MUR Joint Ventures BV v Compagnie Monegasque De Banque

A demand guarantee is construed according to the natural meaning of its terms. Strict compliance, developed in the context of documentary credits, does not automatically apply to demand guarantees.

Requirements for documents accompanying a demand must be stated clearly. A requirement to authenticate documents does not ordinarily require a notary to give a legal opinion on the signatory’s authority. Formal requirements such as multiple signatures or registered post may be directory where the guarantee, read as a whole, shows that effective presentation and an authorised demand were achieved.

MUR claimed US$500,000 plus interest under a demand guarantee issued by Compagnie Monegasque de Banque in support of obligations owed by Monaco Seatrade SAM. MUR made two demands. The Bank resisted payment, alleging that the demands were defective because they lacked authentication of the signatory’s authority, were signed by only one representative, and the first was not sent by registered post.

The guarantee was governed by English law. The court considered the proper construction of its authentication and delivery requirements, the effect of Dutch law on the signatory’s authority, and whether strict compliance was required.

1. Construction of the guarantee. The guarantee was to be construed according to the natural meaning of its language. The court applied the approach summarised in Arnold v Britton, [2015] UKSC 36. Commercial common sense could not displace the wording, but the wording had to be read as a whole.
2. Authentication. Clause 2 required notarisation and apostillisation of the demand letter, the Netherlands Chamber of Commerce register extract and the signatory’s passport. The words “authenticate” and “identifying” concerned the authenticity of documents, not a legal judgment on their contents or on the signatory’s authority. If a Dutch-law legal opinion had been required, the guarantee should have said so expressly.
3. Strict compliance. The strict-compliance rule applicable to letters of credit did not automatically govern demand guarantees. Following I E Contractors v Lloyd’s Bank, [1990] 2 Lloyd’s Rep 496, the degree of compliance depended on construction of the instrument. Sea Cargo v State Bank of India, [2013] EWHC 177 (Comm), illustrated that a demand must nevertheless disclose on its face that the contractual trigger had occurred.
4. Authority and signatures. The Bank accepted that, under Dutch law, Mr Veltema’s acts were legally valid and that he had authority to make the demands. The guarantee was internally inconsistent about whether multiple signatories were required. In context, one authorised signatory sufficed; the wording did not impose an essential requirement for at least two signatures.
5. Delivery. The registered-mail requirement for the first demand was directory rather than mandatory. The demand and attachments had in fact reached the Bank by several means, including courier, so presentation was effective.
6. Disposition. Judgment was given for MUR.