Bachmann Pty Ltd v BHP Power New Zealand Ltd [1998] VSCA 40

* Wood Hall Ltd. v. Pipeline Authority [1979] HCA 21; (1979) 141 C.L.R. 443 at 452-4 per Gibbs, J. (with whom Mason, J. agreed) and at 459 per Stephen, J.;

"Although GECC states the principle accurately, it does not apply it correctly in this case. The independence principle, and the above-quoted portion of the Letter of Credit [recognising that principle], speak only to the bank's obligation to honor the sight draft in the first instance. They do not preclude subsequent investigation and efforts at recovery. Pubali Bank v. City National Bank, [1982] USCA9 798; 676 F.2d 1326 (9th Cir. 1982), appeal after remand, 777 F.2d 1340 (1985). The purpose of the independence principle, and of the similar provision in Mellon's Letter of Credit, is to provide the beneficiary with an unfettered, immediate remedy upon occurrence of the triggering event on a standby letter of credit. The purpose is not to prevent any subsequent challenge to the validity of the beneficiary's claim, but to ensure that 'contractual disputes wend their way towards resolution with money in the beneficiary's pocket rather than in the pocket of the contracting party'. Itek Corp. v. First National Bank of Boston, 730 F.2d. 19, 24 (1st Cir. 1984); C.K.B. & Associates v. Moore McCormick Petroleum, 734 S.W. 2d 653, 655 (Tex. 1987)."