INJUNCTION GRANTED TO RESTRAIN DEMAND UNDER PERFORMANCE BOND

In Simon Carves Ltd v Ensus UK Ltd [2011] EWHC 657 (TCC), [2011] All ER (D) 260 (Mar) Mr Justice Akenhead held that the claimants were entitled to an injunction to restrain the defendant beneficiaries from making any demand under a performance bond which the claimants had procured from a bank. The basis on which the claimants were held to be an entitled to an injunction was not based on any fraud by the defendants but on the basis that the claimants had established a strong case that the defendants were not entitled under the underlying contract between the claimants and the defendants to make a demand on the ground that the bond was to be treated, in the light of events that had occurred, as null and void and returnable.

The facts

The claimants, Simon Carves Ltd, were employed by the defendants, Ensus UK Ltd, to carry out works relating to the provision of a process plant to produce bioethanol at a site on Teeside. Under the terms of the contract the claimants were obliged to deliver a performance bond to the defendants. This they duly did in the sum of £18.5m. The expiry date of the bond was 31 August 2010. The performance bond was in a form which obliged the bank to make payments ‘on receipt of a demand made in accordance with the provisions of this Bond without any further proof or condition and without any right of set-off or counterclaim.’ The contract between the parties made provision for the performance bond to become null and void (save in respect of any pending or previously notified claims) upon the issue of what was termed the ‘Acceptance Certificate’ for the works. In this event, the performance bond was to be returned immediately to the claimants.