Greenland Bank Ltd v American Express Bank Ltd

Where foreign proceedings concerning a contract governed by foreign law are pending, an English court should not pre-empt them unless the foreign outcome is plain. A claimant seeking repayment may therefore fail where the foreign court has found against the defendant and there is a real, rather than fanciful, prospect that the finding will stand on appeal.

In assessing that prospect, the court may consider whether fresh evidence is likely to be admitted under principles akin to Ladd v Marshall, and whether the foreign court may adopt a plausible construction of the contract. A rectification argument requires pleaded and evidenced antecedent arrangements; it cannot be introduced speculatively after the event.

Westmont Power (Bangladesh) Ltd obtained a performance bond from American Express Bank Ltd at the request of Greenland Bank Ltd, securing Westmont’s obligations under a Bangladeshi power purchase agreement. The bond initially expired on 10 June 2000, with provision for possible annual renewal until 10 June 2013.

After Greenland entered liquidation, the bond’s renewal became disputed. Bangladesh proceedings resulted in findings and orders adverse to Amex, which appealed. Greenland then claimed repayment in England of the deposited security. Evans-Lombe J dismissed the claim, holding that there was a real prospect that a Bangladesh court would finally conclude that the bond had not lapsed. Greenland appealed on fresh evidence, contractual construction and rectification. The central question was whether that prospect was real or merely fanciful.

1. Appeal dismissed. The English court should not pre-empt the pending Bangladeshi litigation concerning a Bangladeshi contract governed by Bangladeshi law unless its outcome is plain. The judgment below was therefore upheld because there was a real prospect that the Bangladesh appellate court would uphold the finding that the bond had been extended to 10 June 2001 and might conclude that it remained effective thereafter.
2. On fresh evidence, the evidence consisted of Amex documents which had not been put before the Bangladesh trial court. The parties accepted that the Bangladesh appellate court would apply principles akin to those in Ladd v Marshall, requiring reasonable diligence, likely material influence on the result, and evidence capable of belief. Amex faced an obvious difficulty in explaining its omission. There was consequently a real prospect that the evidence would be excluded and that Amex would remain bound by the finding that its receipt of the renewal commission indicated agreement to renewal. The first ground failed.
3. On construction, Ward LJ considered the natural meaning of the renewal clause to require, after the initial extension, a written request by Bangladesh Power and Amex’s agreement for each annual renewal. The words permitting renewal for successive one-year periods did not make renewal automatic. Nevertheless, the court’s task was only to assess whether the Bangladesh appellate court might reasonably adopt a different construction where the foreign litigation was pending. That possibility was real, not fanciful, having regard to the bond’s commercial purpose and its stated objective of securing obligations until 2013.
4. The rectification argument had no real prospect of success. It had not been pleaded or supported by evidence of antecedent arrangements and was inconsistent with the negotiations, which showed that Amex had insisted on an initial two-year, then annual-renewal, structure. No rectification could properly remove the requirement for Amex’s agreement or transform the bond into a guarantee for the whole contractual term.
5. Hughes LJ and Rimer LJ agreed that the appeal should be dismissed. The order was to be stayed pending the outcome of the Bangladesh appeal, rather than the English claim being dismissed outright at that stage.

• Court of Appeal (Civil Division): [2009] EWCA Civ 14. Appeal dismissed. The English proceedings were stayed pending the outcome of the appeal in Bangladesh.
• High Court of Justice (Chancery Division): Evans-Lombe J dismissed Greenland’s claim for repayment of the deposited security and granted permission to appeal.
• High Court in Dhaka, Bangladesh: judgment dated 5 May 2004 directed Amex to extend the bond for one year, issue a new guarantee and refrain from demanding its return. Amex’s appeal was pending.