PERKINS MARITIME INTERNATIONAL PTY LTD v COMMONWEALTH BANK &
ANOR
Supreme Court of the Northern Territory of Australia Angel J
21 and 22 October 1991 at Darwin

BANKING - 'Bank Guarantee' - charter party - guarantee provided by bank as security for performance - unconditional undertaking to pay when "properly demanded" - alleged demand outside terms of guarantee - whether fraud - relevance of charter party to guarantee

INJUNCTION - 'Bank Guarantee' - guarantee provided by bank as security for performance of charter party - demand on guarantee alleged to be fraud - whether bank to be restrained from paying upon demand

INJUNCTION - Interim - ex parte application - extent of counsel's duty of disclosure to court
PRACTICE AND PROCEDURE - allegation of fraud - must be clearly made and fully particularised
PRACTICE AND PROCEDURE - duty of counsel where fraud alleged

Cases considered:
Edison v Bullock (1913) 15 C.L.R. 679
Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] Q.B. 159
Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd [1985] 1 N.S.W.L.R. 545
Wood Hall Ltd v The Pipeline Authority & Anor (1979) 141
C.L.R. 443

Cases followed:
Harbottle (Mercantile) Ltd v The National Westminster Bank [1978] Q.B. 146

Cases referred to:
Reddaway & Anor v Banham & Anor [1896] A.C. 199

Counsel for the plaintiff: Solicitors for the plaintiff:

T Riley QC and
J Noonan
J Noonan

Counsel for the first defendant: Solicitors for the first defendant:

Counsel for the second defendant: Solicitors for the second defendant:

G Hiley QC and K Philp Cridlands

J Waters Ward Keller

ang910034
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA

No. 375/1991

BETWEEN:
PERKINS MARITIME INTERNATIONAL PTY LTD
Plaintiff

AND:
COMMONWEALTH BANK
First Defendant

AND:

HVG HANDELS UND SCHIFFHARTS GMBH
Second Defendant

CORAM:	ANGEL J

EXTEMPORE REASONS FOR JUDGMENT
(Delivered 22 October 1991)

This is an application by the plaintiff, a customer of the first defendant bank, seeking an interlocutory injunction against the first defendant to restrain it from making any payment to the second defendant pursuant to a document described as a bank guarantee and dated
14 September 1988.	The plaintiff also seeks an injunction against the second defendant to restrain it from enforcing, or seeking to enforce, any rights or obligations arising pursuant to the bank guarantee.

By a charter party dated 29 June 1988, the plaintiff agreed to charter a vessel known as the 'Markham Bay' from the second defendant, the owner of the vessel, for the term therein mentioned.		The charter party is in standard form with variations.	It is unnecessary to set out the entire document, but I set out certain relevant clauses, as they actually appear:

1125. Law and Arbitration
This Charter shall be governed by the law of the country agreed in Box 33 (if Box 33 not filled in, English Law shall apply).	Any dispute arising out of this Charter shall be referred to arbitration in London or at the place agreed in Box 34 as the case may be, the dispute being settled by a single Arbitrator to be appointed by the parties hereto. If the parties cannot agree upon the appointment of the single Arbitrator the dispute shall be settled by three Arbitrators, each party appointing one Arbitrator, the third being appointed by the Arbitrators of the parties.	If the Arbitrators fail to agree on the appointment of the third Arbitrator, such appointment shall be made by The Baltic and International Maritime Conference in Copenhagen.	If either of the appointed Arbitrators refuses or is incapable of acting, the party who appointed him shall appoint a new Arbitrator in his place.
If one party fails to appoint an Arbitrator - either originally or by way of substitution - for two weeks after the other party having appointed his Arbitrator has sent the party making default notice by mail, cable or telex to make the appointment, The Baltic and International Maritime Conference shall, after application from the party having appointed his Arbitrator, also appoint an Arbitrator on behalf of the party making default. The award rendered by the Arbitration Court shall be final and binding upon the parties and may if necessary be enforced by the Court or any other competent authority in the same manner as a judgment in the Court of Justice."

Box 33 of the form is headed "Applicable Law (Cl. 25)" and therein is typed "English".

"27) vessel to be delivered in darwin under commenwealth flag, ...

