Simic v New South Wales Land and Housing Corporation

Code of Justinian, 4.18.2 Digest of Justinian, 13.5 Institutes of Justinian, 4.6.8 Category: Principal judgment Parties: Daniel Matthew Simic (First Appellant) Hazel Mary Delaney (Second Appellant) Richard Paul Sapsford (Third Appellant) Simic Management International Pty Ltd (ACN 134 150 833) (in its own capacity and as trustee for the Daniel Simic Family Trust) (Fourth Appellant) Track & Machine Operations Pty Ltd (ACN 134 620 018) (Fifth Appellant) New South Wales Land and Housing Corporation (ABN 24 960 729 253) (First Respondent) Australia and New Zealand Banking Group Ltd (ABN 11 005 357 522) (Second Respondent) Nebax Constructions Australia Pty Ltd (in liq) (ACN 101 054 068) (Third Respondent) Representation: Counsel: Mr M Ashhurst SC with Mr A Fernon (Appellants) Mr G Curtin SC with Mr D Talintyre (First Respondent) Mr S Docker (Second Respondent)

Solicitors: O'Neill McDonald Lawyers (Appellants) Sparke Helmore Lawyers (First Respondent) Kemp Strang (Second Respondent) File Number(s): 2015/106881 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2015] NSWSC 176 Date of Decision: 24 March 2015 Before: Kunc J File Number(s): 2014/185982

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

1. BATHURST CJ: I agree with the orders proposed by Emmett AJA and with his Honour's reasons.
2. WARD JA: I have had the advantage of reading in draft the comprehensive reasons of Emmett AJA. I agree with his Honour's reasons and the orders his Honour has proposed.
3. EMMETT AJA: This appeal concerns two instruments (the Undertakings) called "Bank Guarantee" given by the second respondent, Australia and New Zealand Banking Group Ltd (ANZ) in favour of "New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940", which was referred to in the Undertakings as "Favouree" and described as "the Principal". By each of the Undertakings, which were executed on 16 April 2010, ANZ undertook unconditionally to pay to "the Principal", on written demand, any sum or sums up to an aggregate amount not exceeding $73,482.53, making a total of $146,965.06. On 2 October 2013, the first respondent, New South Wales Land and Housing Corporation ABN 24 960 729 253 (the Corporation), made demand on ANZ for payment of two sums of $73,482.53. ANZ declined to meet the demands on the basis that they had not been made by the "Principal" named in the Undertakings.
4. The Corporation brought proceedings in the Commercial List of the Equity Division seeking, in the alternative, a declaration that the description of the Principal should be construed as describing the Corporation or an order that the Undertakings be rectified by substituting the name of the Corporation for the description of the Principal. On 24 March 2015, for reasons published on 9 March 2015, [1] a judge of the Equity Division, sitting in the Commercial List (the primary judge), made a declaration as sought by the Corporation. The primary judge also concluded that, while it was unnecessary to deal with the claim for rectification, the pre-requisites for the making of an order for rectification had been satisfied and that his Honour would order that the Undertakings be rectified, if it were suggested that leaving them in an unrectified state would be a potential source of confusion or difficulty. [2]
5. The Undertakings were issued by ANZ at the request of Nebax Constructions Pty Ltd (Nebax) under a financial facility entered into between ANZ and Nebax. Nebax agreed to indemnify ANZ against any loss, costs or expenses that it might incur in making any payment or payments, or that may arise from any claim on it, under the Undertakings. Nebax authorised ANZ to debit its account with any losses, costs or expenses for which it thereby agreed to indemnify ANZ. The obligations of Nebax to ANZ were guaranteed by the appellants, Daniel Simic, Hazel Delaney, Richard Sapsford, Simic Management International Pty Ltd and Track & Machine Operations Pty Ltd (together, the Guarantors). ANZ sued Nebax and the Guarantors by cross-summons filed in the Commercial List proceedings brought by the Corporation.
6. In addition to making the declaration referred to above, the primary judge directed the entry of judgment for the Corporation against ANZ in the sum of $146,965.06. His Honour also declared that ANZ was entitled to be indemnified by Nebax for that amount and also made declarations that the Guarantors were liable to ANZ under the various surety and guarantee agreements between the Guarantors and ANZ.
7. The Guarantors have now appealed to this Court from the orders made by the primary judge. It is not in dispute that they have an interest in the determination made by his Honour that ANZ is liable to the Corporation under the Undertakings. If ANZ has no liability to the Corporation under the Undertakings, then Nebax would have no liability under its indemnity and the Guarantors would have no liability to ANZ under their guarantees and securities in respect of the liability of Nebax to ANZ.

History of the Relevant Instruments

1. On 13 October 2009, Nebax submitted to the Corporation a tender to perform works at 3-7 Karowa Street, Bomaderry, identified as "Project/Job No" BG 2J8. The tender was addressed to "The Director, NSW Land and Housing Corporation". On 21 October 2009, a letter was written to Nebax on the letterhead of "Housing New South Wales", with an address of 223-229 Liverpool Road, Ashfield. The letter relevantly said: On behalf of the New South Wales Land and Housing Corporation (Housing NSW), we refer to your revised tender dated 13 October 2009 and confirm that Nebax Constructions has been selected as the preferred tenderer in relation to the Design, Development and Construction of 10 x 1 bed and 6 x 2 bed units at 3-7 Karowa Street, Bomaderry (the Project). The letter was headed as follows: Housing New South Wales Nation Building Economic Stimulus Plan Tender for Design, Develop & Construction - BG2J8 3-7 KAROWA STREET BOMADERRY On 21 November 2009, another letter on the same letterhead was sent to Nebax, dealing with matters not presently relevant.
2. On 4 March 2010, another letter was written to Nebax on the letterhead of "Housing New South Wales" (the 4 March Letter). The 4 March Letter relevantly said: I am pleased to inform you that with respect to BG2J8 C-71561 at Bomaderry (3-7 Karowa Street), the New South Wales Land and Housing Corporation accepts your tender dated 13 October 2009 … for the work broadly described as the demolition of existing dwellings and the design and construction of 10 x 1 BR and 6 x 2 BR dwellings in the above mentioned Job No for the total lump sum of $2,939,301.39 […]
3. The 4 March Letter enclosed a copy of a proposed "Formal Instrument of Agreement" between the Corporation and Nebax.
4. The 4 March Letter went on to say as follows: In accordance with clause 5 of the General Conditions of Contract and Special Condition 39, the Principal requires security in the sum of $146,965.06. Please provide original Bankers Certificate(s) totalling this amount at the time of the execution of the Contract documents. I enclose the Principal's form of Bankers Certificate of Undertaking to be used. The option of providing security by retention from progress payments is not available. The Certificate is to be executed under the Bank's Power of Attorney. [Emphasis in original] Also enclosed with the 4 March Letter was a form of "Unconditional Bankers Certificate" carrying the instruction for a bank letterhead to be used. The form required the insertion of the name of the bank and an ABN for the bank. It was addressed as follows: TO: NEW SOUTH WALES LAND AND HOUSING CORPORATION (ABN 24 960 729 253) trading as Housing NSW (ABN 45 754 121 940) 223-239 Liverpool Road, Ashfield (hereinafter called "the Principal")
5. The form of banker's certificate stated that it was a security deposit by Nebax and referred to "Job No: BG2J8 C-71561 - Bomaderry (3-7 Karowa Street) - MATTER NO: 20092540". The form provided for execution by the relevant bank by its duly constituted attorney under power of attorney and contained provision for the insertion of details of registration of the power of attorney.
6. On 4 March 2010, an agreement was signed on behalf of the Corporation by its delegate and under the common seal of Nebax (the Construction Contract). The Construction Contract was described as "Contract No.: S1384" and was expressed to be between the Corporation and Nebax. It recited that, by tender dated 13 October 2009, Nebax had offered to carry out works described as "Job No. BG2J8 C-71561" (the Works), that the Corporation had caused a site plan, drawings and specification describing the Works to be prepared and that the Corporation wished to engage Nebax to carry out the Works. The Corporation was described in the Construction Contract as follows: NEW SOUTH WALES LAND AND HOUSING CORPORATION (ABN 24 960 729 253) a statutory authority constituted pursuant to section 6(1) of the Housing Act 2001 and having its principal office at 223-239 Liverpool Road, Ashfield in the State of New South Wales ("the Principal")
7. The Construction Contract incorporated General Conditions of Contract for Design and Construct (AS 4902-2000) and Standard Special Conditions of Contract. Special Condition 39 deleted cl 5 of the General Conditions of Contract and substituted the following clause: If required, security must be provided by the Contractor for the purpose of ensuring the due and proper performance of the Contract and of satisfying the obligations of the Contractor under the Contract. If required, security must be in the form of an unconditional undertaking to pay on demand, in a form and by a financial institution approved in writing by the Principal. Insurance bonds, cheques or cash are not acceptable. For the purpose of giving unconditional undertakings, the Principal has approved banks, building societies and credit unions listed by the Australian Prudential Regulation Authority ("APRA") as being regulated by APRA. […] That provision is the genesis of the requirement for banker's certificates that resulted in the issuing of the Undertakings by ANZ.
8. On 12 April 2010, ANZ wrote a letter of offer to Nebax offering various financial facilities (the Facility Letter). They included the following: Indemnity/Guarantee Facility Purpose: Bank Guarantee requirement various contracts Condition precedent: ANZ must agree with the terms of your application and you must execute all documents required by ANZ before you can use this facility. Fees: An Indemnity Guarantee Facility Fee of 2.88% p.a. on the Facility Limit is payable monthly in advance commencing on the date of acceptance of the Letter of Offer. This fee is not rebateable.

On 12 April 2010, Nebax accepted the Facility Letter.

