteed hereunder, pursuant to the terms of the Shipbuilding Contract, comprises the 2nd instalment … 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 …
(4) In the event that the BUYER fails to punctually pay the second Instalment … 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 …, we shall
immediately pay to you or your assignee the unpaid 2nd Instalment, together with the Interest …, 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.…

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(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 Guarantee9.…’

5.11 In May 2009 the builder sent to the buyer an invoice for the second instalment and a written demand for payment, together with a
certificate confirming that steel cutting had taken place at the seller’s shipyard some three weeks earlier. The buyer refused to pay and
contended, amongst other things, that there was no proof that steel cutting had taken place and thus the second instalment was not payable.
Both the builder and the buyer claimed they had terminated the shipbuilding contract by accepting the other’s repudiatory breach and London
arbitration proceedings were commenced in which these and other issues were to be determined.
5.12 In June 2011, the seller made demand for payment under the guarantee. The Bank declined to pay.
5.13 The seller submitted that the guarantee was in the nature of a demand guarantee or performance bond and issued English court
proceedings against the Bank seeking summary judgment.
5.14 The Bank contended that the instrument was a guarantee properly so-called (ie a secondary liability instrument) and that, since as it
alleged, the second instalment was not due under the shipbuilding contract (because there was no proof that steel cutting had taken place) there
could be no liability under the guarantee.

Wuhan – the judgment at first instance

5.15 At first instance, Christopher Clarke J held that the Payment Guarantee was a guarantee properly so-called (ie a secondary obligation
instrument) and not an on demand bond. He therefore refused the seller’s application for summary judgment. He reached this conclusion after a
careful review of the authorities and considering each of the provisions of the instrument which pointed towards primary and secondary
liability respectively.10 He also took into account the fact that the Bank was not providing the guarantee for a set fee but was closely connected
with the whole transaction which it was financing and could find itself having to pay up to the amount of the second instalment without any
refund guarantee being in place from the seller’s bank to secure its return.
5.16 He adapted the words used by Carnwath LJ in Marubeni to conclude that ‘…if the Seller wanted the additional security of a demand
bond I would have expected it (i) not to use what was (a) described as, (b) took the form and used the language of and (c) included provisions
habitually found in, a guarantee; and (ii) to have used, instead, appropriate (and terser) language to make it clear that that was so’.

Wuhan – the judgment of the Court of Appeal

5.17 The Court of Appeal overturned the judgment of Christopher Clarke J at first instance. Having described the judgment as ‘an exhausting
document’ Longmore LJ said as follows:
‘Entirely understandably he found it necessary, in order to resolve this question of construction, to cite no less than 20 authorities and deliver a
judgment of 93 paragraphs. Beatson J needed to cite a similar number of authorities in Meritz v Jan de Nul [2011] 1 AER (Comm) 1049. But
something has surely gone wrong if this comparatively simple question of construction requires such lengthy consideration. It is a problem of our
system of precedent, that as more and more cases get decided, it seems to be necessary for judges at first instance to consider each case and
determine how near or how far the document in question differs from the document construed in each past case. The commercial community
deserves better than this, if better can be done.
The judge did not find this case particularly easy and neither do I. The difficulty, as so often in these cases, is that there are pointers in different
directions. The following points might be thought to favour a conclusion that the document is a traditional guarantee:-
(i) the document is called a “payment guarantee” not an “on demand bond”;
(ii) clause 1 says that the Bank guaranteed “the due and punctual payment by the Buyer of the 2nd instalment”;
(iii) clause 2 describes the second instalment as being payable (in terms different from Article 3(b) of the Building Contract) 5 days after completion of
cutting of the first 300 metric tons of steel of which a written notice is to be given with a certificate countersigned by the Buyer;
(iv) clause 3 guarantees the due and punctual payment of interest;
(v) clause 4 imposes an obligation on the Bank to pay “in the event that the Buyer fails punctually to pay the second instalment”;
(vi) clause 7 says that the guarantor’s obligation is not to be affected or prejudiced by any variations or extensions of the terms of the shipbuilding
contract or by the grant of any time or indulgence.
Conversely the following points might be thought to favour a conclusion that the document is an “on demand” bond:-
(i) clause 4, which is the clause which requires payment by the Bank, provides that:
(a) payment is to be made on the Seller’s first written demand saying that the Buyer has been in default of the payment obligation
for 20 days; and
(b) payment is to be made “immediately” without any request being made to the Seller to take any action against the Buyer;
(ii) clause 7 provides that the Bank’s obligations are not to be affected or prejudiced by any dispute between the Seller and the Buyer under the
shipbuilding contract or by any delay by the Seller in the construction or delivery of the vessel;
(iii) clause 10 provides a limit to the guarantee of US$10,312,500 representing the principal of the second instalment plus interest for a period of 60
days; it is thus not envisaged that there will be any great delay in payment after default as there will be if (as in the present case) there is a dispute

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about whether the second instalment has ever became due.’

5.18 Against this background, Longmore LJ held that in deciding whether the document is a traditional ‘see to it’ guarantee or an on demand
guarantee, ‘it would be obviously absurd to say that there are 6 pointers in favour of the former and only 4 pointers in favour of the latter and
it must therefore be the former. … The only assistance which the courts can give in practice is to say that, while everything must in the end
depend on the words actually used by the parties, there is nevertheless a presumption that, if certain elements are present in the document, the
document will be construed in one way or the other’.
5.19 Longmore LJ pointed out that these types of guarantees are almost worthless if the bank can resist payment on the basis that the foreign
buyer disputes whether a payment is due. That is particularly so in a case such as Wuhan when the buyer can refuse to sign any certificate of
approval which may be required by the underlying contract.
5.20 Longmore LJ then cited with approval Paget’s presumption, noting that the words ‘will almost always be’ amount to a presumption
which was justified by the Court of Appeal authorities referred to in paragraph 5.6 above and concluded that the document was an on demand
guarantee.
5.21 Longmore LJ said that the factors which led Christopher Clarke J to come to a contrary conclusion could all be very serious points if a
court was approaching the document without regard to previous authority, but the court was not in that position. He respectfully suggested,
therefore, that Christopher Clarke J ought to have had much more regard to Paget’s presumption than he did.
5.22 Finally, he noted that there were indications that the document was to some extent drawn up by persons not entirely familiar with the
English language. In those circumstances it was not right to treat the words with the reverence with which one would construe a statute. It is
much better (and indeed simpler) to be guided by the general tenor of previous authority.
5.23 The Supreme Court refused permission to appeal against the decision of the Court of Appeal, which therefore provides authoritative
guidance as to the approach to be adopted to determine the nature of a refund guarantee instrument.