30)	to secure charter's obligation, charterers shall at least 7 days prior to the estimated delivery date, establish a bankguarantee in favour of the owners which guarantee may be excercised by the owners should the charterers default under this charter, but which shall be released by owners to charterers within one month after redelivery of the vessel to owners in accordance with the terms and conditions of the charterparty.	Guarantee amount to be equal to 90 days charterhire in australian Dollars.

Despite wording of box 15/cl 27 - all surveys and paperwork to be carried out in Singapore (incomming costs for vessel to be borne by Charterers i.e. costs ab arrival first seapilot), whereafter owners sail her to Darwin under Charterers insurance, but otherwise at their Own costs as far as crew, and bunkers are concerned.Hire to commence from time of arrival at charterers berth at Darwin.(Incomming costs to be born by charterers).	charterers have the right to fix her with cargo from Singapore to Darwin via ports at their own benefit, but costs for crew, bunkers, exceeding 7 days to be paid by charterers."

Box 15 of the form is headed "Port of delivery (Cl. 1)" and therein is typed "Darwin see Cl.2711

Pursuant to clause 30 of the charter agreement, a 'bank guarantee' was established.	The document is dated
14 September 1988.	I set it out in full.

"COMMONWEALTH BANK OF AUSTRALIA BANK GUARANTEE
TO:	HVG HANDELS UND SCHIFFAHRTS[sic] GMBH & CO
("the Favourees")

RE:	M/V MARKHAM BAY
29 JUNE 1988

BAREBOAT CHARTER PARTY DATED

At the request and for the account of PERKINS MARITIME INTERNATIONAL PTY LTD the ("the Charterer") and in consideration of the Favourees entering into a Bareboat Charter Party dated 29th June 1988 a copy of which is attached hereto, chartering the M/V MARKHAM BAY to the Chartered, Commonwealth Bank of Australia ("the Bank")· unconditionally undertakes to pay any sum which may be properly demanded pursuant to this Guarantee from time to time during the term of this Guarantee by the Favourees to a maximum of .TWO HUNDRED AND SEVENTY EIGHT THOUSANDDOLLARS[sic] ($278,000).
The term of this guarantee shall be 37 consecutive months commencing on the date of delivery of the M/V MARKHAM BAY pursuant to clause 27 of the Charter Party.

Should the Favourees wish to make a demand under this guarantee they shall by notice of demand in writing advise the Bank that the Charter is in breach of the Charter Party.	Any such notice of demand shall:-

specify the breach or breaches of the Charter Party which the Favourees rely upon to make demand under this guarantee;

state the fact that the Charterer has failed to rectify the said breach or breaches in the time or in the manner required by the Charter Party;
contain a certificate sworn by the owner verifying the matters stated in the notice of demand
Upon receiving a[sic] any such notice of demand from the Favourees the Bank shall forthwith give a true copy of the same to the Charterer.

Notwithstanding any notice given by the Charterer to the Bank not to pay the same, payment or payments will be made to the Favourees after receipt of a notice of demand without further reference to the Charterer provided that the liability of the Bank shall not exceed the sum of TWO HUNDRED AND SEVENTY EIGHT THOUSAND DOLLARS ($278,000).

The Bank's liability hereunder shall terminate upon payment to the Favourees of the said sum of TWO HUNDRED AND SEVENTY EIGHT THOUSAND DOLLARS ($278,000) or such
lesser amount as may be required or specified by the Favourees or upon the expiration of the term of this guarantee.

Notice to the Bank with respect to this Guarantee may be effected by way of facsimile to the Bank's facsimile number

Dated at Darwin this 14th day of September 1988 For Commonwealth Bank of Australia
(Manager)"

The second defendant made a demand on the defendant bank.	The second defendant demanded the sum of US$278,000. The demand was supported by a certificate in terms of the guarantee.	Annexed to the demand was a detailed account whereby the second defendant claimed a total of US$405,375.03 against the plaintiff.	The second defendant also requested the plaintiff to extend the term of the 'bank guarantee' until mutual agreement was reached, or arbitration was had, resolving the differences between them. Apparently that request passed unheeded by the plaintiff.
The second defendant's offer not to call upon the guarantee pending arbitration, provided its interests were safeguarded in the interim, runs counter to the plaintiff's submission before me that the second defendant is guilty of fraud and lacks bona fides.