Preparation of the Undertakings

1. Ms Adele Hanna was the senior relationship manager at the Caringbah Business Centre branch of ANZ from September 2006 until September 2013. During that time, she was the senior relationship manager for Nebax. Mr Daniel Simic was a director of Nebax and, during Ms Hanna's time at the Caringbah Business Centre, she had many dealings with Mr Simic. Ms Hanna understood that Nebax operated a construction business and regularly obtained contracts from various entities and government departments. Mr Simic would regularly contact Ms Hanna and advise her that Nebax required variations to its facilities or credit limits. She would then prepare a letter of offer for execution by Nebax and any guarantor or security provider. The letters of offer prepared by Ms Hanna often related to what she described as "bank guarantee facilities", which allowed funds to be set aside for the purpose of providing "bank guarantees" that Nebax would need to provide under construction contracts that it had obtained. The Facility Letter of 12 April 2010 was such a letter.
2. Ms Hanna described her considerable experience with ANZ "bank guarantees", and the procedure according to which they would be granted. The relevant relationship manager first verifies that the customer has a specific guarantee facility with available funds from which the guarantee can be provided. The customer advises the manager of the name of the proposed favouree and the required amount of the bank guarantee. The senior relationship manager or assistant relationship manager then prepares indemnity guarantee documents that consist of three separate documents on three separate pages. Page 1 is the version of the guarantee retained by ANZ, page 2 is the version of the guarantee to be provided to the favouree and page 3 is an indemnity and application for guarantee form to be executed by the customer, which page is also retained by ANZ. The documents are checked by the relationship manager once they are prepared and then provided to the customer for review. If the customer is satisfied with the documents, the indemnity and application for guarantee is executed by the customer. ANZ's copy of the guarantee and the favouree's copy of the guarantee are then executed by the relationship manager on behalf of ANZ. The customer is then usually provided with the favouree's copy of the guarantee and ANZ retains the other two documents.
3. It was not unusual for Mr Simic to contact Ms Hanna at the Caringbah Business Centre and say that he required an urgent bank guarantee for a contract that Nebax had obtained. In the usual course, Mr Simic would attend the branch on the same day and wait for the bank guarantee to be prepared and executed. Mr Simic would either telephone Ms Hanna first to say that he intended to visit the branch that day or he would simply attend and tell Ms Hanna in person.
4. In an affidavit sworn on 9 September 2014, Ms Hanna said that Mr Simic visited the branch at Caringbah on 16 April 2010, when she had a conversation with him to the following effect: Mr Simic: Adele, I require two bank guarantees for Nebax. Nebax has just obtained a contract from Housing NSW; they need to be each made out to New South Wales Land & Housing Department trading as Housing NSW and each for $73,482.53. Ms Hanna: Looking at the accounts you may need to change some of the facilities.
5. Mr Simic instructed Ms Hanna to undertake some transactions to allow the two bank guarantees to be provided. Ms Hanna prepared a contemporaneous diary note in respect of the meeting. The diary note, which was signed by Ms Hanna and Mr Mitchell Bru, the assistant manager, was relevantly as follows: Client Daniel Simic visited the office this afternoon requiring 2 bank guarantees for $73,482.53 in favour of New South Wales Land & Housing Department Trading As Housing NSW. At this point in time the client does not have enough limit remaining to obtain these guarantees. As they are urgent the following was completed to allow for the guarantees to be instated: […] The 2 bank guarantees were prepared and given to the client for signing, Daniel Simic signed documents and took the original guarantees.
6. On 16 April 2010, Mr Simic signed two forms of indemnity and application for guarantee on behalf of Nebax. The forms were addressed to ANZ at an address in Melbourne. The indemnity begins as follows: To facilitate my/our business transactions with (a) New South Wales Land & Housing Department trading as Housing NSW ABN 45754121940 (a) Insert Name of Department, etc., to whom guarantee or security is to be given (The Favouree) I/we ask the Bank to execute a guarantee or security in your standard form (from time to time), unless we have attached or provided you with the form of guarantee that we request you to issue under this request, for an amount not exceeding (b) When appropriate, add "per week" etc. In other cases, insert "in all". 73,482.53 (b) in all AUD In consideration of the Bank giving such a guarantee or security, I/we ask you to pay to the Favouree and to debit to my/our account without prior reference to me/us any sum or sums, not exceeding the amount stated above, which the Favouree may claim from you under the guarantee or security or may require on its termination by you. The Bank will not be responsible in any way for the correctness of any amount or amounts claimed or required.

1. The Undertakings were then signed by Ms Hanna on behalf of ANZ. The form of the Undertakings is set out in the Appendix to these reasons. The Undertakings are entitled "Bank Guarantee". For reasons that I shall explain briefly below, the Undertakings are not guarantees in any ordinary sense, but are in the nature of performance bonds, which would normally be in the form of a deed, obviating the need for consideration to pass from the Corporation to ANZ. However, the Undertakings are not executed by ANZ under seal or by an attorney under power. Rather, they are expressed as synallagmatic [3] agreements between ANZ and the Corporation.
2. Thus, the Undertakings relevantly provide as follows: Favouree To: New South Wales Land & Housing Department trading as Housing NSW ABN 45754121940 (The Principal) Business name or trading name For: Nebax Constructions Australia Pty Ltd ACN 101054068 (The Customer) Description of contract/agreement Australia and New Zealand Banking Group Limited ("ANZ") asks the Principal to accept this bank guarantee ("Undertaking") in connection with a contract or agreement between the Principal and Customer for Job Number: P0409021, Bombaderry - Design & Construct 3-7 Karowa Street Contract Number BG2J8 In consideration of the Principal accepting this Undertaking and its terms, ANZ undertakes unconditionally to pay the Principal on written demand from time to time any sum or sums up to an aggregate amount not exceeding 73,482.53 AUD ("Amount") ANZ will pay the Amount or any part of it to the Principal upon presentation of this original Undertaking (accompanied by a written demand) at any ANZ branch located within Australia without reference to the Customer and even if the Customer has given ANZ notice not to pay the money, and without regard to the performance or non-performance of the Customer or Principal under the terms of the contract or agreement. By accepting this Undertaking, the Principal acknowledges and agrees that ANZ may rely entirely on any demand or notice as presented to it and has no responsibility or obligation to investigate the authenticity or correctness of the matters stated in a demand or notice, the signature on the same, the positions of such signatories or the capacity or entitlement of the Principal to give and execute the demand or notice. Amount Any alterations to the terms of the contract or agreement or any extensions or time or any other forbearance by the Principal or Customer will not impair or discharge ANZ's liability under the Undertaking. […] This Undertaking is personal to the Principal. The Principal cannot assign, transfer, charge or otherwise deal with its rights under this Undertaking and ANZ will not recognise any purported assignment, transfer, charge or other dealing. [emphasis in original]

1. The name of the town of "Bomaderry" is misspelled in the Undertakings. That mistake does not appear to be at all significant. Much more importantly, the language of the Undertakings is significantly different from the form of "Bankers Certificate" enclosed with the 4 March Letter. Nevertheless, it appears that the Undertakings were accepted by the Corporation as sufficient to satisfy the requirements of the Construction Contract.
2. In cross-examination, Ms Hanna had no recollection about where the information concerning the Construction Contract that was inserted in the Undertakings came from. She accepted that she was preparing the Undertakings for Nebax in relation to a contract that Nebax had entered into and that the inclusion of the description of the contract in the Undertakings was intended to be a reference to the contract that Nebax had entered into with another party.
3. Ms Hanna said that the information consisting of the job number and contract number inserted in the Undertakings would not have been given to her by Mr Simic orally, but would have been given by email or in a document. However, she had not been able to identify any such email or document. Ms Hanna agreed that it was possible that, when the Undertakings were being prepared, Mr Simic presented her with either a copy of the Construction Contract or a copy of part of the Construction Contract, but she did not remember what document was provided. However, she said that it was usual when information of such detail was put in a guarantee, she would take it from a document, rather than from oral instructions. There must have been a further source of information, since the "Job Number" (P0409021) given in the Undertakings does not appear in the Construction Contract or in any other document. Further, the "Contract Number" (BG2J8) given in the Undertakings does not match the contract number in the Construction Contract (S1384); instead, the former number appears in the Construction Contract as the "job number".
4. Ms Hanna also said that, to the best of her recollection, Mr Simic stayed on the premises of the Caringbah Business Centre while she prepared the Undertakings. The form of the Undertakings is contained in an ANZ computer program as a pro forma document. She simply enters the relevant amounts, the purpose, the ABN and the name of the signatory. She agreed that, in so far as she had typed in the numbers and the reference to the Construction Contract, Mr Simic provided her with that information, either in writing or orally, during the course of his attendance at the Caringbah Business Centre. The following exchange occurred in cross-examination of Ms Hanna: Q. [Ms] Hanna, I take it [that] it was a matter of indifference to you preparing the guarantees that had Mr Simic transpose[d] the words "Corporation" [and] "Department", it wouldn't have troubled you at all; you still would have prepared the document with the word "Corporation" instead of "Department"; is that right? A. It's no concern who it is made out to. I would just receive instructions from the customer and prepare them accordingly[;] whether it's "Department" or "Corporation", isn't my worry as such.
5. The primary judge accepted Ms Hanna's evidence. His Honour found that Mr Simic did not give Ms Hanna either a copy of the Construction Contract or the form of banker's certificate that was attached to the 4 March Letter, both of which had the correct name of the Corporation. His Honour considered that it was highly unlikely that Ms Hanna, as a careful employee of ANZ, would have made an error in the name of the Corporation if either of those documents had been given to her. [4] There is no challenge to that finding.
6. The description of "the Favouree" in the Undertakings is incorrect in two respects, in so far as they were intended to refer to the Corporation. First, they describe the Favouree as "New South Wales Land & Housing Department trading as Housing NSW ABN 45754121940". The correct name of the Corporation, as provided in the Housing Act 2001 (NSW) (the Housing Act), is: New South Wales Land and Housing Corporation. Thus, the name of the Corporation is incorrect in so far as it substitutes "&" for "and" and substitutes "Department" for "Corporation". Secondly, there is no reference to the correct ABN of the Corporation. At all relevant times, the correct ABN of the Corporation was "24 960 729 253".
7. The draft form of banker's certificate enclosed with the 4 March Letter describes the Corporation as "trading as Housing NSW (ABN 45 754 121 940)". That is the ABN of an entity described as "Housing NSW" since 10 October 2008 (see further below at [38]).

