Greenland Bank Limited (in liquidation) v American Express Bank Limited
27 January 2009, Court of Appeal, England
The dispute arose from a performance bond issued by the respondent to Bangladesh Power Development Board (“Bangladesh Power”) at the request of the appellant and the Bank of Uganda on the application of Westmont Power (Bangladesh) Ltd. (“Westmont”). The performance bond was issued in relation to a power purchase agreement between Westmont and Bangladesh Power (as buyer) dated 10 June 1998. A deposit of USD1.5 million was made to Amex on the back of the performance bond.
The part of the performance bond that was in dispute (the “renewal clause”) says
"On 10th June 2000, this Guarantee shall expire. On such date this Guarantee shall become null and void, whether or not returned to us for cancellation, unless we shall have agreed, on receipt of your written request therefor not later than one month prior to such date, to renew this Guarantee for a further period of one year. Thereafter, this Guarantee may be renewed for successive periods of one year on the terms hereof or on such other terms as we may from time to time agree, until 10th June 2013."
The appellant went into liquidation on 3 April 1999. There was evidence that Westmont sent a fax dated 9 May 2000, apparently on behalf of Bangladesh Power, to renew for another year up to 10 June 2001. Amex denied that it received such communication and showed that it faxed Bangladesh Power and the Bank of Uganda (on 11 June 2000 and 27 June 2000 respectively) to the effect that the performance bond expired on 11 June 2000.
Starting from 7 July 2000 the liquidators of the appellant wrote to Amex to demand the return of the USD1.5 million deposit and Amex initially agreed but Westmont issued proceedings in the High Court of Bangladesh on 20 July 2000 and Amex wrote to the liquidators on 23 August 2000 saying that "while these proceedings remain extant, we regret that we are not in a position to remit the deposit to you".
The High Court of Bangladesh ruled against Amex on 5 May 2004, and
"The gist of the reasoning seems to be that the district judge in Dhaka found that the fax of 9th May 2000 was not a forgery, that it was sent by Westmont to Amex and received by Amex and that it constituted a written request for an extension of the Bond for a further year. Amex's agreement to the extension was to be implied from their apparently debiting Greenland?fs account on 21 July 2000, i.e. after the Bond would otherwise have expired, with a further annual fee of $15,000 as if for the year 2000 - 2001?h
Amex appealed the Bangladesh court?fs decision but the appeal had not been heard.
The liquidators brought these proceedings on behalf of the appellant against Amex for the return of the USD1.5 million deposit.
Fresh Evidence
The issue before the English court of appeal (Ward, Hughes, Rimer LLJ) was whether Amex had a chance ("real as opposed to fanciful") to persuade the Bangladesh court on appeal that the performance bond had lapsed and that depended on the principles in Ladd v Marshall [1954] 1 W.L.R. 1489, i.e. whether the Appellate Division of the Bangladesh Court will admit fresh evidence (certain correspondence sent by Amex in June, July and August 2000) on the ground that either
"(1) the evidence could not have been obtained with reasonable diligence for use at the trial; (2) the evidence must have been such that, if given, it will probably have had an important influence on the result of the case though it need not be decisive; and (3) the evidence must be such as is presumably to be believed though it need not be incontrovertible."
In addition, Article 104 of the Bangladesh constitution imposes on Bangladesh courts to issue "such orders as may be necessary for doing complete justice in any cause or matter pending before it".
The court of appeal agreed with the trial judge (Evans-Lombe J) that Amex would have a real difficulty in doing and so would the appellant in the English proceedings ("Amex's difficulty there is Greenland?fs difficulty here.")
Automatic Renewal
While the court of appeal "unhesitatingly prefer" the arguments of the appellant on the second ground of appeal i.e. the "ordinary, natural meaning" of the renewal clause must be that the performance bond would only be renewed each year after 2001 if the procedures procedure prescribed were followed (as made clear by the words "may be renewed", "for successive periods of one year" and "on the terms hereof"), it could not "conscientiously say that there is only a fanciful prospect" that the Bangladesh court decision will be upheld, so the appellant failed too on this ground of appeal.
Irrevocable
On the question whether the performance bond can be construed under Bangladeshi law to be irrevocable until 2013, with "considerable reluctance", the appeal judge concluded that
"Mr Wolfson has persuaded me that even though the prospects of successfully arguing that are not high, the prospects of success cannot be said to be fanciful. To return to Jonathan Swift's view of lawyers, while Mr Wolfson has not shown that black is white nor that white is black, he has managed to paint the problem in a shade of grey."
The court however varied the trial judge's order by imposing a stay of the action pending the outcome of the appeal in Bangladesh, rather than ordering outright dismissal of the English action.
