Banque Saudi Fransi v Lear Siegler Services Inc

On an application for summary judgment concerning an alleged fraud exception to a performance bond, CPR 24.2 applies in the ordinary way. The claimant must show a real prospect of proving fraud by the beneficiary. In this context, that means a real prospect of proving that the beneficiary could not honestly have believed that its demands under the bond were valid. This is a difficult, high threshold. Fraud may be proved without an admission, but speculation that further disclosure may emerge cannot establish the required prospect of success.

Banque Saudi Fransi appealed from a decision of His Honour Judge Mackie QC in the Queen’s Bench Division, Commercial Court. The appeal concerned the claimant’s case that demands made by Lear Siegler Services Inc under a performance bond were fraudulent, and whether that case had a real prospect of success for the purposes of summary judgment.

Lady Justice Arden delivered the judgment referred to by Lord Justice Pill. Arden LJ would dismiss the appeal. Pill LJ agreed, including with the applicable test and the conclusion that the evidence fell well short of establishing a real prospect of proving fraud.

1. Appeal dismissed. Lady Justice Arden’s judgment was adopted by Lord Justice Pill, and Lord Justice Pill agreed with the conclusion that the appeal should be dismissed.
2. The test in CPR 24.2 applies in this context as in any other. The court was not justified in disregarding the words of the rule.
3. The relevant exception to the autonomy of the performance bond was fraud of which the bank had notice. At the first stage, the claimant had to show a real prospect of proving fraud by the beneficiary. This required a real prospect of proving that the beneficiary could not honestly have believed in the validity of its demands on the bond.
4. That burden was a difficult one and represented a high hurdle. Admissions were not essential to proof of fraud, but the evidence relied on, including Mr Young’s statement, fell well short of establishing the required real prospect.
5. It would be pure speculation to infer a real prospect of success from the possibility that further disclosure might occur. The appeal was therefore dismissed, with the formal order: Appeal dismissed.

• Court of Appeal (Civil Division): [2006] EWCA Civ 1130. Appeal from the Queen’s Bench Division, Commercial Court, before His Honour Judge Mackie QC. The Court of Appeal dismissed the appeal.