The Letter of Demand

1. On 2 October 2013, the Corporation wrote to ANZ demanding payment of the amount of $146,965.06 pursuant to the "two Bankers Certificates dated 16 April 2010". The letter said that, on receipt of a cheque for that amount payable to the Corporation, the original "Bankers Certificate(s)" would be released to ANZ. As an alternative, the letter requested that arrangements be made to effect an exchange of the documents. ANZ's solicitors responded on 9 October 2013, saying relevantly: Would you kindly explain why the New South Wales Land and Housing Corporation ABN 24 960 729 253 may claim the benefit of the bank Guarantees issued in favour of New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940. We note that: 1. the Bank Guarantees were issued in favor of the New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940; 2. the new entity trading as "Housing NSW" is the Department of Family & Community Services ABN 84 608 917 940; and 3. the party calling upon the Bank Guarantees is the New South Wales Land and Housing Corporation ABN 24 960 729 253.
2. The Corporation replied on 1 November 2013, relevantly, as follows: The contracting entity was always New South Wales Land and Housing Corporation ("the Corporation"). The wording of the bank guarantees confirm[s] that it was contracts with the Corporation that were secured by the guarantees. The ABN of the Corporation's then trading name, Housing NSW, was correct at the date of the guarantees. The trading name is irrelevant, as the contracting entity was always the Corporation. The fact that Housing NSW is now the trading name of another branch of the NSW Government is also irrelevant. The only discrepancy in the transaction was a typographical error on the part of ANZ by describing the Corporation as 'Department' instead of 'Corporation'. The Corporation is the contracting entity and is also the party calling on the guarantees, and it is entitled to claim the benefit of the guarantee. The assertion that the error in the Undertakings was the fault of ANZ is not borne out by the evidence.
3. After a further exchange of correspondence, ANZ's solicitors wrote on 5 December 2013 saying that ANZ did not accept that a call had been made on the "Bank Guarantees". That prompted the Corporation to commence the proceedings in the Commercial List in which the primary judge made the orders of 24 March 2015.

Statutory Framework, ABN and Name Changes

1. The Corporation is constituted by s 6(1) of the Housing Act. Under s 6(2) of the Housing Act, as in force as at April 2010 and unchanged to the present day, the affairs of the Corporation are to be managed by the Director-General of the Department of Human Services. Section 6(4) provides that the Corporation is, for the purposes of any Act, a statutory body representing the Crown. Section 6(7) provides that the Corporation may exercise any of its functions, and may otherwise act, in the name of the Department of Human Services. Under s 6(8), the Corporation and the Department of Human Services, to the maximum extent possible, are to act in a complementary manner, so as to achieve a unified administration of the Housing Act.
2. Under s 7 of the Housing Act, the Corporation has the functions conferred on it under the Housing Act or any other Act and may do such supplemental, incidental and consequential acts as may be necessary or expedient for the exercise of its functions. While the Corporation cannot employ any staff, staff could be employed in the Government Service under the Public Sector Employment and Management Act 2002 (NSW) (the Public Sector Act) to enable the Corporation to exercise its functions.
3. Under s 8(2) of the Housing Act, the Corporation has the functions of acquiring land for present or future residential development and for public purposes and, from time to time, as prevailing circumstances require, to develop and make available, or to make available for development by others, such of the land so acquired as the Corporation considers necessary or expedient for residential development and for public purposes. Under s 12, the Corporation may make and enter into contracts with any person for the carrying out of works or the performance of services or the supply of goods or materials in connection with the exercise by the Corporation of its functions.
4. The Public Sector Act (since repealed, with effect from 24 February 2014 [5] ) provided for the functions and operation of the Government Service and Public Service. It allowed for orders by the Governor to establish, abolish or change the name of any division of the Government Service. [6] Clause 3 of the Public Sector Employment and Management (Housing NSW) Order 2008, [7] dated 11 June 2008, provided that the name of the "Department of Housing" was changed to "Housing NSW" and that, in any document, a reference to the "Department of Housing" was to be construed as a reference to "Housing NSW". On 1 July 2009, the Public Sector Employment and Management (Departmental Amalgamations) Order 2009 abolished Housing NSW as a separate department and Housing NSW became a division of the Department of Human Services. [8] Clause 13(3) of that order provided that, in any document, a reference to "Housing NSW" was to be construed as a reference to the "Department of Human Services". On 4 April 2011, the Public Sector Employment and Management (Departments) Order 2011 changed the name of the Department of Human Services to the Department of Family and Community Services. [9] Clause 34(3) of that order provided that, in any document, a reference to the "Department of Human Services" is to be construed as a reference to the "Department of Family and Community Services". [10]
5. Thus, as at the time of the execution of the Undertakings on 16 April 2010, "Housing NSW" was a division of the Department of Human Services, the Director-General of which was the manager of the affairs of the Corporation. However, at the time of the Corporation's letter of demand on ANZ on 2 October 2013, the entity that was previously known as "Housing NSW" was known as the "Department of Family and Community Services". There has never been a government department called the "New South Wales Land & Housing Department", whether trading as "Housing NSW" or otherwise.
6. The ABN of the Corporation has been unchanged at all relevant times. Since 25 September 2009, it has been 24 960 729 253. However, the ABNs of entities associated with it have changed. Further, according to the ABN historical extracts in evidence, the Corporation has never formally had "Housing NSW" as its trading name, although clearly its officers used the letterhead of "Housing New South Wales" and the primary judge concluded that the Corporation was trading as "Housing NSW" at least between October 2009 and April 2010. [11]
7. The ABN 45 754 121 940, which appeared in the draft banker's certificate and on the Undertakings, has been associated with the entity "HOUSING NSW" since 10 October 2008. Further, from that date until 1 July 2010, that ABN was associated with the trading name "HOUSING NSW". It was also, from 21 October 2008 to 1 July 2010, associated with the trading name "NSW Department of Housing". On 1 July 2010, that ABN was cancelled.
8. Finally, the ABN 84 608 917 940 has been associated with the entity "Department of Family and Community Services - Housing NSW" since 30 June 2011. It was also associated with the entities "Housing NSW Department of Human Services" and "Housing NSW Department of Human Services NSW" at various dates between 5 October 2009 and 30 June 2011. It has been associated with the trading names "Housing NSW" and "NSW Department of Housing" since 25 September 2009. It has also been associated with the trading names "Department of Human Services Housing NSW" since 1 January 2010 and "Department of Family and Community Services - Housing NSW" since 1 July 2011.
9. The purpose of the above account is to demonstrate that the trading name "Housing NSW" (whether written that way or in capitals) has been associated with the ABNs of two different entities at various times since 2008, and sometimes (between 25 September 2009 and 1 July 2010, and relevantly at 16 April 2010) at the same time. Further, it shows that ABN 45 754 121 940 (which appeared on the draft banker's certificate and on the Undertakings) was associated with both an entity and a trading name known as "HOUSING NSW" between 10 October 2008 and 1 July 2010. Finally, it demonstrates the number of name changes since 2008 of the department with which the Corporation has been associated. Those considerations underline the importance of accuracy and precision in identifying government entities in instruments such as the Undertakings. However, they are not necessarily fatal to the Corporation's case in this appeal, for the reasons that follow.

Reasons of the Primary Judge

1. Before making some general observations and considering the relevant principles and case law (the latter of which are discussed in more detail below), the primary judge recalled that there are four aspects to the contractual framework in which the present construction dispute arises: 1. the contract between ANZ and Nebax, as evidenced by the Facility Letter, under which ANZ agreed to provide bank guarantees; 2. the contract between the Corporation and Nebax, as evidenced by the Construction Contract; 3. the contract between ANZ and Nebax, as evidenced by the indemnity; and 4. the Undertakings.
2. The primary judge considered that the construction of the Undertakings could be resolved by application of various principles of interpretation that he identified, all of which came to the same end. Whatever approach was used, his Honour considered that it was dictated by the reference in the Undertakings to the Construction Contract, where the Undertakings recorded that ANZ asked "the Principal" to accept the Undertakings "in connection with a contract or agreement between the Principal and Customer", followed by a reference to the job number of the Works at Karowa Street, Bomaderry and the contract number. His Honour held that there was no doubt about the identity of ANZ and that there was no doubt that the reference to "Customer" in the Undertakings is a reference to Nebax. [12]
3. The primary judge then posed the question as to who was "the Principal", in circumstances where there was no entity that matched the description "New South Wales Land & Housing Department trading as Housing NSW ABN 43 754 121 940". His Honour considered that a reasonable business person would, without going outside the four corners of the Undertakings, understand that question to be resolved by ascertaining the identity of the party who had entered into the contract referred to with Nebax. It could not be suggested that the reference to such a contract was a reference to anything other than the Construction Contract. His Honour considered that the principle that evidence can be admitted to identify a party to or the subject matter of an agreement established beyond doubt that the other party to that contract with Nebax was the Corporation. [13]
4. The primary judge characterised the Undertakings as "unilateral contracts", [14] although, as I have said, they were expressed to be bilateral contracts. [15] His Honour did so because, under the Undertakings, ANZ undertook to do or refrain from doing something on its part if another party, the Principal, did or refrained from doing something, where that other party did not itself undertake to do or to refrain from doing that thing. [16] His Honour held that, under the Undertakings, the Principal did not promise to accept the Undertakings and its terms. However, if the Principal did accept them, ANZ's obligation to pay under the Undertakings was enlivened. His Honour concluded that the question of the identity of "the Principal" must be answered by reference to the intention of ANZ and Nebax as evidenced by the indemnity between Nebax and ANZ and the Undertakings. [17]
5. On the basis of that analysis, the primary judge concluded that the language in the indemnity made it clear that the commercial purpose of the Undertakings was to facilitate a business transaction with the named "Favouree", who was "the Principal" in the Undertakings. His Honour considered that that business transaction was better described in the reference in the Undertakings to the Construction Contract. Further, his Honour found, the following circumstances were known to both Nebax and ANZ: [18]

• Nebax was a construction company that frequently entered into contracts that required Nebax to provide "guarantees" such that the provision of such guarantees was a feature of the market in which Nebax operated;
• Nebax had a facility with ANZ that had, as one of its express purposes, the provision of "guarantees" by ANZ to parties with whom Nebax had a contractual relationship;
• Nebax had a contract that Mr Simic intended to identify by the description given by Mr Simic to Ms Hanna, which Ms Hanna recorded in the Undertakings;
• The Undertakings were required as security pursuant to the contract referred to in the Undertakings, namely the Construction Contract (see [12] above).

