Parties

Initiator: Company W (Applicant)

Respondent 1: Bank C (Issuing Bank)

Respondent 2: Company M (Beneficiary)

Background and transaction

The Initiator was the applicant for a guarantee that was issued by Respondent 1 in favour of Respondent 2. The guarantee was issued by SWIFT, subject to URDG 758. It was advised to Respondent 2 through another bank.

As there was no response from Respondents 1 and 2, the summary of the background was based solely on the documents provided by the Initiator.

On 21st January 2013 a guarantee was issued by Respondent 1 in favour of Respondent 2 covering the supply of "power plant (new conditions) including but not limited to boilers".

Demand for payment under the guarantee required: "For the purpose of identification your written demand must be duly signed and presented through your local bank and your signature(s) on the demand in writing must be verified and authenticated by the presenting bank which must confirm to this effect through authenticated swift (or tested) message to us"

The role of the advising bank was to advise the guarantee to Respondent 2 and to verify and authenticate the signatures on any claim that was made. The guarantee did not expire at the counters of the advising bank. The guarantee stated: "This guarantee shall expire on Nov. 20, 2013. Any demand for payment and documents required under this guarantee must be received by us within 14 (fourteen) working days after its expiry at our address stated above."

On 5th December 2013, the advising bank advised Respondent 1 that it had authenticated a claim made by Respondent 2 under the guarantee and that it had sent the original claim document via DHL courier to Respondent 1.

Respondent 1 sent a SWIFT message to the advising bank on 12th December 2013 stating that it had received the claim documents on 11th December 2013: "which exceed the period of presenting documents according to our guarantee. Based on the above, you're kindly notified that the claim is refused."

The key issue was whether or not the demand was presented within the time for presentation as provided by the guarantee. The guarantee was issued subject to URDG 758.

URDG 758 sub-article 14 (a) states that:

"A presentation shall be made to the guarantor:

i. at the place of issue, or such other place as is specified in the guarantee and,

ii. on or before expiry."

URDG 758 article. 2 defines "Expiry" as "the expiry date or the expiry event or, if both are specified, the earlier of the two".

In the context of the guarantee there was no "expiry event" as defined by URDG 758, hence only the "expiry date" was applicable, which is defined in article 2 as: "the date specified in the guarantee on or before which a presentation may be made."

URDG 758 article 25 (b) (i) provides that, "Whether or not the guarantee is returned to the guarantor, the guarantee shall terminate ...on expiry".

Documents submitted

A. Documents submitted by the Initiator

1. The formal request for a DOCDEX decision

2. Attachment list

3. Copy of Respondent 1 performance guarantee

4. Copy of Respondent 2 claim under the guarantee

5. Copy of advice of claim from the advising bank

6. Copy of DHL courier receipts

7. Copy of Notice of Refusal from Respondent 1

8. Copy of message sent by the advising bank

9. Copy of message sent by Respondent 1

B. Documents submitted by Respondent 1

Respondent 1 did not submit any documents

C. Documents submitted by Respondent 2

Respondent 2 did not submit any documents

Issues

1. That Respondent 2 raised the claim under the Guarantee after the expiry date thereof.

2. Respondent 1's guarantee liability under the Guarantee had been completely released.

Analysis

The guarantee stated: "This Guarantee shall expire on Nov. 20, 2013".

This would usually mean that presentation of a demand for payment under the Guarantee must be presented to Respondent 1 before 20th November 2013. The guarantee however contained the following additional provision in respect of presentation of claims: "Any demand for payment and documents required under this guarantee must be received by us within 14 (fourteen) working days after its expiry at our address stated above."

The guarantee therefore was ambiguous in defining the expiry date. Such ambiguity is the responsibility of the guarantor. This provision had the effect of making the practical expiry date of the guarantee the 14th working day after 20th November 2013

URDG 758 makes no distinction between the terms "presented to (guarantor)" and "received by (guarantor)". The fact that the beneficiary ("Respondent 2") may have "presented" the demand after 20th November 2013 would have no bearing if it succeeded in having it delivered to the guarantor no later than 14th working day after 20th November 2013. The demand was only "presented" under URDG 758 (and in respect of the guarantee in question) if it was delivered to the guarantor.

In this context, we considered that the expiry date, in accordance with the definition in URDG 758 article 2, "the date specified in the guarantee on or before which a presentation may be made", fell not on 20th November 2013 but on the 14th working day following 20th November 2013.

There appears to have been no relevant holidays between 20th November 2013 (Wednesday) and 11th December 2013 (the day of receipt of the demand, again a Wednesday).

On the basis that there were no holidays between the two dates, then the 14th working day after 20th November 2013 fell on 10th December 2013. Hence in accordance with the URDG definition of "expiry date", the guarantee expired for presentation of any claims on 10th December 2013.

The fact that late delivery of the claim might have been caused by a courier's inability to timely deliver the demand due to a missing postcode in the guarantor's instructions for delivery of the documents had no bearing on the requirement for the demand being delivered on time. It was the responsibility of the beneficiary to make such arrangements so that the claim arrived in time.

Conclusion

The wording of the guarantee in respect of its expiry provisions was badly expressed, with the effect that the "presentation period" overruled the stated expiry date. Under the guarantee, the "period demand" was 20th November 2013 plus 14 working days. There appeared not to be relevant holidays in the period in question, so in consequence the issuer received the claim under the guarantee too late. Accordingly we consider that:

1. Respondent 2 raised the claim under the Guarantee after the expiry thereof.

2. Respondent 1's guarantee liability under the Guarantee had been completely released.

This was a unanimous decision.