ALYK (H.K.) Limited v Caprock Commodities Trading Pty Limited and Anor [2012] NSWSC 1558

ALYK (H.K.) Limited v Caprock Commodities Trading Pty Limited and Anor [2012] NSWSC 1558

On construction of the contract, the standby letter of credit operates according to its agreed terms, with no express or necessarily implied limitations restricting the beneficiary's right to make demand except for fraud or unconscionability. No negative stipulation was found. The plaintiff cannot restrain the first defendant from making demand under the standby LC based on the contract as amended.

Parties
Plaintiff: ALYK (H.K.) Limited; First Defendant: Caprock Commodities Trading Pty Limited; Second Defendant: China Construction Bank Corporation
Jurisdiction
Australia
Judgment Date
13 December 2012
Procedural Posture
Principal Judgment / Final Hearing
Outcome
Permanent injunction not granted. Interlocutory injunction dissolved. Stay of orders until 5:00pm, 19 December 2012. Proceedings otherwise dismissed. Submissions invited on special costs orders.
Legal Topics
Letters of Credit, Standby Letter of Credit, Negative Stipulation, Interlocutory and Final Injunctions, Implied Contractual Terms
Contract Law Banking Law Commercial Law Letters of Credit Standby Letter of Credit Negative Stipulation Interlocutory and Final Injunctions Implied Contractual Terms

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Parties

ALYK (H.K.) Limited

Plaintiff

Caprock Commodities Trading Pty Limited

First Defendant

China Construction Bank Corporation

Second Defendant

Procedural Posture

Principal Judgment / Final Hearing

Legal Issues

  1. 1 Whether the first defendant has a right to make demand under the standby letter of credit
  2. 2 Whether the contract contains an implied negative stipulation limiting the circumstances in which the first defendant may call upon the standby LC
  3. 3 Whether the plaintiff may restrain the second defendant bank's payment under the standby LC

Ratio Decidendi

On construction of the contract, the standby letter of credit operates according to its agreed terms, with no express or necessarily implied limitations restricting the beneficiary's right to make demand except for fraud or unconscionability. No negative stipulation was found. The plaintiff cannot restrain the first defendant from making demand under the standby LC based on the contract as amended.

Court Disposition

Permanent injunction not granted. Interlocutory injunction dissolved. Stay of orders until 5:00pm, 19 December 2012. Proceedings otherwise dismissed. Submissions invited on special costs orders.

Orders

  • Plaintiff's Summons dismissed.
  • Plaintiff to pay the defendant's costs.