1. The primary judge concluded that a reasonable business person taking into account the matters referred to in the previous paragraph would have understood the reference in the Undertakings to "New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940" as being intended to be a reference to the party with whom Nebax had entered into the contract which answered the description contained in the Undertakings. Such a reasonable business person would be left in no doubt, his Honour held, that that contract was the Construction Contract and that, therefore, the party that Nebax and ANZ intended to describe as "the Principal" in the Undertakings was the Corporation. [19]
2. The primary judge observed that no piece of paper generated by any party in the process up to and including the Construction Contract ever referred to "NSW Land & Housing Department" and that there has never been such an entity. Accordingly, his Honour held, there could be no doubt that, when Mr Simic gave that name to Ms Hanna, he made a mistake, which Ms Hanna, unwittingly, perpetuated in both the indemnity and the Undertakings produced pursuant to the indemnity. [20]
3. His Honour did not consider that it was an objection to that analysis that Ms Hanna did not know the correct name of the Corporation since that was something that, if the mistake had been drawn to her attention, she could easily have found out by asking Mr Simic, either to tell her from his own knowledge or by producing the Construction Contract. [21]
4. In addition, the primary judge held that the present case was a clear case where the literal meaning of the contractual words was an absurdity and that it was self-evident what the objective intention was to be taken to have been. [22] His Honour considered that it was an absurdity because the literal description of "the Favouree" and "the Principal" in the indemnity and in the Undertakings referred to a non-existent entity, with the result that none of those instruments had any legal effect. That, his Honour held, was an absurd outcome because it was clear that the entire process of Mr Simic attending at ANZ's branch, providing the information to Ms Hanna, Ms Hanna producing the relevant documents and Mr Simic and Ms Hanna duly executing those documents all pointed to their intention that the documents were intended to have legal effect. His Honour held that the description of "the Favouree" and "the Principal" in the documents, taken literally, would render the whole process a "solemn farce". [23] Further, his Honour held, it was self-evident from the language of the indemnity and the Undertakings that the objective intention of Nebax and ANZ was that the party with which Nebax had entered into the Construction Contract was intended to be the entity referred to in the Undertakings as "the Favouree" and "the Principal". [24]
5. The primary judge then dealt with the submissions advanced on behalf of ANZ and the Guarantors as to why that conclusion was wrong. His Honour referred to the emphasis laid on cases that held that there must be strict compliance with the terms of a bank undertaking or letter of credit. His Honour accepted that the requirement for strict compliance in the present case arose from the terms of the Undertakings themselves. They required the originals of the Undertakings to be produced, "accompanied by a written demand". His Honour held that there could be no doubt that, on its proper construction, "written demand" meant a written demand by "the Principal". In circumstances where the originals of the Undertakings had in fact been produced by the Corporation, accompanied by a written demand, the question was whether "New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940", on its proper construction, means the Corporation. His Honour did not consider that the cases concerning strict compliance (such as United Bank Ltd v Banque Nationale de Paris, [25] as to which see further below at [80]-[82]) were of any assistance because the question of construction in the present case raised an issue that must be determined before the application of the contractual requirement of strict compliance between what the Undertakings said had to be done and what was in fact done. In other words, the question of how to construe the Undertakings preceded the question of whether the Undertakings, properly construed, had been complied with. Having determined the question of construction, the contractual requirement of strict compliance was only then engaged and, his Honour held, had been shown to be satisfied. [26]

Appeal Grounds and Preliminary Matters

1. By notice of appeal filed on 10 April 2015, the Guarantors appeal from the orders of the primary judge made on 24 March 2015. The respondents to the appeal were the Corporation, ANZ and Nebax. On 30 September 2015, the Guarantors filed an amended notice of appeal and notice of discontinuance of the appeal so far as it concerned Nebax. Nebax is now in liquidation. Following the orders of the primary judge, arrangements were made for ANZ to pay to the Corporation the sum of $146,695.08 and for the Guarantors to pay that sum to ANZ. In their appeal, the Guarantors ask, inter alia, that the appeal be allowed and for orders that the Corporation repay that sum (plus interest) to ANZ and that ANZ repay the sum to the Guarantors.
2. The grounds relied on by the Guarantors in their amended notice of appeal may be stated as follows: 1. The primary judge erred in construing the Principal named in the Undertakings to be the Corporation and, in so construing, erred in: 1. failing to apply the principle of strict compliance; 2. failing to construe the Undertakings as standalone documents; 3. having reference to the Construction Contract; 4. having reference to the intention of Nebax; 5. finding that ANZ's objective intention was to issue the Undertakings to the Corporation; and 6. finding that each of the Undertakings was a commercial absurdity if the Principal named therein was not construed to be the Corporation; 1. […] 2. The primary judge erred in construing the reference to "New South Wales Land and Housing Department" in the two indemnities between ANZ and Nebax to be a reference to the Corporation; 3. […] 4. The primary judge erred in finding that the Corporation was entitled to rectification of the Undertakings by amending the name of the Principal therein to be the Corporation and, in so finding, erred in: 1. finding that the objective intention of ANZ was to issue the Undertakings in the name of the Corporation; and 2. relying on the objective intention of Nebax in having the Undertakings issued.
3. ANZ also filed a cross-appeal against the possibility that, if the appeal were allowed, a demand could be made under the Undertakings by an entity other than the Corporation, such as a department of the New South Wales executive government under one guise or another. Although ANZ now holds the original bank guarantee, that is only as a condition of a stay granted pending the outcome of this appeal.
4. However, during the course of the hearing, the Chief Justice raised with senior counsel for the Corporation whether he could obtain instructions for the provision of "an assurance but not an undertaking" that the Corporation would not call on the Undertakings unless the Court determined that it was entitled to relief in the appeal. Such instructions were not forthcoming. In those circumstances, ANZ submitted that, should the appeal be successful and its cross-appeal be unsuccessful, there should be orders inter alia to the effect that the Undertakings remain in its possession. Because of the conclusion that I have reached below, the issue does not arise.
5. Further, in the course of the hearing, when the Corporation made clear that it sought rectification in the alternative, it became apparent that, since the primary judge did not make an order for rectification of the Undertakings, the Corporation would need to file a second cross-appeal seeking rectification in the alternative. That second cross-appeal was filed in court on 12 October 2015. In addition, ANZ would need to file an amended cross-appeal seeking rectification of the indemnity given to it by Nebax. Since Nebax is in liquidation, it was necessary to grant leave to ANZ to commence and prosecute the appeal against Nebax. The liquidator of Nebax has not indicated any objection to that course.
6. Thus, there are two questions raised by the appeal. The first is whether the primary judge erred in construing the Undertakings as referring to the Corporation as the Favouree and the Principal. The second is, if so, whether the Undertakings should nonetheless be rectified by correcting the name of the Favouree so as to refer to the Corporation.
7. The Guarantors challenge the conclusions reached by the primary judge in favour of the Corporation as against ANZ. The Guarantors were not parties to the proceedings brought by the Corporation against ANZ. However, as I have indicated, they were cross-defendants in the cross-claim brought by ANZ. By reason of the indemnity given by Nebax to ANZ in respect of the Undertakings and the guarantees and securities given by the Guarantors to ANZ in relation to the obligations of Nebax to ANZ, the Guarantors were affected, albeit indirectly, by the conclusions reached by his Honour. Accordingly, there was no dispute that the Guarantors have standing to appeal from the orders made by the primary judge in favour of the Corporation against ANZ, as well as the orders made by his Honour in favour of ANZ against them and Nebax. [30]