Gold Coast
5.24 In Gold Coast v Caja de Ahorros,11 the buyer’s obligation to make payment of the pre-delivery instalments due under a shipbuilding
contract was subject to the simultaneous delivery of refund guarantees from issuers acceptable to the buyer’s bank, which had provided finance
for the transaction and taken an assignment of the refund guarantees by way of security.
5.25 The defendant banks issued refund guarantees, each of which contained provisions that:
‘In consideration of your payment to Naval Gijon, S.A. (“the Builder”) of the … instalment (the “Instalment”) under the Shipbuilding Contract
we do hereby irrevocably and unconditionally undertake (except as provided below) that we will pay to you within five (5) days of your first
written demand US$ … together with interest thereon at the rate of two per cent (2%), per annum over LIBOR from the date of your payment of
the instalment to the date of our payment to you of amounts due to you under this Guarantee if and when the instalment becomes refundable from
the Builder under and pursuant to the terms and conditions of the Shipbuilding Contract.
This Guarantee is subject to the following conditions:
1. We shall pay any amount payable under this Guarantee upon receipt of a certificate issued by LLOYDS BANK PLC stating the amount of the
Instalment paid to the Builder under the Agreements, the date of such payment that you have become entitled to a refund pursuant to the Agreements
and that the Builder has not made such refund.
2. This Guarantee shall become null and void upon the earlier of
(a) … delivery and acceptance of the Vessel or
(b) … payment in full … either from us under this Guarantee or directly from the Builder, or
(c) 1 July 2000, provided that in this latter case if arbitration proceedings have been commenced by the Builder or you under
Article 15 of the Shipbuilding Contract, then this Guarantee will remain in full force and effect until 21 days after the publication
of the final award in those arbitration proceedings except that we shall not be liable under this Guarantee for any interest
accruing on the instalment after 1 May 2001…
5. Any variation, amendment to or waiver given in respect of the Agreements will not limit, reduce or exonerate our liability under this Guarantee,
always provided such variation, amendment or waiver will not increase our maximum liability assumed under this Guarantee …
8. This Guarantee shall be governed in every respect by English law. Any Dispute arising under or in connection with this Guarantee shall be referred to
the exclusive jurisdiction of the English Courts.’

5.26 The refund guarantees were governed by English law and contained exclusive jurisdiction clauses in favour of the English courts.
5.27 The buyer and the builder each declared the other in default of the underlying shipbuilding contract and the dispute was referred to
arbitration. In the meanwhile, demands were made under the refund guarantees, accompanied by a certificate from Lloyds Bank. The banks
refused to pay. The buyer issued court proceedings and sought summary judgment.
5.28 The issue for decision was whether upon their true construction, the guarantees issued by the banks were demand guarantees, or
traditional ‘see to it’ guarantees.

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5.29 Thomas J held that the words ‘on first written demand’ were ‘very strong indications’ that the refund guarantee gave rise to obligations
independent of a final determination of the state of affairs under the underlying shipbuilding contract and that this was not a ‘see to it’
guarantee.
5.30 Three main matters were relied upon as indications to the contrary. It was said that (1) the words in the opening paragraph ‘if and when
the instalment becomes refundable from the Builder under and pursuant to the terms and conditions of the Shipbuilding Contract’ made the
payment conditional upon the actual building contract and pointed to the fact that payment is made under the refund guarantee when the
instalments are refundable in accordance with the terms of the shipbuilding contract; (2) the fact that condition 2 provided for a termination
date of the refund guarantee which could be extended in the event that arbitration proceedings commenced under the shipbuilding contract
pointed towards a secondary liability; as did (3) the anti-discharge provision in condition 5.
5.31 As to (1) Thomas J, referring both to a statement in Documentary Credits by Jack, Malek and Quest12 and Esal,13 held that words such
as these did not make payment dependent upon a determination of the actual position as between the parties to the underlying contract.
5.32 As to point (2) Thomas J held that the inclusion of condition 2 in the refund guarantee did not support the argument that the refund
guarantee was a ‘see to it’ obligation. He held that it was clearly foreseeable that there may be circumstances where Lloyds Bank were unable
to come to a view as to whether the buyers were entitled to a refund until after an arbitration award was published, but this did not mean that
Lloyds Bank could not issue their certificate earlier.
5.33 As to (3) Thomas J distinguished the decision of the House of Lords in Trafalgar House Construction (Regions) Ltd v General Surety
& Guarantee Co Ltd,14 (in which the House of Lords held that an anti-discharge provision provided a clear indication that the instrument in
question was a ‘see to it’ guarantee) on the ground that the refund guarantee was quite different in other respects to the bond considered in
Trafalgar House and held that the inclusion of condition 5 did not outweigh the other considerations.
5.34 The defendant banks appealed to the Court of Appeal.
5.35 Tuckey LJ gave the leading judgment in the Court of Appeal (with which Simon Brown and Hale LJJ agreed) upholding the decision
of Thomas J at first instance that the guarantees were so-called ‘on demand’ guarantees independent of the shipbuilding contract.
5.36 Tuckey LJ noted that factors (i), (ii) and (iii) of Paget’s presumption favoured the buyer, but (iv) was in favour of the defendant banks,
since condition 5 was a clause excluding and/or limiting the defences available to a surety. He identified a further feature which favoured the
buyer, namely that payment was to be made against a certificate (condition 1) and referred to the statement of Staughton LJ in IE Contractors v
Lloyds Bank Plc15 that ‘there is a bias or presumption in favour of the construction which holds a performance bond to be conditioned upon
documents rather than facts’.
5.37 Tuckey LJ held that the instrument had all the appearances of a first demand guarantee. The description of the instrument as a
guarantee was simply a label and the instrument did not use the language of a guarantee. The obligation was expressed to be an ‘irrevocable
and unconditional undertaking’ that the banks ‘will pay’ on a first written demand. The only express condition of payment was contained in
condition 1. This required a certificate, but made no reference to arbitration or underlying liability under the shipbuilding contract and the
instrument contained its own dispute resolution provisions.
5.38 He rejected the argument based upon the ‘if and when’ language on the basis that this wording did no more than identify the
contractual events which triggered the right to call the refund guarantee, referring to the same paragraph in Documentary Credits as was
referred to by Thomas J at first instance16, Esal17 and quoting the following passage in the judgment of Ackner LJ:
‘…If the performance bond was so conditional, then unless there was clear evidence that the seller admitted that he was in breach of the contract
of sale, payment could never safely be made by the bank except on a judgment of a court of competent jurisdiction and this result would be wholly
inconsistent with the entire object of the transaction, namely to enable the beneficiary to obtain prompt and certain payment.’

