A recent decision by the Court of Appeal in New South Wales (Simic v New South Wales Land and Housing Corporation  NSWCA 413) sheds light on when a Court will still enforce a bank guarantee, even if it does contain errors.
This case involved two bank guarantees that were prepared in favour of the New South Wales Land and Housing Corporation (“Corporation”) as a result of it entering into a contract with a company whereby the company was required to provide security for its obligations.
Inadvertently, when the bank guarantees were prepared, the name and ABN of the Corporation had been slightly changed and was named “New South Wales Land & Housing Department”.
When the Corporation called on the bank guarantees, the bank that had provided the bank guarantees (ANZ) refused to pay due to the difference in names.
The Court considered whether the bank guarantees had to strictly match the name of the Corporation in the contract. As there was no entity with the name noted in the bank guarantees, the Court decided that the only way they could make sense would be to interpret the bank guarantees as meaning to refer to the Corporation. The Court also noted that ANZ should have contacted the company who gave the bank guarantees in order to confirm that they were one and the same, and then paid on the bank guarantees.
While the outcome was favourable for the Corporation, the case highlights the importance of getting names right in bank guarantees. The case could have been avoided had the parties, in particular the Corporation, been more diligent and ensured the documents stated the correct names.
Special leave was granted to appeal the decision to the High Court, with it being heard on 20 July 2016 so it will be interesting to see if the High Court upholds the Court of Appeal’s decision.
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