Nature of the Undertakings

1. A letter of credit is an undertaking by a bank or other person that the issuer will honour a demand for payment on compliance with specified conditions, namely, the tender of specified documents. [31] The point of issuing a letter of credit is to "create a type of currency", [32] and for that reason they are centrally important in the business world (and particularly international trade).
2. Instruments such as letters of credit and bank guarantees in the nature of performance bonds have a long history (although the terminology of "performance bonds" is somewhat newer [33] ). They can probably be traced back to the receptum argentarii and the constitutum debiti alieni of Roman law, being an informal promise by a banker to pay the debt of a customer to a third person, irrespective of the contractual basis for the debt of the customer. In Roman law, the mere promise of the banker was considered enough to ground an action and probably grew out of the peculiar character of a banker's business. [34]
3. There are two broad types of letters of credit: commercial letters of credit (also known as "documentary credits") and standby letters of credit. They are similar in that they both require the tender of specified documents before they can be drawn upon; they are different in that, for example, commercial letters of credit are usually used as a payment mechanism to reduce the risk of non-payment for goods sent to the buyer, while standby letters of credit are generally issued as a security device to reduce the risk of non-performance of an obligation. [35] Thus, whereas a commercial letter of credit is expected to be drawn upon if the underlying transaction is successfully performed, a standby letter of credit is only expected to be drawn upon if the underlying transaction is not successfully performed. [36]
4. A "bank guarantee" is a similar type of instrument to a standby letter of credit. [37] Notwithstanding its misleading name (as to which, see below at [65]), a bank guarantee is a primary undertaking by a bank to pay a specified amount without regard to performance or default of obligations in the underlying contract. The term "performance bond" (or "performance guarantee") is essentially interchangeable with the term "bank guarantee". The former may be described as "a promise by a bank that it will pay, usually on production of documents, without reference to any other contract there may be between the parties". [38] It is for that reason that a performance bond may be described as being "on a similar footing to" a letter of credit. [39] Thus, when instruments of this nature are viewed as simply promises to pay on specified conditions, independent of any underlying contract, the precise nomenclature is of little relevance.
5. The description "bank guarantee" applied to the Undertakings in question is a complete misnomer. The Undertakings are probably best described as performance bonds, since the relationship between ANZ and Nebax and the relationship between ANZ and the Corporation, in the circumstances of this case, have none of the elements of suretyship. Neither ANZ, nor the Corporation, is involved in any of the obligations or rights of suretyship. [40] For example, the performance of ANZ's obligations under the Undertakings is not dependent in any way on the state of performance of the obligations under the Construction Contract (as is explicitly stated in the Undertakings [41] ). In other words, ANZ assumed a primary obligation, not a secondary obligation as is the case with guarantees properly so called. [42] Rather, the Undertakings are in the nature of an unconditional promise to pay money on demand up to a stated maximum amount. There is no basis upon which the unconditional nature of the promise by ANZ under the Undertakings to pay on demand can be qualified by reference to the terms of the contract between ANZ and Nebax. [43]
6. The purpose of the Undertakings was to obviate any need for Nebax to provide security for the performance by it of its obligations under the Construction Contract, such as, for example, by the deposit of cash, against which the Corporation would be entitled to draw in the event of default by Nebax. A performance bond is a substitute for cash, as is a letter of credit. That is to say, ANZ would not be entitled to refrain from meeting a demand by the Corporation under the Undertakings by reference to any arrangement between Nebax and the Corporation, as might be the case if the Undertakings created the relation of suretyship: if the Undertakings were truly guarantees in respect of the obligations of Nebax under the Construction Contract, a variation of the Construction Contract could operate to discharge ANZ from any obligation under the Undertakings. The Undertakings make absolutely clear that that is not the case.