5.39 Referring to condition 5, Tuckey LJ held that this undoubtedly gave the defendant banks their best point, but agreed with Thomas J that it
did not tip the balance in the banks’ favour. He distinguished Trafalgar House on the grounds that there were other very compelling reasons for
the conclusion in that case, not least the language of suretyship which was strikingly absent from the present case. He suggested that possible
reasons why such a clause may be included in an instrument which is intended to be autonomous may be to avoid any argument that variation
of the shipbuilding contract would imperil recovery under the refund guarantees, or it could have been inserted simply to ensure that the rule
applicable to true guarantees did not apply to this instrument.

Meritz
5.40 In Meritz Fire & Marine Insurance Co Ltd v Jan de Nul NV and another,18 the defendant buyers contracted to purchase dredgers being
built by a Korean shipyard (known as HWS). They became obliged to make advance payments in respect of the purchase price of the vessels
and obtained Advance Payment Guarantees (“APGs”) from Meritz Fire & Marine Insurance Co Ltd, which provided that, in the event of
premature termination of the shipbuilding contracts for excessive delay or the insolvency of the builder within the termination provisions of the
contract, such advance payments would be returned with appropriate interest. The APGs were subject to English law and jurisdiction and
incorporated the Uniform Rules for Demand Guarantee of the International Chamber of Commerce, ICC Publication No. 458 (“the Uniform

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Rules”). The provision of the APGs was undertaken as a commercial transaction for a fee.
5.41 In June 2007, the builder merged with another entity and the shipbuilding contracts were without the knowledge or consent of Meritz
or the buyers transferred first to an entity called Buyoung Heavy Industries Co Ltd (“Buyoung”) and then to an entity called Asia Heavy
Industries Co Ltd (“Asia Heavy”).
5.42 Shortly thereafter it became apparent to Meritz and the buyers that Asia Heavy was in financial difficulty. The buyers subsequently
terminated the shipbuilding contracts and demanded repayment of the advance payments together with interest. Asia Heavy did not pay. The
buyers demanded payment from Meritz under the APGs. Meritz refused to pay and issued court proceedings for a declaration that it was not
liable under the APGs.
5.43 The APGs provided as follows:
‘[1] We hereby issue the irrevocable Advance Payment Guarantee (Letter of Guarantee Number …) in favor [sic] of [Jan de Nul NV/Codralux
SA] … (hereinafter called “the Buyer”) for the account of Heun Woo Steel Co Ltd, a shipyard organized and existing under the laws of the
Republic of Korea … (hereinafter called (“the Builder”) in connection with the shipbuilding contract … (hereinafter called (“the Shipbuilding
Contract”) made by and between the Buyer and the Builder for the construction [the vessel is then identified by description and its Builder’s Hull
number] … (hereinafter called “the Vessel”).
[2] If, in connection with the terms of the Contract, the Buyer shall become entitled to a refund of advance payments made to the Builder prior to
the delivery of the Vessel, we hereby irrevocably and unconditionally guarantee the repayment of the same to the Buyer within Thirty (30) days
after demand is made not exceeding the sum [specified] … together with interest …
[3] Under no circumstances shall the amount of this Advance Payment Guarantee (Letter of guarantee) exceed [the specific sum, being an
amount equal to 20% of the total Contract Price in the case of HS1005 and HS1006 and 70% of the total Contract Price in the case of HS1007]
plus interest thereon at the rate of Six percent (6%) per annum …
[4] The Buyer’s demand for payment under this Advance Payment Guarantee (Letter of Guarantee) is payable upon our receipt of the Buyer’s
signed statement certifying that the Buyer’s demand for refund is made in conformity with Clause 17 of the Contract and that the Builder has
failed to make the refund …
[6] Notwithstanding the provisions hereinabove, in the event that within Thirty (30) days from the date of your claim to the Builder referred to
above, we receive written notification from either you or the Builder stating that your claim for refund hereunder is disputed by the Builder and
has been referred to arbitration in accordance with the provision of the Contract, we shall, under this Advance Payment Guarantee (Letter of
Guarantee), refund to you the sum as per the award issued under such arbitration immediately upon receipt from you of a demand for the sum so
adjudged together with a copy of the arbitration award and not before.
[7] This Advance Payment Guarantee (Letter of Guarantee) [shall] become null and void upon receipt by the Buyer of the sum guaranteed hereby
or upon acceptance by the buyer of the delivery of the Vessel in accordance with the terms of the Contract …
[8] This Advance Payment Guarantee (Letter of Guarantee) is valid from the date herein stated below until such time that the Vessel is delivered
by the Builder to the Buyer in accordance with the provision of the Contract.
[9] This Advance Payment Guarantee (Letter of Guarantee) shall be governed by and construed under the substantive law of England and the
undersigned hereby submits to the non-exclusive jurisdiction of the courts of England.
[10] This Advance Payment Guarantee (Letter of Guarantee) is subject to the Uniform Rules for Demand Guarantee of the International
Chamber of Commerce (ICC), ICC Publication No. 458.’

