Tecnicas Reunidas Saudia for Services and Contracting Co Ltd v The Korea Development Bank

A demand guarantee must be construed objectively, using both textual and contextual analysis. Where competing constructions exist, the court may prefer the construction that accords with business common sense and avoids rendering the guarantee pointless or commercially absurd. A bank-related condition may be satisfied where payment was made into an account held by a bank associated with the named bank, if that is the objectively appropriate construction. An obvious misnomer may also be corrected where the factual evidence identifies a single possible entity. Under Article 7 of the ICC Uniform Rules for Demand Guarantees URDG ICC Publication 758, a non-documentary condition is deemed unstated and must be disregarded. A rejection of a demand must be sent to the presenter within the time required by Article 24D.

The claimant, the main contractor on a Saudi Arabian construction project, sought summary judgment against the defendant bank under an advance-payment demand guarantee. The guarantee required payment within five business days of a written demand and contained an HSBC condition requiring the advance payment to have been received in an account bearing a specified number held with HSBC.

The advance payment was made into an account with the same number at Saudi British Bank, an HSBC-associated bank in Saudi Arabia. The bank rejected the demand, asserting that the HSBC condition required payment into an account at a bank trading as HSBC. It also relied on the timing and recipient of its notice of rejection. The court considered construction, misnomer, Article 7 of the URDG, and Article 24D.

1. Summary judgment granted. The bank had no real prospect of successfully defending the claim and there was no other compelling reason for a trial.
2. The HSBC condition was not wholly unambiguous. Applying the approach in Rainy Sky & Ors v Kookmin Bank [2011] UKSC 50, and the limits identified in Arnold v Britton [2015] AC 1619 (SC), the court construed it in its commercial and factual context. Payment into the account at Saudi British Bank satisfied a condition referring to a bank trading as, or associated with, HSBC.
3. The bank’s construction would have made the guarantee worthless from the outset because the specified account could never have been maintained with a retail HSBC bank in Saudi Arabia. The court was entitled to avoid that pointlessness or absurdity where the construction remained open on the language. The later amendments and extensions to the guarantee reinforced that conclusion.
4. Alternatively, the reference to HSBC was a misnomer. There was only one possible qualifying account with the specified number. Extrinsic evidence could therefore identify the account at Saudi British Bank, consistently with Durnford Trading AG v OAO Atlantrybflot [2005] 1 Lloyd's Rep. 289 and Gastronome UK Ltd. v Anglo Dutch Meats UK Ltd. [2006] EWCA Civ 1233.
5. In any event, Article 7 of the URDG applied. The HSBC condition required no specified document and could not be determined from the guarantor’s records or an index. It was therefore deemed unstated and had to be disregarded. Article 7 was a deliberate override and could not be neutralised by Article 12.
6. The court also held, if necessary, that the rejection notice should have been sent to TRS, the presenter of the 30 December demand, rather than BNP. The earlier involvement of BNP in presenting another demand did not alter that conclusion. The Article 24D timing issue was not sufficiently clear to provide an independent unanswerable ground.