Queensland Judgments


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Santos Limited v BNP Paribas

Unreported Citation: [2018] QSC 105

In this matter Jackson J considered whether a demand under a performance security or “bank guarantee” complied with the requirement that it be in the form of the letter attached to the bank guarantee and purport to be signed by an authorised representative of the plaintiff. The demand was in the form of a letter annexed to the performance security but replaced the words “authorised signatory of Santos Limited” with “General Manager Development”. Jackson J held that, having regard to the need for strict compliance, it was not a valid demand.

Jackson J

21 May 2018

The plaintiff in this matter claimed for payment of the amount of $55 million due and owing under a performance security signed by the defendant bank. [1]. The performance security was “in the nature of an unconditional bond to pay money on demand up to a stated maximum amount”. [2]. In December 2015, the plaintiff made a demand upon the defendant. [6]. The defendant did not pay the security amount to the plaintiff. [7]. Both parties applied for summary judgment, each on the ground that the other party had no real prospect of success. [9].

The plaintiff alleged that the demand was in the form of the “Annex A letter” that was annexed to the performance security. [10]. The Annex A letter had a sign off which read “authorised signatory of Santos Limited”. [10]. However, the demand was merely signed by Mr Simpson, who was described as the “General Manager Development”. [12]. The defendant argued that the demand was not in the form of the Annex A letter “because the demand did not purport to be signed by an authorised representative of the plaintiff”. [11]. The complaint was not that Mr Simpson lacked actual authority to sign the demand. [13].

Relevantly, paragraph (c) of the performance security provided that:

“Should the Financial Institution receive a notice in writing in the form of the letter attached to this Bank Guarantee (amended as applicable), purporting to be signed by an authorised representative of the Beneficiary … the Financial Institution must make that payment to the Beneficiary immediately…”

The plaintiff argued that Mr Simpson did purport to sign as authorised representative and authorised signatory of the plaintiff. [17]. The defendant, on the other hand, submitted that the proper construction of the instrument was that “a notice desiring payment must state on its face that the signatory is an ‘authorised signatory of Santos Limited’.” [16].

Jackson J explained that the “purpose of the instrument [was] to operate as a bond by a financial institution of worth that will unconditionally pay the amount promised to the named beneficiary when presented with a complying demand”. [19]. As such, “it is of critical importance that the financial institution pays only upon a complying demand, that entitles the financial institution to indemnity from the indemnifier, and that a complying demand must strictly comply with the requirements of the instrument for payment”. [19].

His Honour was ultimately of the view that “the signature by Mr Simpson coupled with the description of his position did not amount to a representation that he was an authorised representative or authorised signatory (if there be any difference) of the plaintiff”. [20]. Accordingly, the demand did not constitute notice in writing purporting to be signed by an authorised representative as required by paragraph (c) and Annex A. [20].

In the result, his Honour held that the defendant had shown that the plaintiff had no real prospect of succeeding on its claim and there was no need for a trial. [28]. Judgment was given for the defendant. [29].

J English