McGuid v Office De Commercialisation et D'Exportation

[2000] NSWSC 503

CITATION:	McGuid -v- Office De Commercialisation et D'Exportation [2000] NSWSC 503
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50121/98
HEARING DATE(S):	2.6.00, 5.6.00
JUDGMENT DATE:	8 June 2000
PARTIES :	Sarwat McGuid t/as ABS Gulf -v- Office De Commercialisation et D'Exportation & National Australia Bank Limited & Export Finance Insurance Corporation
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiff: M W Hadley Second Defendant: M Walton SC
SOLICITORS:	Plaintiff: Colinard & Co Second Defendant: Dibbs Crowther & Osborne
CATCHWORDS:	Practice and procedure - interlocutory order - no substantive right over which Court has jurisdiction - whether order should be maintained lis alibi pendens in relation to foreign proceedings - whether inherent jurisdiction or power of Court under s 23 or s 66(4) has any application - balance of convenience favouring maintaining order.
CASES CITED:	Riley McKay Pty Ltd -v- McKay [1982] 1 NSWLR 264 The Siskina [1979] AC 210
DECISION:	Orders in terms of pars 1 and 2 of the Notice of Motion: Plaintiff to pay the second defendant's costs of the proceedings and of this application.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HUNTER J

THURSDAY 8 JUNE 2000

50121/98 SARWAT MCGUID T/AS ABS GULF -V- OFFICE DE COMMERCIALISATION ET D’EXPORTATION & NATIONAL AUSTRALIA BANK LIMITED & EXPORT FINANCE AND INSURANCE CORPORATION

REASONS FOR JUDGMENT

1    National Australia Bank Limited (the bank), the second defendant in these proceedings, moves by way of Notice of Motion for the following orders:

“1. the order made by this Court on 14 October 1998 that the second defendant be restrained from paying the Banque Marocaine Du Commerce, Casablanca, any amount on account of Sarwat McGuid, trading as ABS Gulf, pursuant to standby letter of credit AI2098048635, until further order, be discharged;
2. the proceedings as against the second defendant be dismissed; ...”

2    On 20 July 1999 Einstein J granted a permanent stay against the first defendant. His Honour’s reasons for judgment, which were revised on 15 September 1999, conveniently set out the nature of the proceedings, and for ease of reference, the relevant paragraphs follow:

“2 The parties to the proceedings are Sarwat McGuid trading as ABS Gulf [“Gulf”], OCE, National Australia Bank Limited [“the Bank] as second defendant and Export Finance Insurance Corporation [“EFIC”] as third defendant.
...
4 The plaintiff is a resident of New South Wales trading from premises at 12 Lily Street, Croydon Park, and is a Cost Accountant and Licensed Meat and Livestock Exporter. The first defendant is an entity formed and existing under the laws of the Kingdom of Morocco. The Bank is an Australian corporation. EFIC is an Australian corporation.
...
7 The dispute arises in relation to the April 1998 issue by OCE of a request for tenders to supply frozen bovine meat as specified.

