Combined team of Fenwick Elliott, Anneliese Day QC of Fountain Court and Hugh Saunders of 4 New Square win Court of Appeal Case

Simon Tolson and Claire King (with Anneliese Day QC of Fountain Court and Hugh Saunders of 4 New Square acting as Counsel), have won their Court of Appeal case against Santander. Fenwick Elliott were acting for the National Infrastructure Development Company Limited (“NIDCO”). NIDCO is a corporate vehicle used by the government of Trinidad and Tobago to effect public infrastructure works. The Court of Appeal declined to allow Santander’s appeal in respect of a dispute regarding $38 million due pursuant to various of letters of credit (on-demand performance securities). These had been issued to NIDCO pursuant to a FIDIC Yellow Book Contract.

One of Santander’s grounds for appeal pertained to whether monies could be said to be properly “due and owing”, as certified in the demand.  The question was whether the fraud exception could be invoked where there was a debate (or an alternative interpretation) of how the provisions in the underlying contract should be applied meaning that they could arguably not be “due and owing” as certified in the demands. Lord Justice Longmore firmly dismissed this stating:

“No doubt lawyers can have a debate as to whether a current entitlement to claim damages for repudiation entitles one to say that the amount of such damages is due and owing (and I have summarised my own views on that interesting question above) but it borders on the absurd to say that the only realistic inference from the fact that businessman did not have (or may not have had) that debate is that they could not have believed in the validity of their demands.”

This is an important judgment which, along with the Petrosaudi Court of Appeal Judgment, will set minds at rest that a potential widening of the scope of the fraud exception for on-demand performance securities, has been firmly closed. For those claiming on securities, it should also be reassuring that you can’t be accused of being “fraudulent” just because you happen to have a different interpretation as to whether a claim can be made pursuant to the underlying contract to the entity seeking to resist such payment.

A detailed legal briefing will follow.