The plaintiff submitted that the second defendant's

demand is out of time, being beyond the term of the guarantee.	The plaintiff also asserted that the claim of the second defendant, in so far as it claims unpaid hire under the charter party agreement, is for a period preceding the effectiveness of the charter party agreement; this turns on the time and place of delivery of the vessel, which are matters in dispute between the parties.

The plaintiff also asserted that the demand upon the bank and the prospect of the bank paying out on the demand constitutes a fraud on the plaintiff.

The word 'fraud' is not used in any of the correspondence or exchanges between the parties, and it does not appear in any of the affidavit material before me, or, so far as I can discover, in any other material on the court file.	However the word 'fraud' was used by counsel for the plaintiff, both senior counsel on the first day of the hearing, and junior counsel who took up the plaintiff's case in the absence of senior counsel on the second day of the hearing.

I am not altogether clear as to the nature of the alleged fraud.	I enquired of Mr Riley QC at one stage whether he was alleging common law deceit.	He did not give me any encouragement to think that is what he was alleging. I also enquired as to the possibility of equitable fraud, or fraud on a power, but again, Mr Riley did not seem to

embrace those possibilities with any enthusiasm either.	As I have said, nothing has been said in the written material before me as to fraud.	Mr Noonan, who used the word again today, said that the fraud was constituted by, in effect, the second defendant falsely claiming and demanding monies plainly not due to it from the bank under the bank guarantee.	The second defendant's actions, he said, were "at least colourable".

In this case there is no evidence of fraud, and, in my view, the material before me does not even give rise to a hint or suspicion of fraud.	At most, the plaintiff's allegations would constitute a breach of contract on the part of the second defendant and/or the first defendant in relation to their respective contracts with the plaintiff, but that is a far cry from fraud.	Fraud in this context, whatever else it means, involves dishonesty and there is nothing whatsoever to suggest that the owners of the ship under the charter party agreement are dishonestly making a claim or asserting anything other than a bona fide claim.

As I have said, I can see no evidence of fraud.	I repeat that fraud has not been alleged in any of the documents, it has not been alleged in any of the correspondence between the parties.	In the course of the hearing I referred counsel to Lord MacMillan's essay, 'Ethics of Advocacy' in The Law and Other Things, Cambridge at the University Press, 1937, at pages 191-192.	It is

worthy of repetition.

"Written pleadings are frequently sent to counsel for revisal containing serious allegations of fraud, dishonesty, or misconduct.	The consequence of lodging such pleadings in Court may be to cause irreparable injury to the person thus publicly accused.	For an advocate to allow such charges to be launched with his name attached to them without the fullest investigation would be to abuse the absolute protection against actions for slander which the law affords to counsel.
Counsel is not worthy of that protection unless he justifies it by the most scrupulous care in his written or oral attacks on character.	He must insist upon being supplied with all the information which is thought by his client to justify the attack, and then he must decide for himself whether the charges made are such as can be justifiably made.	In exercising his judgment in such a matter the advocate is fulfilling one of the most delicate duties to society which his profession casts upon him.	It is no·small responsibility which the State throws upon the lawyer in thus confiding to his discretion the reputation of the citizen.	No enthusiasm for his client's case, no specious assurance from his client that the insertion of some strong allegations will coerce a favourable settlement, no desire to fortify the relevance of his client's case, entitles the advocate to trespass, in matters involving reputation, a hair's-breadth beyond what the facts as laid before him and duly vouched and tested will justify.	It will not do to say lightly that it is for the Court to decide the matter.	It is for counsel to see that no man's good name is wantonly attacked."

I naturally tread warily where responsible counsel make an allegation of fraud, but, in my view, no case can possibly be made out on the material before me.	It is true, as Lord Macnaghten said on a celebrated occasion in Reddaway & Anor v Banham & Anor [1896] A.C. 199 at 221, that fraud is infinite in variety, but in my view there is not a hint or suspicion of any variety of fraud on the materials before me.	There is nothing to suggest any dishonesty or lack of bona fides on the part of either defendant in what either of

them propose, or on what they have done by way of activating the bank guarantee.

There is nothing to suggest, let alone establish fraud on a power, if that is relevant, which is doubtful, see Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd [1985] 1 N.S.W.L.R. 545 at 552G-554D.

