MALAYSIA HOTEL (AUSTRALIA) PTY LTD v SABEMO PTY LTD [1993] NSWCA 306

MALAYSIA HOTEL (AUSTRALIA) PTY LTD v SABEMO PTY LTD [1993] NSWCA 306

There was no implied negative stipulation in the contract preventing the proprietor from calling up the bank guarantee before the final certificate was issued. The guarantee's unqualified language gave the proprietor the right to demand payment at any time, and contractual attempts to circumscribe this right were not supported by the contract language or commercial sense. The appeal was allowed, reversing the first instance decision.

Parties
Appellant / Proprietor: Malaysia Hotel (Australia) Pty Ltd; Respondent / Builder: Sabemo Pty Ltd; Second Respondent / Holding Company: Chew Kong Chian and Sons Holdings Pty Ltd
Jurisdiction
Australia
Judgment Date
12 March 1993
Procedural Posture
Appeal / Decision on Appeal
Outcome
Appeal allowed; orders of Hodgson J set aside; summons in the Equity Division dismissed with costs.
Legal Topics
Bank Guarantees, Building Contracts, Retention Fund, Security Under Contracts, Interpretation of Contract Terms
Contract Law Construction Law Equity Bank Guarantees Building Contracts Retention Fund Security Under Contracts Interpretation of Contract Terms

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Parties

Malaysia Hotel (Australia) Pty Ltd

Appellant / Proprietor

Sabemo Pty Ltd

Respondent / Builder

Chew Kong Chian and Sons Holdings Pty Ltd

Second Respondent / Holding Company

Procedural Posture

Appeal / Decision on Appeal

Legal Issues

  1. 1 Whether the proprietor breached the building contract by calling up the bank guarantee before the architect's final certificate was issued
  2. 2 Whether the guarantee was subject to an implied negative stipulation preventing its being called upon prior to the architect's final certificate
  3. 3 Whether 'or' in a critical contract clause should be read as 'and', limiting when the proprietor could call upon the security

Ratio Decidendi

There was no implied negative stipulation in the contract preventing the proprietor from calling up the bank guarantee before the final certificate was issued. The guarantee's unqualified language gave the proprietor the right to demand payment at any time, and contractual attempts to circumscribe this right were not supported by the contract language or commercial sense. The appeal was allowed, reversing the first instance decision.

Court Disposition

Appeal allowed; orders of Hodgson J set aside; summons in the Equity Division dismissed with costs.

Orders

  • Appeal allowed;
  • Orders of Hodgson J set aside;