Principles of Construction

1. All forms of letters of credit, including performance bonds given by banks, are governed by three principles: the documentary nature of instruments, the principle of strict compliance and the principle of autonomy. The first principle is not relevant to the present proceedings. The second and third principles are interrelated: the former is to the effect that an issuer (such as a bank) should only accept documents (such as a letter of demand) that comply strictly with the terms of the instrument involved; the latter is to the effect that the undertaking of the issuer to the beneficiary is independent of the underlying transaction and of any other contract. [44] There is, however, a recognised exception to the principle of autonomy, of fraud perpetuated by the beneficiary. [45]
2. The principle of strict compliance is a fundamental aspect of the efficacy and dependability of instruments of the kind in question. There is no room for documents that are almost the same or which will do just as well. Business could not proceed securely on any other lines. [46]
3. In addition, although this is perhaps better described as a limitation on the scope of the principle of strict compliance rather than as an exception to it, obvious typographical errors are not a valid ground for rejection of a demand for payment on instruments of the kind in question. [47] Thus, strict compliance does not require rigid, meticulous fulfilment of precise wording in all cases. Some slight margin must and can be allowed and banks will be at risk in most cases where there is less than strict compliance. [48] Similarly, the requirement of strict compliance is not equivalent to a test of exact literal compliance in all circumstances and as regards all documents. To some extent, therefore, a bank must exercise its own judgment whether the requirement is satisfied by the documents presented to it. [49] In other words, the question of compliance should be considered intelligently rather than mechanically. [50] That is so even though the principle of de minimis non curat lex has been held not to apply to letters of credit. [51]
4. Generally, it is sufficient for an issuing bank simply to inspect the documents tendered in purported compliance with the terms of instruments of the kind in question, though it must do so with reasonable care; it need not, however, investigate further to check whether they are genuine. [52] (In the present case, it appears that ANZ at least conducted an ABN search of the trading name "Housing NSW": see the letter of 1 November 2013 at [30].) To a similar effect, where the instructions given by the customer to the issuing bank as to the documents to be tendered by the beneficiary are ambiguous or are capable of covering more than one kind of document, the bank is not in default if it acts on a reasonable meaning of the ambiguous expression or accepts any kind of document that fairly falls within the wide description used. [53] In addition, a tender of documents that, properly read and understood, call for further inquiry or are such as to invite litigation is a bad tender. [54] Finally, a bank is not concerned with whether the documents that the letter of credit has stipulated serve any useful commercial purpose or with why a document of a particular description has been called for. [55]
5. The abovementioned limitation on the scope of the principle of strict compliance is important. It is a recognition of the tension between, on the one hand, the weight that commercial parties place on the confidence and reliability of instruments of the kind in question, strictly construed, and, on the other hand, considerations of commercial common sense and the understanding that an issuing bank has its own task to perform in ensuring that the documents tendered comply with the minimum requirement implicit in the ordinary meaning of the words. [56] It has been said that the relevant test is whether a discrepancy is sufficiently "material" to entitle the bank to refuse payment. [57] The test has also been described as being whether the discrepancy is "trivial". [58] Of course, the distinction between discrepancies in a document tendered that may be regarded as not being "material" or "trivial" and those that require the bank to reject the document tendered is not always easy to draw, [59] and determining the correct answer in such a borderline situation must necessarily involve the exercise of discretion in the light of the circumstances of the particular case. It would be neither necessary nor helpful exhaustively to define the scope of either "material" or "trivial" discrepancies.
6. Although it has occasionally been suggested that the principle of strict compliance may apply with less force in relation to performance bonds than letters of credit, [60] the parties did not submit that any such distinction should be drawn in the present case. Further, the provisions of the Uniform Customs and Practice for Documentary Credits, commonly applied in the United Kingdom, are not expressed to apply to the Undertakings in the present case. The Guarantors and the Corporation agree that the principle of strict compliance applies to letters of credit and performance bonds such as the Undertakings. However, the essence of the dispute between them relates to how that principle is to be applied. Properly, ANZ takes no stance one way or the other in relation to the construction question.
7. The Guarantors take issue with the primary judge's distinction between construction and performance [61] being, first, how the terms of a letter of credit are to be understood, and, second, how those terms are to be applied to the conduct purportedly done in pursuance of them. While the primary judge considered that the principle of strict compliance was relevant only to that second question, the Guarantors say that that approach was erroneous: they say that the principle applies to the question of construction as well. On the other hand, the Corporation, in supporting the reasoning of the primary judge, contends that the Guarantors erroneously conflate those two questions and that the principle of strict compliance is a principle of performance only.
8. The main contention advanced on behalf of the Guarantors is that strict compliance with the terms of an instrument such as the Undertakings is necessary before any liability pursuant to such an instrument can arise. Therefore, they say, issues of misnomer and the proper construction of the Undertakings, by reference to other contracts to which ANZ was not a party, such as the Construction Contract, cannot arise. However, they accept that the usual principles of construction otherwise apply, save that reference cannot be had to documents outside the Undertakings. They say that the primary judge fell into error and failed to follow the principle of strict compliance. In effect, they also say that the primary judge failed to observe the principle of autonomy.
9. In support of their respective contentions about how the principle of strict compliance is to be applied, the parties relied on a series of cases. It is desirable to say something about the cases in question.
10. In Equitable Trust Co of New York v Dawson Partners Ltd, [62] the respondents had contracted with a man named Rogge to ship a quantity of vanilla beans from Batavia (now Jakarta) to them for sale on consignment. Rogge required advance payment. The respondents arranged with the appellant to open a credit with a bank in Batavia to pay Rogge before he shipped the beans, once he presented to the bank a complete set of shipping documents and a certificate of quality. That certificate was required to be "issued by experts who are sworn brokers, signed by the Chamber of Commerce". Because of a coding error, the message that reached the local bank was ambiguous as to whether the certificate needed to be issued by an expert (in the singular) or experts (in the plural). The local bank ultimately advised Rogge that the certificate had to be issued by "expert who is sworn broker". Rogge obtained a certificate signed by a single broker and countersigned by the "Handelsvereeniging te Batavia". He obtained money from the local bank, but then shipped a package containing mostly wood and iron to the respondents. The appellant reimbursed the local bank but then sought to be reimbursed by the respondents, on the basis that Rogge had not complied with the terms of the credit in two respects: first, the certificate was not signed by the Chamber of Commerce; second, it was not signed by more than one broker.
11. As to the first objection, the trial judge received evidence that the Handelsvereeniging te Batavia, a semi-official institution performing the functions commonly performed by chambers of commerce, corresponded to the expression "Chamber of Commerce" in the credit. The signature on the document received by the bank had asserted as much. There was in fact no body by that name, but another institution called "Kamer von Koophandel" translated to "Chamber of Commerce" (while the name of the other institution referred to above translated to "Commercial Association of Batavia"). Only that latter body, however, conducted certifications of the relevant kind. The trial judge agreed that there had been compliance with the letter of credit, [63] and a majority of the Court of Appeal took the same view. [64] In the House of Lords, that issue was barely dealt with but the trial judge's decision in relation to it was not overturned.
12. As to the second objection, the House of Lords held, by majority, that there had not been compliance with the letter of credit. It was said that the plural number in the credit had been "deliberately used", [65] and that expressions such as "experts" could not be assumed to have been intended to connote both the singular and the plural. Thus, it was said that the bank "which knows nothing officially of the details of the transaction thus financed, cannot take upon itself to decide what will do well enough and what will not". [66]
13. Next, in JH Rayner and Co Ltd v Hambro's Bank Ltd, [67] a letter of credit was opened by a bank in relation to a cargo of "Coromandel groundnuts". Bills of lading that were later presented pursuant to the letter of credit were described as being in respect of "machine-shelled groundnut kernels". The bank refused to pay on the letter of credit. The trial judge received evidence to the effect that "Coromandel groundnuts" were universally understood in the relevant trade to be the same as "machine-shelled groundnut kernels", and concluded that the bank should be taken to be aware of that special knowledge. An appeal to the Court of Appeal succeeded, with the Court holding that the bank could not be considered to be affected by knowledge of the customs of every trade that may transact with it. As Goddard LJ said, "[f]or all the bank knows, its customer may have a particular reason for wanting 'Coromandel groundnuts' in the bill of lading". [68]
14. In United Bank Ltd v Banque Nationale de Paris, [69] the High Court of Singapore held that a banking institution that issued a letter of credit in favour of "Pan Associated Ltd" was not entitled to pay under a demand made by "Pan Associated Pte Ltd", notwithstanding that it was established that there was an entity by the name "Pan Associated Pte Ltd" and there was no entity by the name "Pan Associated Ltd" and that under the relevant companies legislation, a company could not be registered by a name that so nearly resembled the name of another company as to be likely to be mistaken for it. There was apparently no reference in the letter of credit to any underlying contract between the two parties. In the course of reaching the conclusion that his Honour did, Chao Hick Tin J referred to the proposition that the "materiality" of a discrepancy will determine whether a bank is entitled to refuse to pay on a letter of credit, and said that, while such a proposition may be "tempting", his Honour asked rhetorically: "why should a bank assume the responsibility of determining the question of materiality and take the risk if it goes wrong[?]" [70]
15. Chao Hick Tin J reached that conclusion with "some hesitation", [71] having considered two United States authorities that might have suggested a different result. Thus, some variations in a bill of lading might be so insignificant as not to relieve the issuing or confirming bank of its obligation to pay, such as where the name intended is unmistakably clear despite what is obviously a typographical error; however, a misspelling of the name "Mohammed Sofan" as "Mohammed Soran" was held not to fall into such a category. [72] The Court opined that the situation would be different if, for example, the name "Smith" were misspelled "Smithh".
16. On the other hand, in the other American case, [73] a reference in a letter of credit to "Blow Out Prevention Ltd", rather than "Blow Out Products Ltd", was held to be "clearly a draftsman's error" where it appeared in another part of the letter of credit. That former name was a non-existent company. The Court considered that where the language of the instrument was contradictory or ambiguous or doubtful so as to be fairly susceptible of two constructions, one of which made the instrument one that a prudent man would naturally enter into and the other made it inequitable, unusual or such as a reasonable man would not be likely to enter into, the former interpretation should be preferred. [74] Chao Hick Tin J distinguished that case on the basis that it involved an ambiguity within the letter of credit itself, so as to allow the application of the contra proferentem rule. [75]
17. Other cases (not referred to by Chao Hick Tin J) demonstrate that the courts are sometimes prepared to accept minor discrepancies between a requirement of a letter of credit and a document tendered in pursuance of it. For example, in Hing Yip Hing Fat Co Ltd v Daiwa Bank Ltd, [76] a discrepancy between the name of a company on a letter of credit ("Cheergoal Industries Limited") and its identification on a document presented in connection with it ("Cheergoal Industrial Limited") was held to be an "obvious typographical error" that did not entitle the bank to refuse payment. [77] Similarly, in Kredietbank Antwerp v Midland Bank plc, [78] the requirement in a letter of credit of the presentation of "a draft survey report issued by Griffith Inspectorate" was held to be complied with by the presentation of such a report signed by "Daniel C. Griffith (Holland) BV … member of the worldwide inspectorate". There was in fact no body in existence called the "Griffith Inspectorate". [79]
18. The Guarantors and the Corporation also referred to Wood Hall Ltd v The Pipeline Authority. [80] In that case, performance bonds were issued in connection with a construction contract, and for the purpose of providing security for the contractor's proper performance of the construction work. However, the absence of proper performance was not described in the performance bonds as being the condition on which the bank would pay the relevant sums of money: the bank promised "unconditionally" to pay. The performance bonds identified the underlying contract and the parties to it, and one of them was expressed to have been given "in accordance with" one of the provisions of the contract. When the contractor made demand on the bank for payment under the performance bonds, the other party obtained an injunction preventing such payment, having argued that the contractor had been in breach of the construction contract in various respects.
19. The High Court held that the performance bonds were not to be construed in the light of the construction contract. That conclusion was reached not so much on the basis of the principle of strict compliance in relation to letters of credit (indeed, neither that phrase, nor the principle of autonomy, appears anywhere in the Court's reasons) but on the basis of the ordinary meaning of the terms of the performance bonds. Thus, for example, Gibbs J stated that "[t]o hold that the bank guarantees are conditional upon the making of a demand that conforms to the requirements of the [construction contract] would of course be quite inconsistent with the express statement in the bank guarantees that the undertaking of the Bank is unconditional … [i]t would be contrary to the settled rules governing the implication of terms in contracts to imply provisions that would contradict the ordinary meaning of the words of the bank guarantees in this way". [81] Similarly, Barwick CJ stated that "there is no basis whatever upon which the unconditional nature of the Bank's promise to pay on demand can be qualified by reference to the terms of the contract between the contractor and the owner". [82]
20. Stephen J, reaching the same conclusion, made implicit reference to the principle of strict compliance, or at least its rationale. Thus, his Honour said: "[n]ot only does the clear, indeed emphatic, language of these guarantees preclude the introduction of any such qualification: to introduce such a qualification would be to deprive them of the quality which gives them commercial currency. Once a document of this character ceases to be the equivalent of a cash payment, being instantly and unconditionally convertible to cash, it necessarily loses acceptability." [83]
21. Thus the High Court did not, in Wood Hall, state as a universal principle that the doctrine of strict compliance (or the principle of autonomy) prevented reference to an underlying contract in all cases. Indeed, on one view, it was nothing more than an ordinary application of principles of contractual construction that happened to involve letters of credit. Relevantly, the Court distinguished an earlier case [84] in which there was a bank guarantee in respect of which a demand had been made and money paid. In that case, the guarantee made express reference to the underlying building contract and the purpose, under that contract, for which the guarantee was issued. The question was not whether the bank was bound to pay but how the moneys in fact paid by the bank should be applied. It was held that, since the guarantee was given for the purposes of a provision of the building contract, it was right to conclude that the parties to the guarantee mutually contemplated and agreed that the moneys when provided by the bank would be dealt with as the building contract required. [85] Thus, that case did not assist in the question facing the Court in Wood Hall because it did not employ the terms of the underlying contract to decide whether the relevant bank should pay pursuant to the guarantee in the first place.
22. Finally, in Griffin Energy Group Pty Ltd v ICICI Bank Ltd, [86] the question (relevantly for the present case) was the construction of the words "due and payable" in provisions of a letter of credit, expressly stated to have been issued in connection with an underlying sale agreement. [87] The appellant had sought a declaration that it was entitled to call on the credit on a particular date, and the respondent bank resisted that relief on the basis of (inter alia) provisions of the sale agreement. In reaching its conclusion, the Court had regard to the provisions of the underlying sale agreement in order to determine whether a claimed amount was "due and payable", so that one of the parties would be able to make a declaration to that effect to the bank in order to receive payment from it. [88] That was so even though the letter of credit did not refer to any specific provision of the sale agreement.
23. In outlining the principles to be applied in the resolution of the dispute, the Court said, in a passage much discussed by the parties both before the primary judge and on appeal in this Court: [46] Mr Hutley SC, who appeared with Mr Giles for the appellants, accepted that the primary Judge was correct to observe (at [58]) that the Letters of Credit are stand alone instruments. Thus in determining the rights of the Beneficiary (Griffin) to call on the Letters of Credit and the obligations of the Issuing Bank (ICICI Bank) to pay under them, regard is not to be had to any provision of the Sale Agreement between Griffin and the Account Party (Lanco). This principle is stated, in the context of performance guarantees, in Wood Hall Ltd v The Pipeline Authority [1979] HCA 21; 141 CLR 433 at 450-451 (Gibbs J, Barwick CJ and Mason J agreeing); 457 (Stephen J); 461 (Murphy J). The principle is founded on the importance of a letter of credit being the equivalent of a cash payment: see S McCracken and A Everett, Everett and McCracken's Banking and Financial Institutions Law (7th ed, 2009, Lawbook Co) at [14.060]. [47] Secondly, both the Sale Agreement and Letters of Credit must be construed by reference to what a reasonable business person would have understood the terms to mean. Subject to the principle stated in the previous paragraph, this requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract: Electricity Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ). It is to be noted that the language, surrounding circumstances and commercial purpose or objects of the Sale Agreement are different from those of the Letters of Credit. This passage is really directed to the principle of autonomy rather than to the principle of strict compliance. It does not appear to support the Corporation's contention that that principle (leaving the principle of strict compliance to one side for the moment) is only relevant at the stage of determining whether the provisions of a letter of credit have been properly performed, and not at the stage of construing them. The words "[s]ubject to the principle stated in the previous paragraph" in [47] bear this out. Further, the approach of the Court, in having regard to the underlying sale agreement, appears to recognise that, similarly to the principle of strict compliance, the scope of the autonomy principle is not necessarily applied with unyielding exactitude in all cases. Certainly in Griffin Energy Group, it would have been surprising had regard not been had to the underlying sale agreement, since no other document could have resolved the question whether a certain payment was "due and payable" at a given time.
24. After the hearing of the appeal in the present matter, the parties sought, and were granted, leave to make short written submissions concerning the decision of the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37 (which was delivered after the hearing) and the decision of the Western Australian Court of Appeal in Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215 (which had not been the subject of submissions during the appeal).
25. In relation to Mount Bruce Mining, the Corporation draws attention to the statement of French CJ, Nettle and Gordon JJ that "[t]he rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose" [89] (emphasis of the Corporation). It also draws attention to the statement by their Honours, in the context of surrounding circumstances that may be taken into account when construing a contract, that "[w]hat may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction" [90] (emphasis of the Corporation). Thus, it says that the Construction Contract can be used in the interpretation of the Undertakings because it is "referred to" by them, and that the "circumstance" that the Corporation, properly described, is a party to the Construction Contract (and to the antecedent written negotiations) can be taken into account, notwithstanding that its proper identification was not known to ANZ, because that circumstance would "assist in identifying the purpose or object" of the Undertakings.
26. However, shortly after the sections quoted above, French CJ, Nettle and Gordon JJ declared explicitly that "[t]hese observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of NSW and Electricity Generation Corporation v Woodside Energy Ltd". [91] Neither party relies on either of those two cases as providing any particular support for their submissions in the present case. Further, as the Guarantors point out, Mount Bruce Mining concerned not a performance bond but an ordinary contract, and the High Court did not purport to comment on the principles attending the proper construction of the kind of instrument relevant to these proceedings.
27. The Guarantors also rely on the statement, by Bell and Gageler JJ, that the proper interpretation of a contract "is to be determined by reference to what reasonable businesspersons having all the background knowledge then reasonably available to the parties would have understood those terms to have meant" [92] (emphasis of the Corporation) as at the date of the contract. They say that the true description of the Corporation, as a party to the Construction Contract, was "reasonably available" to ANZ. Again, however, their Honours stated that that rule is "consistent[] with numerous recent statements of principle in this Court", [93] being Electricity Generation Corporation [94] and Maggbury Pty Ltd v Hafele Australia Pty Ltd. [95] The High Court clearly did not intend, in this most recent judgment, to state anything new in relation to the kind of extrinsic material to which reference may legitimately be had in the construction of contracts.
28. Secondly, in Ideas Plus Investments v National Australia Bank, the appellant had requested a letter of credit from HSBC in favour of the respondent. It was described as being in respect of "the unpaid indebtedness of" a company associated with Ideas Plus. Later, the letter of credit was amended so as to include a requirement that NAB have enforced its debenture rights as against the associated company before it could call on the letter of credit. Later, when NAB called on the letter of credit, the question arose whether that requirement had been satisfied according to its terms.
29. The Western Australian Court of Appeal, when construing the letter of credit, had regard to the fact that it had been amended in a manner proposed by HSBC, at the request of Ideas Plus, and accepted by NAB. [96] However, the terms of those amendment communications were not considered by the Court (nor, for that matter, were the terms of the debenture) in resolving the construction dispute, and even the fact that the final form of the terms of the letter of credit was the product of amendment was considered to be "neutral" so far as the construction issue was concerned. [97] In those circumstances, it is difficult to see how the Corporation can derive assistance from that case for its construction argument in the present matter. In any event, the Corporation made almost no submissions about Ideas Plus Investments, beyond pointing out that the court in that case had taken into account "various surrounding circumstances" in construing the letter of credit.

