McGuid t/as ABS Gulf v Export Finance & Insurance [2000] NSWSC 277

New South Wales Supreme Court

CITATION : McGuid t/as ABS Gulf v Export Finance & Insurance [2000] NSWSC 277 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50144/99 HEARING DATE(S) : 31.3.00, 4.4.00, 5.4.00 JUDGMENT DATE : 31 March 2000

PARTIES : Sarwat McGuid t/as ABS Gulf v Export Finance & Insurance Corporation JUDGMENT OF : Hunter J

COUNSEL : Plaintiff: N Cotman SC Defendant: R Dubler SOLICITORS : Plaintiff: Colinard & Co Solicitors Defendant: Minter Ellison DECISION : Short minutes of order to be brought in

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

HUNTER J

FRIDAY 31 MARCH 2000

50144/99 SARWAT McGUID t/as ABS GULF v EXPORT FINANCE & INSURANCE CORPORATION

REASONS FOR JUDGMENT

1 The plaintiff in these proceedings is an exporter of goods under a supply contract with a Moroccan entity and in relation to which the plaintiff took the precaution of effecting a policy with the defendant known as an unfair calling policy. The nature of the indemnity provided by that policy is evidenced in the affidavit of Alexander Ivantsoff sworn 24 March 2000 and is in the following terms:

" INDEMNITY 1. EFIC agrees, subject to the terms of the Policy, to indemnify the Exporter for a percentage of the amount of any loss hereinafter defined arising from a call being made under the Bond by reason of events or circumstances beyond the Exporter's control, after the date of the Contract and which result in the Exporter making a Bond Payment." 2 The bond referred to was a performance bond provided by a Moroccan bank and secured by National Australia Bank on the instructions of the plaintiff. Limitations on the insurer's liability, so far as is relevant, are to be found in clause 2 of the policy as follows: "2. Notwithstanding anything contained in the Policy EFIC shall not have any liability for loss arising from a Bond Payment :- (1) (a) If there has been a material failure by the Exporter to comply with any term or condition of the Contract or if there has been any indication by the Exporter to the Buyer that there will be such a failure, or (b) If there is a failure by the Exporter to comply with any law (including any order, decree or regulation having the force of law) insofar as that law affects the obligations of the Exporter under the Contract, provided that the Exporter shall not be deemed to have failed to have complied with any such law EFIC in the exercise of its absolute discretion determines in writing that any such law has the effect of preventing the Exporter from completing the Contract or is harsh or unconscionable, unless such failure has occurred or been indicated by reasons solely of events or circumstances beyond the Exporter's control, after the date of the Contract." 3 There has been a call upon the bond arising out of the circumstances, which is common ground, as I understand the issues, that the plaintiff failed to supply the goods under the subject contract. In those circumstances, it is not particularly surprising that the insurer, against whom the claim was made under the policy following upon a call on the subject bond, invoked the operation of clause 2 of the policy and in turn the provisions of clause 6(2) which is in the following terms: "6. (2) Where, in the opinion of EFIC, a call under the Bond in respect of which a Bond Payment has been made, was due to the failure of the Exporter to comply with a term or condition of the Contract or of any indication by the Exporter that there would be such a failure or of failure by the Exporter to comply with any law (including any order, decree or regulation having the force of law) so far as that law affects the obligations of the Exporter under the Contract, then loss shall not be payable in respect of such Bond payment until the Exporter has satisfied EFIC , in such manner as EFIC may in its absolute discretion determine (including, if so required by EFIC, the institution of legal proceedings), that there has been no failure by the Exporter to comply with a term or condition of the Contract or any indication that there would be such a failure and that there has been no failure by the Exporter to comply with any law (including any order, decree or regulation having the force of law) insofar as that law affects performance of the Contract."