5.44 At first instance,19 there were three issues before the court, namely: (1) whether the APGs were performance bonds or classic contracts of
suretyship; (2) if the latter, whether Meritz were discharged from liability under them as a result of material variations in the shipbuilding
contracts as to the delivery dates of the vessels and/or changes in the corporate identity of the shipbuilder; and (3) irrespective of the nature of
the APGs, whether as a result of the corporate changes the buyers were unable to make a contractual demand that triggered liability under the
APGs.
5.45 As to (1), Beatson J held that the APGs were on demand guarantees. As a result, the second issue did not arise, but Beatson J stated
obiter that Meritz would not be discharged from liability under the APGs as a result of the changes to the corporate identity of the shipbuilder
or because of material variations in the shipbuilding contracts. As to (3), Beatson J held that the buyers were able to make a contractual
demand upon Meritz despite the corporate changes to the shipbuilder.
5.46 Looking at the broad structure of the APGs, Beatson J considered it noteworthy that they had three of the four attributes comprising
Paget’s presumption. As to the fourth attribute – that the instrument is issued by a bank – whilst Meritz’s primary business was insurance, it
was also providing financial instruments for a fee. He approved the statement in Andrews and Millett, The Law of Guarantees,20 that a
document issued by a bank or other financial institution, or by a professional bond issuer will, if it is conditioned on a demand, point to it being
a demand guarantee.
5.47 Turning to the terms of the APGs, Beatson J first observed that the APGs were subject to the Uniform Rules for Demand Guarantees of
the International Chamber of Commerce; this indicated that the parties regarded them as demand guarantees.
5.48 Beatson J went on to conclude that the provisions of the APGs satisfied the definition of ‘demand guarantee’ in the Uniform Rules and
there was no inconsistency between them. Although there were factors which indicated that the guarantor’s liability was secondary in nature,

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namely the conditional if in clause [2] and the references to arbitration in clause [6], these were not enough to ‘tip the balance’ against
construing the APGs as demand guarantees. He referred, in particular, to the fact that (1) payment was triggered by a demand upon
presentation of specified documents; (2) the guarantee was stated to be irrevocable and unconditional; and (3) it was stated to be subject to the
Uniform Rules. The absence of any limitation to, or exclusion of, any of the defences which would be available to a surety was also a pointer
to the instruments being construed as demand guarantees.
5.49 As to the changes to the corporate identity of the shipbuilder, Beatson J held that the buyers had not agreed to the changes, which
occurred because of unilateral action by the shipbuilder and its effect under Korean law. In the absence of agreement and/or a specific breach
of duty on the part of the buyers, the principles in Holme v Brunskill,21 Commercial Bank of Tasmania v Jones22 and First National Finance
Corp Ltd v Goodman23 did not apply, so as to discharge the guarantor from liability under the guarantee.
5.50 In Holme v Brunskill, Cotton LJ made it clear that for the guarantor to be discharged there must be an ‘agreement between the
principals with reference to the contract guaranteed’ and since the novation was effected not by agreement but by operation of law, the rule
did not apply. Beatson J considered that it would also be unattractive to conclude that the guarantors had been discharged of their liability in
circumstances where they had the opportunity to raise objections to the merger of the builder, but chose not to do so.
5.51 Beatson J held also that Meritz was not discharged from the APGs by the material variations of the shipbuilding contracts in relation to
the delivery dates of the vessels. He rested this part of his decision on the fact that Meritz had affirmed the APGs after it had knowledge both
of the merger and of the proposed changes to the delivery dates under the contract.
5.52 On the final issue as to whether the buyers were able to make a demand under the guarantee even though the corporate entity, the
obligations of which Meritz had guaranteed, no longer existed, Beatson J held that the terms of the shipbuilding contracts provided that the
buyers had a right to terminate the contracts and demand repayment on an insolvency event, including the dissolution or liquidation of the
builder. The contract expressly provided for payment under the APGs in the case of the dissolution of HWS and it could not make a difference
that HWS was dissolved as part of a reorganisation that put a new corporate entity in its place. He therefore held that the buyers were able to
make a contractual demand upon Meritz, despite the corporate changes to the shipbuilder.
5.53 The buyers appealed to the Court of Appeal.
5.54 Longmore LJ gave the leading judgment in the Court of Appeal (with which Laws and Etherton LJJ agreed). He held that, in light of
the incorporation of the Uniform Rules into the APGs, the argument that the APGs were traditional ‘see to it’ guarantees was extremely
difficult and rightly rejected by Beatson J.
5.55 The main focus of the argument in the Court of Appeal turned instead upon the precise terms of the APGs and the effect of the
novation in June 2007 as a result of the transfer of the shipbuilding contracts first to Buyoung and then to Asia Heavy.
5.56 Meritz submitted that (1) upon a true construction of the APGs, Meritz had guaranteed the obligation of the original builder to make
the repayment; once that obligation on the part of the original builder had disappeared (whether by transfer to Buyoung or for any other
reason), the APGs no longer had any application; (2) no demand in conformity with clause 17 of the shipbuilding contracts could be made, as
required by the APGs, once Asia Heavy became the builder in place of the original builder; and (3) Commercial Bank of Tasmania v Jones24
decided that where a debtor had been released by novation, the guarantor is discharged.
5.57 Longmore LJ rejected the first argument on the basis that the APGs were intended to operate on the basis that no refund had been
made, not on the basis that the builder had failed to make the refund when it was obliged to do so.
5.58 He rejected the second argument on the ground that it ignored or overlooked the fact that the payment under the APGs was to be made
against documents and there was no requirement that any of the assertions was correct in law.
5.59 As to the third argument, Longmore LJ held that the decision of the Privy Council in Commercial Bank of Tasmania was not
dispositive of the appeal, since that is an authority in relation to a traditional ‘see to it’ guarantee and questions as to whether the debtor is
liable under the underlying contract are irrelevant in the case of demand guarantees.