Consideration

1. The starting point is that letters of credit, like the Undertakings, are contracts to which the ordinary principles of contractual construction apply. [98] However, it appears that little judicial attention has been squarely directed to the interrelationship between those ordinary principles, on the one hand, and the principles peculiar to letters of credit (being those of strict compliance and autonomy), on the other hand, and the cases referred to by the parties do not clearly resolve the matter one way or the other.
2. The question whether the documentary discrepancy in the present case falls within the margins of either of those two latter principles does not arise if it can be shown that they are principles of performance and not of the antecedent process of construction. In other words, if it can be shown that, properly construed, the reference in the Undertakings to the "New South Wales Land & Housing Department" should be understood as a reference to the "New South Wales Land and Housing Corporation", and that that process of construction precedes the application of the principles of strict compliance and autonomy, then the appeal must be dismissed.
3. In my view, the primary judge was correct to hold that the principle of strict compliance is properly classified as one of performance, because it is directed to the question whether documents tendered conform to the requirements stipulated by the letter of credit. In other words, it makes conceptual sense to consider the principle of strict compliance as one pertaining to performance. That is to say, the principle applies when considering the question whether a document tendered in purported pursuance of a letter of credit complies with the requirements imposed by it, after the letter of credit has been construed. [99]
4. On the other hand, in the sense that the autonomy principle restricts the range of material in the context of which a letter of credit may be understood, it seems that it must necessarily form part of the process of construction. In other words, the principle of autonomy is properly classified as one of construction, because it is directed to the question as to which documents can be employed for the purpose of determining what the letter of credit means, in order to determine whether it has been strictly complied with. That conclusion would appear to be necessitated by paragraph [47] of Griffin Energy Group (quoted above at [89]).
5. Indeed, if the position were otherwise, then the situation could arise in which extrinsic material (namely, documents other than the letter of credit and any document tendered in pursuance of it) could be employed for the purpose of understanding the meaning of the letter of credit, [100] but not for the purpose of determining whether compliant performance has occurred. That would seem to be an artificial, and undesirable, distinction to draw.
6. Thus, it is not necessary to determine whether the discrepancy in the present case falls foul of the principle of strict compliance. However, as the foregoing examination of the cases demonstrates, that principle is not always applied with unyielding exactitude. Nonetheless, there may be good reason for more caution in applying the principle of strict compliance to discrepancies in the identity of the beneficiary of a letter of credit, as opposed to discrepancies in other details of a document tendered (by the correct beneficiary) in pursuance of a letter of credit. [101] That is because it would constitute a greater departure from the arrangement contemplated by the parties for the incorrect entity to be paid the credit, on the one hand, than for the correct entity to be paid the credit when it is not entitled to it, on the other hand. In any event, no firm conclusion need be reached on that issue.
7. The question is then whether the autonomy principle applies in the present case to prevent regard being had to the correct description of the beneficiary of the Undertakings in the Construction Contract.
8. It is true that the mere mention of the underlying contract and of the clauses therein that have led to the issuance of a letter of credit by a bank are not sufficient to incorporate that contract into the letter of credit or to make the bank's obligation to pay conditional on the rights of the parties under that contract. [102] Just as in Wood Hall, in which Barwick CJ said that "there is no basis whatever upon which the unconditional nature of the Bank's promise to pay on demand can be qualified by reference to the terms of the contract between the contractor and the owner", or upon which "the owner's unqualified right at any time to demand payment by the Bank can be qualified by reference to the terms or purpose of that contract", [103] so the Undertakings in the present case are described as having been made "unconditionally". Neither party in the present case was so bold as to suggest that the Construction Contract was actually incorporated in the Undertakings.
9. However, there is a difference between, on the one hand, construing a letter of credit with reference to the terms of the underlying contract (that is, with reference to the rights and liabilities of the parties thereto), and, on the other hand, construing such an instrument with reference to the mere identification of that underlying contract, particularly where that contract is already identified in the instrument itself. Thus, it may be a reasonable application of the autonomy principle to state that regard may be had to an extrinsic document only to the extent to which it is referred to in the letter of credit. [104]
10. For example, if a letter of credit makes explicit reference to a particular clause of an underlying contract, then it may be permissible to have regard to that clause (but not others) in construing the letter of credit. Similarly, as in Griffin Energy Group, where the phrase "due and payable" in the letter of credit made implicit reference to the underlying contract and could not be properly understood without reference to that contract, it was permissible to have regard to the relevant provisions of the contract in order to give that phrase meaning. To provide another example, in the case of Rainy Sky SA v Kookmin Bank, [105] the performance bond made reference to the underlying contract and said that "terms and expressions used in this bond shall have the same meaning as in the contract". [106] For that reason, the Court stated that "the terms and meaning of the contracts are only relevant to the extent that they inform the true construction of the bonds", [107] because "[t]hey are referred to in the bonds and provide the immediate context in which the bonds were entered into". [108]
11. But the fact that the underlying contract is simply identified in the letter of credit, as in Wood Hall, does not make it permissible to have regard to any term of that contract in order to determine whether, for example, the issuing party is in default of it at the time that it seeks payment pursuant to the letter of credit. On the other hand, if the underlying contract is identified in the letter of credit, then the identifying features of that contract (which must at least include the parties to it) may be considered in construing the letter of credit.
12. Thus, in the present case, no term of the Construction Contract is referred to in the Undertakings, and so the primary judge was correct in not having regard to any such term in determining whether the Corporation was entitled to the benefit of the Undertakings. [109] However, as has been seen, the Construction Contract and the identity of the parties to it were both referred to in the Undertakings. It follows, in my view, that it is permissible to have regard to the Construction Contract to that extent in order to determine the correct construction of the Undertakings.