As to the allegation of fraud, I would add this.	The plaintiff's counsel did not condescend to particularise the alleged fraud.	It is a fundamental principle of fairness that any allegation of fraud be clearly made and with full particularity.	I adopt, without qualification, the text of Kerr on Fraud and Mistake, seventh edition, at 644.

"In actions brought for the purpose of impeaching transactions on the ground of fraud, it is essential that the nature of the case should be distinctly and accurately stated.	The facts must be so stated as to show distinctly that fraud is charged.	Any charge of fraud or misrepresentation must be pleaded with the utmost particularity; it·will not be inferred from the circumstances pleaded, at all events if those circumstances be consistent with innocence.	A general charge of fraud, however strong, without alleging specific facts, is not sufficient to sustain the action.	It must be shown in what the fraud consists, and how it has been effected.	The fraud alleged must be set forth specifically in particular and in detail, so that the person against whom it is charged may have the opportunity of knowing what he has to meet, and of shaping his defence accordingly."

And, of course, the serious nature of the allegation attracts a high onus of proof.

In the absence of fraud, it seems to me to be very

difficult to see how the plaintiff can obtain the relief it seeks.	The plaintiff is not a party to the bank guarantee. I, with respect, fully agree with the observations of Kerr J in Harbottle (Mercantile) Ltd v The National Westminster Bank Ltd & Ors [1978] Q.B. 146 at 155, where he said:

"The plaintiffs then still face what seems to me to be an insuperable difficulty.	They are seeking to prevent the bank from paying and debiting their account.	It must then follow that if the bank pays and debits the plaintiffs' account, it is either entitled to do so or not entitled to do so.	To do so would either be in accordance with the bank's contract with the plaintiffs or a breach of it.	If it is in accordance with the contract, then the plaintiffs have no cause of action against the bank and, as-it seems to me, no possible basis for an injunction against it.	Alternatively, if the threatened payment is in breach of contract, which the plaintiffs' writs do not even allege and as to which they claim no declaratory relief, then the plaintiffs would have good claims for damages against the bank.	In that event the injunctions would be inappropriate, because they interfere with the bank's obligations to the Egyptian banks, because they might cause greater damage to the bank than the plaintiffs could pay on their undertaking as to damages, and because the plaintiffs would then have an adequate remedy in damages.	The balance of convenience would in that event be hopelessly weighted against the plaintiffs."

So too here, it seems to me.	If the defendant bank, in paying on the second defendant's demand is within the bank's contractual obligations to the plaintiff, then the plaintiff can have no complaint.	If, on the other hand, the bank breaks its contract with the plaintiff, the plaintiff has its remedy in damages, and the plaintiff has not demonstrated that those damages would not be an adequate remedy in the circumstances.	Any injunction would interfere with the defendant bank's obligation to the second defendant.

There was argument before me as to whether the 'bank guarantee', to which I have referred, gives rise to the relationship of principal and surety.	Mr Waters, for the second defendant, relying on Wood Hall Ltd v The Pipeline Authority & Anor (1979) 141 C.L.R. 443, Edward Owen Engineering Ltd v Barclays Bank International Ltd (1978]
Q.B. 159, and Hortico (Australia) Pty Ltd, supra, submits that the bank guarantee is not a guarantee in the strict sense, but is what has become known as a 'performance bond'; see Hortico, supra, at 551.	Mr Hiley QC, for the Commonwealth Bank, submitted that the document is different from the documents referred to in the cases relied upon by Mr Waters.	Mr Hiley stressed the use of the adverb 'properly' in the document.	He highlighted the fact that the charter party agreement itself is annexed to the document, and he submitted that the elaborate notification and certification provisions regarding demand by the second defendant are otiose if indeed it is nothing but a true performance bond.

Were it necessary to decide the point, I would hold that it is a performance bond not giving rise to the relationship of principal and surety.	I do not think the document imports into the province of the bank nice questions or disagreements between the charterer and the owner under the charter party agreement.	I do not think it gives rise to questions of primary and secondary obligation, as does the relationship of principal and surety.	I think

this is the result of a proper construction of the document, particularly having regard to the use of the adverb 'unconditionally' and the later clause requiring the bank to pay without reference to any advice or request to the contrary from the plaintiff.	The word 'properly', in my view, in the context of this document imports the idea that the demand should be	genuine and bona fide, and I think the certification requirement as to demand is really no more than a provision to satisfy the bank that the demand is genuine.	I do not, as I have said, see that the bank's liability turns on questions to be resolved in an arbitration between the hirer and the owner of the vessel under the charter party agreement.