Tankship
5.60 In WS Tankship II BV v Kwangju Bank Ltd and another; WS Tankship III BV v Seoul Guarantee Insurance Co; WS Tankship IV BV v
Seoul Guarantee Insurance Co,25 disputes arose under a series of refund guarantees provided by the defendants in respect of three shipbuilding
contracts made in favour of the claimants.
5.61 The refund guarantees contained substantially the same following provisions:
‘++LETTER OF GUARANTEE++
[1] WE HEREBY OPEN OUR IRREVOCABLE LETTER OF GUARANTEE NUMBER FG24704OU00001 IN FAVOUR OF WS TANKSHIP II.B.V
(HEREINAFTER CALLED THE “BUYER”) FOR ACCOUNT OF GEO MARINE ENGINEERING AND SHIPBUILDING CO., LTD, KOREA
(HEREINAFTER CALLED THE “BUILDER”) AS FOLLOWS IN CONNECTION WITH THE SHIPBUILDING CONTRACT DATED 13TH DEC.
2006 (HEREINAFTER CALLED THE “CONTRACT”) MADE BY AND BETWEEN THE BUYER AND THE BUILDER FOR THE CONSTRUCTION

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OF ONE (1) ONE 6,000 DWT ASPHALT TANKER, HAVING THE BUILDER’S HULL NO. GMS-103 (HEREINAFTER CALLED THE “VESSEL”).
[2] IF, IN CONNECTION WITH THE TERMS OF THE CONTRACT, THE BUYER SHALL BECOME ENTITLED TO A REFUND OF THE ADVANCE
PAYMENTS MADE TO THE BUILDER PRIOR TO THE DELIVERY OF THE VESSEL, WE HEREBY IRREVOCABLY GUARANTEE THE
REPAYMENT OF THE SAME TO THE BUYER WITHIN THIRTY (30) DAYS AFTER DEMAND NOT EXCEEDING USD1,571,000.00 (SAY U.S.
DOLLARS ONE MILLION FIVE HUNDRED SEVENTY ONE THOUSAND ONLY) TOGETHER WITH INTEREST THEREON AT THE RATE OF
FIVE PER CENT (5PCT) PER ANNUM FROM THE DATE FOLLOWING THE DATE OF RECEIPT BY THE BUILDER TO THE DATE OF
REMITTANCE BY TELEGRAPHIC TRANSFER OF SUCH REFUND.
[3] THE AMOUNT OF THIS GUARANTEE WILL BE AUTOMATICALLY INCREASED UPON THE BUILDER’S RECEIPT THE SECOND, THIRD,
FOURTH AND FIFTH INSTALMENTS, PLUS INTEREST THEREON AS PROVIDED IN THE CONTRACT, BUT IN ANY EVENTUALITY THE
AMOUNT OF THIS GUARANTEE SHALL NOT EXCEED THE TOTAL SUM OF USD12,568,000 (SAY U.S. DOLLARS TWELVE MILLION FIVE
HUNDRED SIXTY EIGHT THOUSAND ONLY) PLUS INTEREST THEREON AT THE RATE OF FIVE PER CENT (5PCT) PER ANNUM FROM
THE DATE FOLLOWING THE DATE OF THE BUILDER’S RECEIPT OF EACH INSTALMENT TO THE DATE OF REMITTANCE BY
TELEGRAPHIC TRANSFER OF THE REFUND.
[4] THE PAYMENT BY THE UNDERSIGNED UNDER THIS GUARANTEE (SUBJECT TO THE SECOND AND THIRD PARAGRAPH HEREOF)
SAHLL [sic] BE MADE UPON SIMPLE RECEIPT BY US OF WRITTEN DEMAND FROM YOU INCLUDING A SINGED [sic] STATEMENT
CERTIFYING THAT THE BUYER’S DEMAND FOR REFUND HAS BEEN MADE IN CONFORMITY WITH ARTICLE X OF THE CONTRACT AND
THE BUILDER HAS FAILED TO MAKE THE REFUND.
[5] IF [sic] IS HEREBY UNDERSTOOD THAT PAYEMENT [sic] OF ANY INTEREST PROVIDED HEREIN IS BY WAY OF LIQUIDATED DAMAGES
DUE TO CANCELLATION OF THE CONTRACT AND NOT BY WAY OF COMPENSATION FOR USE OF MONEY.
[6] NOTWITHSTANDING THE PROVISIONS HEREINABOVE, IN THE EVENT THAT WITHIN THIRTY (30) DAYS FROM THE DATE OF YOUR
CLAIM TO THE BUILDER REFERRED TO ABOVE, WE RACEIVE [sic] NOTIFICATION FROM YOU OR THE BUILDER ACCOMPANIED BY
WRITTEN CONFIRMATION TO THE EFFECT THAT YOUR CLAIM TO CANCEL THE CONTRACT OR YOUR CLAIM FOR REFUNDMENT
THEREUNDER HAS BEEN DISPUTED AND REFERRED TO ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT,
WE SHALL UNDER THIS GUARANTEE, REFUND TO YOU THE SUM ADJUDGED TO BE DUE TO YOU BY THE BUILDER PURSUANT TO
THE AWARD MADE UNDER SUCH ARBITRATION IMMEDIATELY UPON RECEIPT FROM YOU OF A DEMAND FOR THE SUMS SO
ADJUDGED AND COPY OF THE AWARD.
[7] THIS LETTER OF GUARANTEE SHALL BECOME NULL AND VOID UPON RECEIPT BY THE BUYER OF THE SUM GUARANTEED HEREBY
OR UPON ACCEPTANCE BY THE BUYER OF THE DELIVERY OF THE VESSEL IN ACCORDANCE WITH THE TERMS OF THE CONTRACT
AND, IN EITHER CASE, THE BUYER SHALL RETURN THIS LETTER OF GUARANTEE TO US.
[8] THIS LETTER OF GUARANTEE IS ASSIGNABLE AND VALID FROM THE DATE OF THIS LETTER OF GUARANTEE UNTIL SUCH TIME AS
THE VESSEL IS DELIVERED BY THE BUILDER TO TH [sic] BUYER IN ACCORDANCE WITH PROVISIONS OF THE CONTRACT.
[9] THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND THE
UNDERSIGNED HEREBY SUBMITS TO THE NON-EXCIUSIVE [sic] JURISDICTION OF THE COURTS OF ENGLAND.’