8 Following a tender submitted by Gulf, Gulf and OCE are alleged to have agreed that Gulf would supply meat to OCE on particular terms and conditions recorded in a document accepted by the parties as having been signed by them in Casablanca on or about 22 May 1998. I understand there to be no contention but that following further negotiations between Gulf and OCE, the terms and conditions were added to and varied and agreed as recorded in a document signed by the parties, this time in Sydney, on or about 11 June 1998.
9 It is common ground that the contract provided that Gulf would deliver two thousand metric tonnes of meat at a price of 1,970 per metric tonne in store to Agadir in Morocco.
10 Article IV of the contract provided that payment would be in US dollars by irrevocable and confirmed letter of credit opened by the buyer in favour of the seller in sufficient time to allow the delivery schedule stipulated in the contract to be met by the seller. Apparently it is common ground that on or about 10 June 1998, OCE through its agent Banque Marocaine De Commerce Exterieur, Casablanca, [“BMCE’], purported to issue a letter of credit complying with its obligations under the contract.
11 Gulf’s claim is that the letter of credit did not comply with the contract for several reasons specified in para 9 of the notice of contentions, including that it was unconfirmed and so drawn that no bank was likely to confirm it according to banking practices and usages.
12 Gulf alleges that it required OCE to open a confirmable letter of credit in conformity with the contract and that thereafter, on or about 22 June 1998, OCE through its agent BMCE purported to issue a further letter of credit pursuant to the contract. The further letter of credit is said by Gulf to have also been in breach of the contract for the same reasons as were set out in relation to the earlier letter of credit.
13 Gulf’s case is that, despite further communications from the plaintiff and several further amendments to the proffered letter of credit, OCE failed, neglected or refused to open a confirmable or confirmed letter of credit which complied with the contract.
14 Gulf therefore alleges that OCE had breached and repudiated the contract thereby discharging Gulf from its obligation to perform. In mitigation of its damages, Gulf asserts that it declined to ship any meat to Morocco.
...
18 Paras 16 through 25 inclusive of the contentions then allege matters going to the plaintiff’s conduct by way, on the plaintiff’s allegations, of its, at the request of the OCE, having procured BMCE to provide to OCE a surety in the sum of $US120,000 by banker’s letter - the description of this agreement in para 16 of the notice of contentions being “the surety agreement”.
21 Para 20 of the contentions then alleges OCE’s breaches of implied terms of the surety agreement.
22 Para 21 of the contentions asserts that OCE’s failure to provide the letter of credit
“discharged the plaintiff from any obligation to further perform the supply contract on its behalf as a matter of common law or by reason of the operation of paragraph 577 of the Moroccan Civil Code.”
23 Para 22 of the contentions asserts that OCE’s failure to provide the letter of credit was a repudiatory breach of the supply contract by OCE which Gulf accepted by not shipping or delivering the goods the subject to the contract.
24 Para 23 of the contention seems to me to be particularly important. It alleges:
“The repudiation and acceptance of repudiation of the supply agreement brought the surety agreement to an end as to all the rights and liabilities under it.”
...
27 Paras 26 through to 28 inclusive of the contentions then deal with the plaintiff’s allegations of wrongful claims by OCE from BMCE allegedly made in breach of the surety agreement. It is again unnecessary to repeat those paragraphs which are self-explanatory.
28 Para 29A is a money had and received count dealing again with the case as between plaintiff and first defendant.
29 The particulars to Para 29B commence detail of the misrepresentation case. It broadly pleads that the benefit of the surety contract was obtained by OCE upon representations that OCE presently intended to perform the contractual obligations imposed on it by the supply contract according to its terms and in particular to provide a confirmable irrevocable letter of credit for the amount of the purchase price. These presentations are said to have been made either with reckless indifference to truth or falsity, or negligently. In the alternative allegations are made in relation to representations as to future performance.
30 Para 30 is the unjust enrichment count in relation to the first defendant and it is self- explanatory.
31 The claims against the Bank are to be found in the contentions paras 31 to 34 inclusive. They relate to the provision by Gulf through the Bank by way of stand-by letter of credit in favour BMCE in the sum of $US120,000 of the bank security required by the contract in favour of OCE. The claim here is that in breach of contract and without valid claim of right, OCE on or about 13 October caused the claim to be made on the Bank for it to make payment of the bank security to BMCE.
32 It is common ground that in earlier interlocutory steps in these proceedings injunctive relief was granted restraining the Bank from making such payment of the bank security. My understanding is that that injunctive relief continues until further order.
33 The claim made against the third defendant is pleaded in paras 35 to 39 of the contentions. The plaintiff asserts that it entered into what is known as an ‘unfair calling policy’, namely a contract of insurance with EFIC to indemnify 95 per cent of its loss arising from a call being made for payment of the performance bond. The first defendant is said to have made a call on the performance bond which is said to have been an ‘unfair call’ within the meaning of the policy. The claim is that by reason of the unfair call the plaintiff has suffered loss in that it is liable to indemnify the Bank in respect of any sum it may be liable to pay to BMCE in consequence of the call. It is common ground that EFIC has failed or refused to indemnify Gulf pursuant to the unfair call policy. The claims against the third defendant are then pursued in respect of the plaintiff’s alleged contractual rights against the third defendant.”

3    The interlocutory order against the bank referred to is the order of 14 October 1998 in the following terms:

“National Australia Bank Limited be restrained from paying the Banque Marocaine Du Commerce, Casablanca any amount on account of Sarwat McGuid t/as ABS Gulf pursuant to standby letter of credit AI 2098048635 until further order.”

