Aria Inc & Anor v Credit Agricole Corporate And Investment Bank & Anor

An injunction restraining payment under a demand guarantee requires a seriously arguable case of clear fraud known to the bank, or fraud as the only realistic inference. A dispute about whether the demand satisfies the guarantee may give the bank a defence, but ordinarily gives the customer no cause of action against the bank absent fraud. If payment would either be contractually authorised or compensable in damages, an injunction is inappropriate. In an insolvency context, the liquidator may rely in another member state on powers conferred by the law of the state where insolvency proceedings opened. The forum’s own procedural law governs the interim injunction. Potential prejudice to the insolvent estate and uncertainty over recovery may justify restraining payment.

Aria Inc owned the vessel Rainbow, which was arrested in France following an unpaid bunker claim brought by World Fuels Services (Singapore) Limited against Allied Maritime. Aria procured an English-law bank guarantee to secure the vessel’s release. WFS later obtained a provisional order against Allied in Bordeaux and demanded payment under the guarantee.

Aria sought continuation of an injunction against the bank, alleging that the French judgment had been dishonestly obtained. Allied’s liquidator advanced a separate claim under the EC Insolvency Regulation, relying on Greek insolvency law and alleged prejudice to Allied’s creditors. The court had to determine whether either claimant satisfied the requirements for interim injunctive relief.

1. Aria’s application. The guarantee was properly characterised as a demand guarantee. Aria therefore had to show a seriously arguable case of clear fraud known to the Bank, alternatively that fraud was the only realistic inference. The court rejected the proposed alternative characterisation under which Aria could restrain payment merely by showing that the demand was invalid.
2. The guarantee was not enforceable by Aria because Aria was not a party to it. Although the Bank might have a defence to a demand that did not satisfy the guarantee, an honest but mistaken payment would not necessarily breach the Bank’s contract with Aria. The reasoning in Ermis Skai Radio & Television v Banque Indosuez SA supported that conclusion.
3. The evidence established a seriously arguable case that the Bordeaux proceedings against Allied had been dishonestly pursued and that the French lawyer had knowingly misled the Bordeaux court by failing to address the Greek insolvency order. This satisfied the fraud exception and the serious-issue stage of the American Cyanamid test.
4. Nevertheless, Aria failed on the remaining interim-relief requirements. If payment was authorised, Aria had no cause of action; if payment was a breach, damages against the Bank were adequate. The analysis in R D Harbottle (Mercantile) Ltd v National Westminster Bank Ltd was applicable. The balance of convenience therefore did not justify continuing Aria’s injunction.
5. Allied’s application. There was at least a seriously arguable case that Greek law governed the relevant insolvency issues and that the liquidator could exercise in England powers conferred by Greek law to prevent prejudice to creditors. Under Article 18(3), English law governed procedural matters, including the interim injunction test. Payment could generate an additional claim against Allied’s estate and recovery from WFS was uncertain. The balance of convenience favoured restraining payment in favour of Allied’s liquidator.

The injunction was continued for the benefit of Allied’s liquidator, but not for Aria.