5.62 The claimants made various advance payments to the builder under the shipbuilding contracts. The shipbuilding contracts were
terminated by the claimants on the grounds of delay. They brought claims against the defendants under the refund guarantees issued in their
favour by the defendant Korean bank (“the Bank”) and guarantee insurance company (“SGI”), for repayment of the advance payments under
the guarantees. The defendants repaid some, but not all, of the advance instalments to the claimants.
5.63 The defendants raised between them nine different defences. The most relevant of these for the purposes of this discussion are (1) that
the refund guarantee applicable in the case of the Bank (which was only a defendant in the first set of proceedings) imposed a secondary, not
primary liability (ie that it was a traditional guarantee rather than an on demand instrument); and (2) on this basis, the refund guarantee was
unenforceable because it had been sent by electronic SWIFT message and was not ‘signed’ within the meaning of the Statute of Frauds 1677.
The Bank accepted that this point would only arise if the guarantee was found to impose a secondary obligation.26
5.64 The guarantees given by SGI were in the same form as that provided by the Bank and although SGI did not dispute the primary nature
of the instruments, it sought to adopt the position of the Bank in the event that it found favour with the court.
5.65 The basis for the Bank’s position that the refund guarantee was a traditional guarantee and not a demand guarantee, was as follows:
(1) The word ‘if’ at the beginning of the second paragraph of the guarantee (which read: ‘If, in connection with the terms of the contract, the
buyer shall become entitled to a refund of the advance payments…’ (emphasis added)) imposed liability in the event that the buyer should
become entitled to a refund.
(2) Under the second paragraph of the guarantee, the Bank guaranteed the ‘repayment’ of the advance payments to the buyer. The Bank
contended that the builder was the only party which could repay the monies to the buyer and hence the Bank was guaranteeing the performance
of the builder’s obligation and not promising its own primary obligation.
(3) The reference in the fifth paragraph of the guarantee to payment of any interest being by way of liquidated damages due to cancellation of the
contract showed that liability was secondary, since if the instrument imposed a primary liability, this paragraph would be redundant.
(4) The provision in the sixth paragraph of the guarantee was another positive indication that the liability was secondary because, if the claim for
a refund from the builder was challenged in arbitration, the liability of the Bank would be dependent upon the determination in the arbitration of
the obligations between the parties.
(5) The provision in the seventh paragraph that ‘upon receipt by the buyer of the sum guaranteed or upon its acceptance of the vessel… the
refund shall become null and void’ was language consistent with a secondary rather than a primary obligation.
(6) Finally the Bank asserted that the guarantee letter repeatedly used the words ‘guarantee’ and was headed ‘Letter of Guarantee’.

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5.66 Construing the instrument as a whole and without preconceptions Blair J held27 that the guarantee in question issued by the Bank was a
demand guarantee. He dealt with each of the Bank’s assertions in turn. In relation to the first argument set out at (1) above, Blair J noted that a
similar argument was rejected in Meritz Fire & Marine Insurance v Jan de Nul NV 28 and that the wording does not point to the Bank’s liability
being secondary. He went on to say that the guarantee provides in the fourth paragraph for payment ‘on demand’ against a ‘signed statement
certifying that the buyer’s demand has been made in accordance with Article X of the contract and that the builder has failed to make the
refund’. Blair J held that it is this statement which conditions the Bank’s obligation to pay rather than the buyer’s contractual entitlement to a
refund of the advance payments. He said this also answered points (2) and (3).
5.67 As to the Bank’s argument at point (4), Blair J held that this provision did not in his view imply that the guarantor’s liability is
secondary. His reasoning was as follows:
‘… The paragraph provides that where, within 30 days from the date of the buyer’s claim on the builder, the bank receives notification that the
claim for cancellation/refund has been disputed and referred to arbitration, payment will be of the sum adjudged due in the award and made
upon demand together with a copy of the award. The provision envisages that in the event that the builder refers the issue to arbitration, the
guarantee will respond to the amount adjudged to be due under the award. It is true that there may be an issue on the construction of the
guarantee where there has been a prior demand under the fourth paragraph, but that does not arise in this case, where there was no reference to
arbitration. This provision does not in my view imply in any way that the guarantor’s liability is secondary. The instrument is conditioned either
upon the certification in the demand, or (if the dispute as to cancellation/refund goes to arbitration) the amount of the award. Essentially the
same argument on very similar provisions was rejected in Meritz at [76]…’29

5.68 In relation to point (5), Blair J again referred to Meritz and held that it was fair to say that ‘null and void’ provisions are predicated on
facts ultimately referable to the underlying contract, but read with the instrument as a whole the provision was consistent with primary liability.
5.69 On point (6), Blair J referred to the principle established in Gold Coast v Caja de Ahorros30 that nothing turns on whether an
instrument is called a guarantee. The nature of the instrument depends upon the terms of the instrument in question as a whole.
5.70 Blair J considered further ‘marginal points’ raised by the Bank,31 but concluded by stating that the refund guarantees in this case were
demand guarantees and that, despite the number of points raised, he did not consider this to be a doubtful issue.