However I find it unnecessary to enter into this area or make any decision upon it.	I decline Mr Riley's offer to decide these questions as between the defendants in the absence of any cross-claims or third party notices between them in this litigation.	It seems to me to be unnecessary and inappropriate to decide these questions on this application in these proceedings where the plaintiff seeks interlocutory injunctive relief severally against the two defendants.	I think it is unnecessary and inappropriate for me to decide on this application whether the second defendant's demand gives rise to an obligation on the part of the first defendant bank to pay.	These matters were not fully argued before me and could, on the plaintiff's approach at least, ultimately turn on evidence not before

me.

Mr Noonan, for the plaintiff, cited authority to the effect that banks are not bound to honour demands under performance bonds and the like unless the demand is in strict accordance with the terms of the bond.	I wish to say no more than that it is far from clear to me that the second defendant's demand in the present case gives rise to an obligation on the part of the first defendant bank to pay according to the terms of the demand.	I say this particularly having regard to.the fact that the demand is for payment in US dollars and the limit of the document is, prima facie, in Australian dollars, it having been executed in Darwin.

But all these questions are matters between the defendants that prima facie do not concern the plaintiff who is not a party to the bank guarantee.	The relationship between the defendant bank and the plaintiff is now in evidence before me, it is that of banker/customer.	Assuming the bank wishes to substantiate and safeguard its right of recourse against the plaintiff in respect of any payments to the second defendant, it seems to me that some confidence can be had in the fact that the bank duly advised, and for sound commercial reasons, is not likely to wittingly breach its contract with the plaintiff and overpay the second defendant, leaving itself open to no recourse against the plaintiff.

In my view, the injunctive relief sought by the plaintiff in this case should be refused.	The plaintiff has failed to establish that there is a serious question to be tried. Neither defendants' past or presently anticipat d conduct gives rise, it seems to me, to a seriously apprehended wrong to the plaintiff's rights which attracts the need for injunctive protection.	In the event that the plaintiffs' commercial interests are adversely affected by any future action of the defendants, and assuming that some breach of the plaintiff's contractual rights has occurred or is threatened, there is no case made out on the material before me that damages are not an adequate remedy.	The balance of convenience, in my view, is clearly in favour of leaving this commercial dispute free from equitable intrusion.

I should mention in this matter that on
15 October 1991, the learned Chief Justice made an interim injunction that was based on the content of Mr Noonan's affidavit of 15 October 1991.	It was, as I have said, an application for an interim injunction and injunctions were granted against both defendants.	The defendant bank was before the court, although the second defendant was not, and therefore the injunction against the second defendant was made ex parte.

I do not wish to say too much about Mr Waters' submission about the affidavit of Mr Noonan being

misleading, or the learned Chief Justice having been misled on the application for an interim injunction.

The principles are quite plain.		When an ex parte application is made to injunct a party either to do something or refrain from doing something, courts will only make an order if satisfied that justice demands that a party be ordered to do or refrain from doing something before they are heard.	Normally the court would require the party to be before it and be heard before any order is made at all.	It behoves a plaintiff who seeks an order in such circumstances to be very frank with the court, not only to put its own case, but to put all relevant matters against the granting of the order sought.	It is apparent in this case that there was not the full frankness before the learned Chief Justice that there ought to have been.	I do not wish to dwell upon this.	I do not wish to develop it.	The principles are well known.		It is sufficient to refer to the well known case of Edison v Bullock (1913) 15 C.L.R. 679, particularly at 681-
682.

The circumstances in which the plaintiff obtained the ex parte relief from the learned Chief Justice underscore my view that there should be no injunctive relief on this application.

Accordingly, and for these reasons, I think the interim order that I made yesterday extending the injunction until

further order, should be discharged, and that the plaintiff's application for interlocutory injunctions against both defendants should be dismissed with costs.	I certify for counsel, including senior counsel.