4    The basis for the granting of the permanent stay against the first defendant lay in the finding by His Honour that the supply agreement contained an exclusive jurisdiction clause, by which the parties agreed to resolve all disputes “by the courts in Casablanca”. His Honour found that each of the causes of action relied upon by the plaintiff against the first defendant fell within the ambit of the exclusive jurisdiction clause and in the exercise of His Honour’s discretion a permanent stay of the proceedings against the first defendant was ordered. 5    In dealing with considerations going to the exercise of that discretion His Honour expressed the following reasons:

“90 Mr Dubler, in adding to those discretionary considerations and by and large supporting Mr Cotman’s submissions, submitted that a further discretionary consideration which weighed strongly against the Court here staying the proceedings, involved the fact that the parties have taken as a given that the proceedings in so far as issues between the plaintiff and EFIC are concerned can on no conceivable basis be otherwise than dealt with by this Court. In those circumstances Mr Dubler raises a spectre, should these proceedings in so far as they involve the plaintiff, the first defendant and the National Bank be stayed. There is, it is submitted, a possibility that the courts of Morocco may find one way on the question of whether or not the letter of credit proffered complied with article VI, only to find that the very same issue but with other witnesses and evidence might have to be determined again in this jurisdiction, when and if the plaintiff’s proceedings against the third defendant would be pursued.

91 To my mind, and having taken into account all of those discretionary considerations, the position on the evidence is that the plaintiff has not shown strong cause for the Court not to exercise its jurisdiction by granting a stay.

92 Whilst it is clear that the submissions opposing the grant of a stay seek to rely upon the several sets of issues now raised, there having been brought into existence following the supply agreement the so-called ancillary agreements or arrangements, the most significant matter is simply that the parties have solemnly and in writing, regardless of which of the translations be preferred, by article VI in the supply agreement clearly stated their mutual agreement that disputes arising from, ensuing from or relating to the supply agreement, are to be determined by the courts of Casablanca.

93 I am by no means satisfied that any of the discretionary factors put forward by Mr Cotman or Mr Dubler are sufficient to require the Court’s discretion to be exercised otherwise than by granting a stay of the proceedings. It is common ground, as I have understood it, that the courts in Casablanca are competent to hear the proceedings in so far as the respective rights and obligations of Gulf and OCE are concerned. The position in so far as other parties are concerned and the contractual relationships between other parties are, subject to the question of EFIC, likely to be determined when the courts of Casablanca determine the issues of fact and law which separate Gulf from OCE.
...

104 It is necessary then to deal with two particular further topics and costs. The first relates to the position which is to obtain in relation to the existing interlocutory regime in place by the injunctions against the bank. The second relates to the discrete question of the way forward as between the plaintiff and EFIC.

105 Following the reasons above given, it will be apparent that the Court is disposed to stay the proceedings permanently in so far as the plaintiff’s proceedings against the first defendant is concerned.
106 I have no doubt that the injunctions presently extant against the bank require to be continued until further order, the spirit and intent of the short minutes of order being that those injunctions will continue up to a point in time when there is an application to discharge the injunctions, again depending as the Moroccan proceedings are determined one way or the other.

6    I do not regard the observation stated in para 106 as a matter which His Honour regarded as relevant to the exercise of the discretion in granting the permanent stay. I think it also should be noted that the bank does not appear to have taken part in the application for a stay, it having earlier filed a submitting appearance in the proceedings. 7    His Honour’s anticipation that the injunction against the bank would stand pending resolution of the claim against the first defendant in the Moroccan courts may well have proved accurate but for two events: the dismissal of the proceedings against the insurer, pursuant to settlement on 28 April 2000, and the circumstances deposed to in the affidavit of Leslie James Bleasdale sworn 19 May 2000, namely, that on 18 January 2000, the bank, in an unrelated matter, made a telegraphic transfer to an account at BMCE, which by mistake represented a substantial overpayment. BMCE has chosen to use the overpayment to satisfy its demand on the National Australia Bank under the standby letter of credit provided in relation to the plaintiff’s bond under the supply agreement. 8    There is no clear evidence that BMCE has paid the first defendant the surety sum provided for under the surety agreement, however it is difficult to see on what legitimate basis BMCE could make demand upon the bank under its standby letter of credit and withhold the amount of the standby letter of credit from the bank’s overpayment to the BMCE account had the surety sum not been paid to the first defendant. 9    As earlier noted in these reasons, no substantive relief is sought against the bank. Notwithstanding the permanent stay against the first defendant, and the dismissal of the proceedings against the third defendant, the plaintiff seeks to maintain the interim order pending determination of his disputes with the first defendant in proceedings in Morocco. Counsel for the plaintiff concedes that this basis for maintaining the interim order is novel in that there is no authority directly in point. 10    The plaintiff had maintained in earlier interlocutory proceedings that he was unable to prosecute his claim against the first defendant in Morocco being fearful of physical harm should he visit Morocco for that purpose. 11    There has been a shift in that position to the extent deposed to in the affidavit of Roland Jules Maurice Colinard sworn 1 June 2000, he being the solicitor for the plaintiff. As a result of his enquiries it has been ascertained from a barrister practising at the Bar of Casablanca as follows:

“1. It is completely possible to initiate proceedings against OCE and/or BMCE, both having their registered offices in Casablanca, except if a clause attributes jurisdiction to an International Chamber of Commerce which may not be the case, I suppose.
2. The proceedings must be commenced before the Tribunal of Commerce of Casablanca, and the presence of Mr. Sarwat McGuid is neither required nor demanded.
However I see no inconvenience for me to meet the interested party in Paris to receive all his explanations viva voce as well as his instructions. There is no urgency for this meeting.”

12    On that basis the plaintiff has instructed his solicitor as follows:

“...that he intends to forthwith take proceedings in Morocco and to meet [counsel] preferably in Tunis were (sic) he has an office at his disposal to give instructions to his Moroccan lawyers with the assistance of the Tunisian lawyers ...if necessary.”

13 On the evidence adduced on this application I am prepared to approach the question of discretion on the following bases: (a) proceedings will be instituted without delay in the Casablanca court by the plaintiff against the first defendant in order to litigate the issues sought to be raised against the first defendant in these proceedings: (b) those Moroccan proceedings will be prosecuted with due diligence : (c) the Moroccan proceedings could be effectively prosecuted without the necessity for the attendance of the plaintiff in Morocco : (d) the plaintiff has a strong prima facie case against the first defendant, at least in relation to the plaintiff’s breach of contract case : (e) in relation to the prejudice to the bank arising out of its overpayment to BMCE, I am prepared to proceed on the basis that if I was disposed to maintain the order against the bank, as a matter of discretion, for reasons aside from that prejudice, I would not be prepared to discharge the order having regard to the fact that BMCE has withheld from the bank’s overpayment the amount the subject of the standby letter of credit: treating that prejudice as being the consequence of the bank’s mistake. 14 On that approach, if it was a matter of discretion, I think the interim order should be maintained until further order. However, the conclusion I have reached in the circumstances of this case is that the maintaining of the order against the bank is neither necessary nor justified for the administration of justice in New South Wales, either in the exercise of the Court’s inherent jurisdiction or under the power conferred by sections 23 or 66(4) of the Supreme Court Act 1970. Those provisions are in the following terms:

“ 23 The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales.
...
66 (4) The Court may, at any stage of proceedings, on terms, grant an interlocutory injunction in any case in which it appears to the Court to be just or convenient so to do.”

15 In my view, the order against the bank cannot be justified on the basis that it is necessary for the administration of justice in New South Wales, when it is an order unrelated to any substantive right of the plaintiff in respect of which the Court has any jurisdiction: in light of the decision of Einstein J of 20 July 1999, and the dismissal of the proceedings against the insurer. That being so, neither section 23 nor the inherent jurisdiction of the Court is of any assistance to the plaintiff in maintaining the Order of the Court against the bank. Ipso facto the plaintiff cannot effectively avail itself of the application of section 66(4). 16 I think the authorities and the learned articles on the subject are of one voice in expressing the view that it is not possible to state exhaustively the categories of cases which may attract the application of the inherent jurisdiction or that conferred by s 23. Still I am unaware of any case which would justify an interim order to maintain the status quo in aid of a substantive right over which the Court has no jurisdiction. 17 In his written submissions, counsel for the plaintiff has attempted to extract from the ‘Mareva’ cases a principle which would justify the maintaining of the order against the bank. However, I have been unable to find assistance from those cases, each of which relates to the enforcement by the plaintiff/ applicant of substantive rights in respect of which the Court has jurisdiction. 18 The way in which the matter was addressed on behalf of the plaintiff was as follows:

“References to abuse of process reflect the fact that the Plaintiff will almost always be proceeding with its final claim in the same jurisdiction as where it seeks the Mareva. The Plaintiff submits that if the injunction is dissolved, the result is that the Plaintiff is deprived of its funds, in effect summarily, and contrary to prima facie evidence. While this is a different kind of ‘abuse’ from that usually prevented by Marevas, it is close in principle and its prevention comes within the scope of the inherent jurisdiction.
This (sic) if one wishes to analyse the matter in terms of ‘abuse’, the injunction prevents what would be an abuse prior to a determination in Morocco.
The prevention of abuse of the Court’s process is a synonym for ensuring the proper administration of justice, which is the more accurate characterisation of the source of the jurisdiction.
The reasoning behind such relief does not preclude an injunction in one jurisdiction to prevent injustice when there is a lis alibi pendens . Note that in Riley McKay the Court concluded its summary of the basis of the Mareva jurisdiction with the following at p 276:

“The whole sense and purpose of the inherent powers, as well as the powers which s.23 confers, are to ensure the effective administration of justice. The analysis of the “Mareva” injunction which has occurred during the years of its growth show that it is designed to prevent conduct inimical to the administration of justice. The reported decisions show that a “Mareva” injunction will be granted where necessary to ensure that justice is effectively administered.” (There is then a reference to the “ Siskina” , discussed below.)””

19    The reference to “Riley McKay” is a reference to the Court of Appeal decision in Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264, the core decision confirming the existence of the jurisdiction to grant a Mareva injunction. The reference to “The Siskina” is a reference to the decision of the English Court of Appeal ([1979] AC 210) in which the court refused to make an order freezing insurance monies payable to ship owners in aid of a cause of action which was not amenable to the jurisdiction of the English court. I think it is instructive to note the following passages from Riley McKay in which the Court of Appeal considered the observations of Lord Diplock in The Siskina:

“As has been made clear by judgments in England, the jurisdiction is still the subject of the development on a case by case basis. It is, accordingly, undesirable to undertake the formulation of general tests or boundary-lines which might, in their generality, preclude or distort the useful development of this new remedy. These observations are made with particular reference to a question which was mentioned in the course of argument but which it is not necessary for present purposes to decide. That question is whether the plaintiff must have a vested and accrued cause of action before commencing proceedings. The observations of Lord Diplock in The Siskina [1979] AC 210, at p 254 postulate as an indispensable prerequisite the existence of a vested and accrued cause of action for which substantive final relief can be immediately granted. See also the passage in the judgment of Ackner LJ, in A J Bekhor & Co Ltd v Bilton [1981] 2 WLR 601, at p 616; [1981] 2 All ER 565, at p 577. It was suggested in argument that a plaintiff holding an unmatured thirty-day bill ought to be able to approach the court for a “Mareva” injunction. In a cognate sense, reference was made to a guarantee situation in which, prior to formal default by the principal debtor, the guarantor is feared likely to spirit away his assets. The point originally had significance in the present case in that, at the date of the commencement of the present proceedings, the plaintiff company was in the hands of a provisional liquidator, a winding up order not having been made. One of the claims advanced by the plaintiff in respect of which the protection of a “Mareva” injunction was sought was the liability of the second defendant to repay the amount of a preference which it was said to have received. Such a claim would not be cognizaable (sic) until a winding up order had been made. In the events which have happened, the winding up order has now been made and it is accordingly unnecessary to decide whether or not this particular claim at the date of inception of the proceedings fell within the permissible scope of the protection of the injunction granted.
(at 276, 277)

20    I think one may glean from those considerations that an interim injunction may be justified in aid of an inchoate right over which, on consummation, the Court would have jurisdiction. No such consideration arises in this case. 21    For those reasons I am not persuaded that the due administration of justice in New South Wales requires that the order in place against the bank, or these proceedings, should be maintained against the bank. Accordingly I make the orders as sought in paragraphs 1 and 2 and order that the plaintiff pay the bank’s costs of the proceedings and of this application.

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Last Modified: 09/27/2000