Rainy Sky – the judgment at first instance

5.71 In Rainy Sky SA & Others v Kookmin Bank,32 Simon J was asked to decide at first instance whether the claimants were entitled to
payment under advance payment bonds, regardless of any dispute as to whether repayment of the instalments were due under the shipbuilding
contracts.
5.72 The advance payment bonds provided:
‘(1)…Other terms and expressions used in this Bond shall have the same meaning as in the Contract, a copy of which has been provided to us.
(2) Pursuant to the terms of the Contract, you are entitled, upon your rejection of the Vessel in accordance with the terms of the Contract, your
termination, cancellation or rescission of the Contract or upon a Total Loss of the Vessel, to repayment of the pre-delivery instalments of the
Contract Price paid by you prior to such termination or a Total Loss of the Vessel (as the case may be) and the value of the Buyer’s Supplies
delivered to the Shipyard (if any) together with interest thereon at the rate of … (7%) per annum (or … (10%) per annum in the case of Total Loss
of the Vessel) from the respective dates of payment by you of such instalments to the date of the remittance by telegraphic transfer of such refund.
(3) In consideration of your agreement to make the pre-delivery instalments under the Contract and for other good and valuable consideration
(the receipt and adequacy of which is hereby acknowledged), we hereby, as primary obligor, irrevocably and unconditionally undertake to pay to
you, your successors and assigns, on your first written demand, all such sums due to you under the Contract (or such sums which would have
been due to you but for any irregularity, illegality, invalidity or unenforceability in whole or in part of the Contract) PROVIDED THAT the total
amount recoverable by you under this Bond shall not exceed US$[26,640,000]… plus interest thereon at the rate of … (7%) per annum (or …
(10%) per annum in the case of Total Loss of the Vessel) from the respective dates of payment by you of such instalments to the date of the
remittance by telegraphic transfer of such refund.
(4) Payment by us under this Bond shall be made without any deductions or withholding and promptly on receipt by us of a written demand
(substantially in the form attached) signed by two of your directors stating that the Builder has failed to fulfil the terms and conditions of the
Contract and as a result of such failure, the amount claimed is due to you and specifying in what respects the Builder has so failed and the
amount claimed. Such claim and statement shall be accepted by us as evidence for the purposes of this’.

5.73 In considering the nature of the instruments, it was submitted on behalf of the claimants that there was nothing exceptional about the
wording of the advance payment bonds. Although they referred to the underlying obligations of the shipbuilding transaction, this was not an
invitation to the defendant to investigate the underlying merits of the claim that the builder was in breach of the shipbuilding contract. Simon J
upheld this submission and went on to note that the express terms of the advance payment bonds required the claimants to provide a statement
specifying in what respects the builder had failed to fulfil the terms and conditions of the contract.
5.74 Simon J concluded that the bonds were demand guarantees and absent fraud the defendant was obliged to pay against a demand from
the claimants in the form in which it was made.

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5.75 The decision of Simon J that the advance payment bonds in question were on demand instruments was not the subject of an application
for permission to appeal and this issue was not, therefore, addressed by the Court of Appeal or the Supreme Court.

Primary/principal obligor
5.76 It is common for refund guarantees to contain wording to the effect that the guarantor’s obligation to pay under the instrument is as
‘Primary Obligor’ or ‘Principal Obligor’ and ‘Not merely as Surety’ or ‘Not by way of secondary liability only’.
5.77 In the BIMCO NEWBUILDCON form, for example, Clause 2 of the specimen refund guarantee at Annex A (iii) provides ‘… we
irrevocably and unconditionally guarantee (but as primary obligor and not by way of secondary liability only)…’.
5.78 It is clear that the inclusion of such a provision will not, of itself, determine whether an instrument is a contract of guarantee or a
contract of indemnity, or convert a guarantee into an indemnity.33
5.79 However, as Sir Bernard Rix concluded in CIMC Raffles Offshore (Singapore) Limited and Yantai CIMC Raffles Offshore Limited v
Schahin Holding SA34 ‘… the role of primary obligor language in a guarantee is complex and ultimately dependent, as it would seem, on the
language and nature of the particular guarantee concerned’.
5.80 In Heald v O’Connor35 the guarantee contained wording as follows:
‘… if and whenever the company makes default in payment of any such principal money [the guarantor] will pays[sic] the amount thereof on
demand provided that the liability hereunder of the guarantor shall be as a primary obligor not merely as a surety and shall not be impaired or
discharged by reason of [certain specified circumstances]…’36

5.81 In considering the plaintiff’s argument that this clause created a contract of indemnity, Fisher J said as follows: ‘… The only straw for the
plaintiff to clutch is the phrase “as a primary obligor and not as surety” but that, in my judgment, is merely part of the common form of
provision to avoid the consequence of giving time or indulgence to the principal debtor and does not convert what is in reality a guarantee into
an indemnity’. He therefore rejected this contention.37
5.82 Instead, it had been held that the purpose of a ‘principal debtor/obligor’ clause is to obviate the need for the beneficiary to make
demand upon the guarantor as a prerequisite to enforcement of the guarantee.38
5.83 In General Produce Co v United Bank Ltd,39 Lloyd J held that, although the plaintiffs’ liability under the document began as that of
guarantor, when the principal borrower’s liability was released, it continued as that of principal debtor by reason of the principal debtor
clause.40 Referring to Heald v O’Connor he said as follows:
‘I agree with Mr. Justice Fisher that it is common to find a provision such as is found here in par. 5 in guarantees and I certainly do not hold that
it automatically converts every guarantee into an indemnity. But equally its operation is not confined to the consequences of giving time or other
indulgence to the principal debtor and I very much doubt if Mr. Justice Fisher intended so to confine it. In the present case it is combined with a
provision for the continuance of the bank’s rights despite the release of the principal debtor’s liability by operation of law. The release of the
principal debtor normally discharges the guarantor as does a binding agreement to give time. The words in par. 5 seem to me equally apt to
enable the guarantor’s liability to continue as if he were the principal debtor in either case. That does not necessarily mean that he is to be
regarded as the principal debtor for all purposes from the inception of the guarantee but only that the creditor is entitled to treat him as the
principal debtor in certain events.’

5.84 In Credit Suisse v Allerdale Borough Council,41 a guarantee contained a clause in the following terms:
‘This guarantee shall not be discharged nor shall liability be affected by reason of [circumstances specified] and such monies or liabilities will be
recoverable by the [creditor] from [the guarantor] as sole or principal debtor.’

5.85 Colman J held that a narrower construction was to be adopted and that the clause did not prevent the guarantor from relying on variations
of the loan agreement to discharge the guarantee.

