Simic v New South Wales Land and Housing Corporation

The case involved a dispute between Mr Simic and the New South Wales Land and Housing Corporation (the Corporation) concerning two unconditional undertakings issued by Australia and New Zealand Banking Group Limited (ANZ). These undertakings were intended to serve as security for a construction contract between the Corporation and Nebax Constructions Australia Pty Ltd (Nebax), a company directed by Mr Simic. The core of the dispute lay in the fact that the undertakings, and the associated applications for them, erroneously named a non-existent entity, "New South Wales Land & Housing Department trading as Housing NSW ABN 45754121940," as the payee, rather than the Corporation itself.

The High Court was required to determine whether the references to the non-existent entity in the undertakings and applications could be construed as referring to the actual counterparty to the construction contract, the Corporation. Furthermore, the Court had to consider whether rectification was available to correct these erroneous references, given that they arose from a common mistake by the parties involved in the creation of the documents. The Court also had to consider the principles of autonomy and strict compliance in the context of performance bonds.

The Court reasoned that while the principle of strict compliance generally applies to performance bonds, the circumstances here warranted rectification. The Court noted the close connection between construction and rectification, particularly when a common mistake leads to documents not reflecting the parties' true intentions. In this instance, the Court found that the references to the non-existent entity were the result of a common mistake, and that the true common intention of the parties was for the undertakings to be payable to the Corporation. The Court allowed the appeal and the cross-appeals, setting aside the orders of the Court of Appeal and ordering that the bank guarantees and associated forms of indemnity and application be rectified to substitute the correct details of the New South Wales Land and Housing Corporation.