Contra Proferentem
5.86 There is a substantial body of authority which indicates that contracts of suretyship are to be construed in the same way as any other
contract, but there are also numerous cases which support the rule that no liability can be imposed upon the surety which is not clearly and
distinctly covered by the terms of the agreement. There are also various decisions which suggest that contracts of suretyship should be
construed in favour of the surety, because in accordance with the rule of contra proferentem, the terms of the contract are in most cases drafted
by the creditor.42
5.87 In Meritz, Beatson J referring to the rule or principle of contra proferentem stated that: ‘While the principle may have a more limited
role today, it survives and, where there is ambiguity or uncertainty about the intention of the parties, the approach reflected in it remains
useful.’43

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5.88 However, the conflicting authorities are not easy to reconcile. As with any other contract, the court will always try to construe the
language of the guarantee to give effect to the intentions of the parties. The court will, therefore, always have regard to the surrounding
circumstances and the factual matrix to determine the extent and the scope of the guarantee, as can be seen from the decisions discussed
previously in this chapter.

Summary
5.89 It is clear from the authorities referred to in this chapter that (1) where each of the four factors comprising Paget’s presumption described
in paragraph 5.5 are present there is a presumption that the instrument is a demand guarantee; (2) where the Uniform Rules for Demand
Guarantee of the International Chamber of Commerce are incorporated into the instrument, it will be construed as a demand guarantee (unless
the instrument contains other language which is inconsistent with the imposition of primary liability); and (3) where each of the four factors
comprising Paget’s presumption are not present, the instrument will be construed as a demand instrument where it otherwise has all the
appearances of one.
5.90 The court’s task is to construe the instrument as a whole without any preconceptions in order to determine the nature of the instrument.
The court will adopt a commercial approach to the construction of such instruments. Where the instrument has all the appearances of a demand
guarantee it will be construed as such, notwithstanding the inclusion of a provision or provisions which are usually more appropriate to true
guarantees. Where refund guarantees are issued by a bank, other financial institution, insurance company or performance bond issuer as part of
a commercial transaction in return for a commission or a fee, the court will be heavily influenced by the fact that the guarantees are
commercially worthless if the bank can resist payment on the ground that the buyer or builder (as the case may be) disputes whether payment is
due.
5.91 This is illustrated by the fact that in each of Wuhan, Gold Coast, Meritz, Tankship and Rainy Sky it was held that the instrument in
question was a demand instrument, even though: (i) in Wuhan and Gold Coast the guarantee contained an anti-discharge provision; and (ii) in
Meritz and Tankship the guarantee contained a provision to the effect that, in the event of a dispute as to the buyer’s entitlement to cancel the
shipbuilding contract and/or claim a refund of the advance payment(s) which was referred to arbitration, the surety would refund the sums
adjudged due pursuant to the arbitration award.

1 [2012] EWCA Civ 1629.

2 Paget’s Law of Banking (14th edn, LexisNexis Butterworths 2014) paragraph 34.8.
3 It is clear that the presumption also applies where the instrument is issued by a financial institution, an insurer or a professional bond issuer
in the business of providing irrevocable financial instruments; Meritz Fire & Marine Insurance Co Ltd v Jan de Nul NV and another [2010]
EWHC 3362, [2011] 1 All ER (Comm) 1049 (QB) [66]; Andrews and Millett, Law of Guarantees (6th edn, Sweet & Maxwell 2011) paragraph
16–002.
4 [1978] 1 Lloyd’s Rep 161.
5 [1978] QB 159.
6 [1985] 2 Lloyd’s Rep 546.
7 [1986] 2 Lloyds Rep 146.
8 [2001] EWCA Civ 1806, [2002] 1 All ER (Comm) 142, [2002] 1 Lloyd’s Rep 617 (CA) [16] discussed at 5.24 to 5.39 below.
9 Curiously paragraph 7 was not quoted in the report of the decision at first instance but appears in the report of the Court of Appeal
decision.
10 At paragraphs 32 to 61 of his judgment.
11 Supra n. 8.
12 (3rd edn, Butterworths, 2001) paragraph 12.57.
13 Esal (Commodities) Ltd and Reltor Ltd v Oriental Credit Ltd and Wells Fargo Bank NA [1985] 2 Lloyd’s Rep 546 (CA).
14 [1996] AC 199.
15 [1990] 2 Lloyd’s Rep 496 (CA) 500.
16 Gold Coast v Caja de Ahorros [2001] EWHC 504 (Comm).
17 Supra n. 13.

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18 [2011] EWCA Civ 827, [2012] 1 All ER (Comm) 182.

19 [2010] EWHC 3362 (Comm), [2011] 1 All ER (Comm) 1049.
20 Andrews and Millett, paragraph 16–002.
21 (1878) 3 QBD 495. See Chapter 14.
22 [1893] AC 313.
23 [1983] BCLC 203.
24 Supra n. 22.
25 [2011] EWHC 3103 (Comm).
26 This aspect of the case is discussed in paragraphs 3.33 to 3.37.
27 Supra n. 25 at [112].
28 Supra n. 19 at [74] and [75].
29 Supra n. 25 at [116].
30 Supra n. 8 at [21].
31 Namely that usual language of primary obligations – such as ‘unconditionally’, ‘primary obligor’, ‘not as surety’, ‘forthwith’ – were not
present. The Bank sought to rely upon the fact that the words ‘and unconditionally’ were present in paragraph 2 of the Meritz instruments, but
were not present in the instruments in this case.
32 [2009] EWHC 2624 (Comm), [2010] 1 All ER (Comm) 823. The Supreme Court decision is discussed at paragraphs 4.2 to 4.24.
33 Carey Value Added SL v Grupo Urvasco SA [2010] EWHC 1905 (Comm), [2011] 2 All ER (Comm) 140.
34 [2013] EWCA Civ 644, [2013] 2 All ER (Comm) 760 [60].
35 [1971] 1 WLR 497 (QB).
36 Ibid at 500 D.
37 Ibid at 503 D.
38 MS Fashions Ltd v Bank of Credit and Commerce International SA (In Liquidation) [1993] Ch 425. See also Andrews and Millett
paragraphs 1–014 and 7–006.
39 [1979] 2 Lloyd’s Rep 255.
40 Ibid at 258–259.
41 [1995] 1 Lloyd’s Rep 315.
42 See Andrews and Millett paragraph 4–002 for further commentary.
43 Supra n. 19 at [56].

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