Application of the Principles to the Undertakings

1. In the present case, carelessness or lack of diligence on the part of the Corporation led the Corporation to accept, by way of performance bond, a "banker's certificate" that did not satisfy the requirements of the 4 October Letter. That is to say, not only did the Corporation accept a "banker's certificate" in terms quite different from the draft enclosed with the 4 October Letter, it accepted performance bonds that did not accurately describe the "Favouree" or the person with whom ANZ was expressed to make an agreement under the Undertakings. There has not been, and apparently could not be, any suggestion that the description of the "Favouree" in the Undertakings could refer to any entity other than the Corporation. There was certainly no legal entity by the name "New South Wales Land & Housing Department" in existence at the time when the Undertakings were signed on behalf of ANZ, on 16 April 2010. Nor was there, or had there been, any department of the executive government of New South Wales by that name.
2. On the other hand, there was an entity, constituted by the Housing Act, with a name very similar to "New South Wales Land & Housing Department", namely, the Corporation. Further, the Corporation engaged in activities in conjunction with a department of state of New South Wales under the name "Housing NSW", the ABN for which was the ABN specified in the Undertakings. More importantly, the actual terms of the Undertakings make it clear beyond dispute that the Undertakings were to be given in favour of an entity that was a party to a contract or agreement with Nebax described as "job number P0409021, Bomaderry - Design and Construct - 3-7 Karowa Street - Contract number BG2J8". Notwithstanding the discrepancies in the job number and the contract number (noted above at [24]), it is unquestionable that the Corporation was the party to that contract or agreement with Nebax.
3. Although it was certainly not required to do so, a simple enquiry by ANZ of Nebax would have clarified the situation, as the Corporation sought to do in its letter of 1 November 2013. ANZ needed only to clarify the identity of the party with which Nebax had contracted in the Construction Contract. That is, of course, not to say that Nebax would have had any entitlement to instruct ANZ not to pay the credit on the basis of the discrepancy. That would be contrary to the express words of the Undertakings. The decision to accept or reject the Corporation's letter of demand remained ANZ's. Nevertheless, it is common practice for banks, in a situation of apparent discrepancy, to approach the applicant for the credit to ask whether it would be prepared to waive the discrepancy. [110]
4. It is axiomatic that any instrument having a legal effect, or intended to have a legal effect, should be construed ut magis valeat quam pereat. That is to say, if there are two ways of reading or construing the Undertakings, one of which means that the Undertakings are quite ineffective because they are addressed to a non-existent entity, and one of which gives them the effect that, on their face, they are clearly intended to have, namely, as a facility for the "Favouree" to demand payment of a sum of money from ANZ, the latter construction must be adopted.
5. Of course, ANZ was entitled to be satisfied that the entity purporting to make demand under the Undertakings was in fact the entity to which they are addressed. However, once the Corporation had furnished to ANZ indisputable evidence that it was the entity that was a party, as "Principal", to the contract or agreement with Nebax described in the Undertakings, there was no basis upon which ANZ would be entitled to refrain from meeting the demand.
6. The only prerequisite for the obligation to arise on the part of ANZ to make a payment was the presentation of the original Undertakings, accompanied by a written demand, at any branch of ANZ located within Australia. Once those prerequisites had been satisfied, an obligation arose on the part of ANZ to make payment in accordance with the Undertakings to the entity to which, on their proper construction, the Undertakings are addressed. For the reasons indicated, the "Favouree" referred to in the Undertakings as "the Principal" could only be the Corporation.
7. It follows that the primary judge made no error in concluding that, on the proper construction of the Undertakings, the words "New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940" mean the Corporation.
8. It was common ground that, if the Undertakings were to be construed as contended for by the Corporation, the indemnity in favour of ANZ by Nebax should be construed in the same way. It would follow that the Guarantors were liable under the securities provided by them to ANZ in respect of the obligations of Nebax.

Rectification

1. Having regard to the conclusion that I have reached concerning the declarations made by the primary judge, it is not necessary to deal with the question of rectification. That is to say, as his Honour concluded, there is no need to rectify the Undertakings since, on their proper construction, they are addressed to the Corporation.
2. It does not necessarily follow, however, that the conclusion of the primary judge, that the prerequisites for the making of an order for rectification were satisfied in the present case, is correct, and I express no view on that question one way or the other. Thus, there may be questions as to the standing of the Corporation to seek rectification of the Undertakings. They were issued by ANZ at the behest of Nebax, not the Corporation. On the other hand, they are expressed as an agreement between ANZ and the "Principal", in the sense that each provides that, in consideration of the Principal's accepting an undertaking in its terms, ANZ unconditionally undertakes to pay the specified amount to the Principal on demand. The form of banker's certificate enclosed with the 4 March Letter follows a not dissimilar format, in so far as it provides that the banking institution unconditionally undertakes to pay the sum on demand at the request of Nebax and in consideration of the Corporation, "at the request of this bank", dispensing with the lodgement of a bank cheque as provided for in the contract proposed to be entered into by Nebax with the Corporation. That is to say, the draft form of banker's certificate and the form of the Undertakings both involve consideration passing from the Corporation to the relevant banking institution. In the case of the draft banker's certificate, the Corporation dispenses with the lodgement of a bank cheque. In the case of the Undertakings, the Corporation accepts the Undertakings and their terms at the request of ANZ.
3. A further question may arise as to whether it can be said that both parties to the Undertakings, being ANZ and the Corporation, had a common intention that the Undertakings be addressed to the Corporation. There can be no question that that was the intention of the Corporation, despite the fact that it accepted the Undertakings addressed to a non-existent entity. However, in so far as the mind of Ms Hanna was the relevant mind of ANZ, it is by no means clear that her intention was to refer to the Corporation. There is nothing to suggest that Ms Hanna was aware of the existence of the Corporation. On one view, her intention was to issue the Undertakings in the name of whomever Mr Simic specified as the "Favouree". For reasons that were not established, Mr Simic specified a non-existent entity, although it is clear that he intended that the Corporation would be the "Favouree" under the instruments that he requested ANZ to issue. It was clearly his intention that the instruments that he requested from ANZ would satisfy the prerequisites of Special Condition 39 of the proposed contract between Nebax and the Corporation, namely, the Construction Contract. It may be that the subjective understanding or intention of Ms Hanna was therefore irrelevant and that the intention of Nebax, and the intention of the Corporation, were all that were relevant.

Conclusion

1. The appeal should be dismissed with costs. The questions raised by the cross-appeal by ANZ and the second cross-appeal by the Corporation do not arise. Both cross-appeals were defensive in substance. The costs of the cross-appeals should therefore be treated as the parties' costs of the appeal.

APPENDIX AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ABN 11 05 357 522 ORIGINAL - TO BE PROVIDED TO THE FAVOUREE BANK GUARANTEE Guarantee No: 10873 Favouree To: New South Wales Land & Housing Department trading as Housing NSW ABN 45754121940 (The Principal) Business name or trading name For: Nebax Constructions Australia Pty Ltd ACN 101054068 (The Customer) Description of contract/agreement Australia and New Zealand Banking Group Limited ("ANZ") asks the Principal to accept this bank guarantee ("Undertaking") in connection with a contract or agreement between the Principal and Customer for Job Number: P0409021, Bombaderry - Design & Construct 3-7 Karowa Street Contract Number BG2J8 In consideration of the Principal accepting this Undertaking and its terms, ANZ undertakes unconditionally to pay the Principal on written demand from time to time any sum or sums up to an aggregate amount not exceeding 73,482.53 AUD ("Amount") ANZ will pay the Amount or any part of it to the Principal upon presentation of this original Undertaking (accompanied by a written demand) at any ANZ branch located within Australia without reference to the Customer and even if the Customer has given ANZ notice not to pay the money, and without regard to the performance or non-performance of the Customer or Principal under the terms of the contract or agreement. By accepting this Undertaking, the Principal acknowledges and agrees that ANZ may rely entirely on any demand or notice as presented to it and has no responsibility or obligation to investigate the authenticity or correctness of the matters stated in a demand or notice, the signature on the same, the positions of such signatories or the capacity or entitlement of the Principal to give and execute the demand or notice. Any alterations to the terms of the contract or agreement or any extensions or time or any other forbearance by the Principal or Customer will not impair or discharge ANZ's liability under the Undertaking. This Undertaking remains in force until the first to occur of -: * The Principal notifies ANZ in writing that the Undertaking is no longer required. * This original Undertaking is returned to ANZ. Amount * ANZ has paid to the Principal the Amount or the balance outstanding of the Amount. On expiry or when no longer required this Original Undertaking must be returned for cancellation to the Manager of any ANZ branch located within Australia. Notwithstanding anything stated in this Undertaking, ANZ has the right to terminate it at any time by paying the Principal the Amount or the balance outstanding of the Amount, or any lesser amount that the Principal may require. This Undertaking is personal to the Principal. The Principal cannot assign, transfer, charge or otherwise deal with its rights under this Undertaking and ANZ will not recognise any purported assignment, transfer, charge or other dealing. This Undertaking will be governed by the laws of New South Wales ("Governing Jurisdiction") Dated this Friday, 16 April 2010 Executed by Adele Hanna, Relationship manager at Caringbah, New South Wales for and on behalf of Australia and New Zealand Banking Group Limited ABN 11 005 357 522 [signature block]

Endnotes

1. New South Wales Land and Housing Corporation v Australia and New Zealand Banking Group Ltd [2015] NSWSC 176.
2. [2015] NSWSC 176 at [95].
3. See, eg, Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 65.
4. [2015] NSWSC 176 at [23].
5. See Government Sector Employment Act 2013 (NSW).
6. Section 104(1)(a).
7. New South Wales Government Gazette, No 68, 13 June 2008, at 4787-8.
8. Clause 13(1)-(2).
9. Clause 34(1).
10. See similarly Government Sector Employment Act 2013 (NSW), Sch 4 cl 12(b).
11. [2015] NSWSC 176 at [15].
12. [2015] NSWSC 176 at [65]-[66].
13. [2015] NSWSC 176 at [66].
14. [2015] NSWSC 176 at [69].
15. See above, [20].
16. See United Dominions Trust (Commercial) Limited v Eagle Aircraft Services Ltd [1968] 1 All ER 104 at 109.
17. [2015] NSWSC 176 at [69]-[70].
18. [2015] NSWSC 176 at [72]-[73].
19. [2015] NSWSC 176 at [74].
20. [2015] NSWSC 176 at [76].
21. [2015] NSWSC 176 at [76].
22. See National Australia Bank Limited v Clowes [2013] NSWCA 179 at [34]-[38].
23. [2015] NSWSC 176 at [77].
24. [2015] NSWSC 176 at [78].
25. [1991] 2 SLR(R) 60.
26. [2015] NSWSC 176 at [81]-[84].
27. [2015] NSWSC 176 at [85].
28. [2015] NSWSC 176 at [86].
29. [2015] NSWSC 176 at [87].
30. See Insurance Exchange of Australasia Group v Dooley [2000] NSWCA 159; 50 NSWLR 222 at 230 and Chaina v Lavaro Homes Pty Limited [2008] NSWCA 353 at [97].
31. See generally A Mugasha, The Law of Letters of Credit and Bank Guarantees (Federation Press, 2003) at p 2ff.
32. Westpac Banking Corporation v Commonwealth Steel Co Ltd [1983] 1 NSWLR 735 at 741.
33. See Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] QB 159 at 169.
34. See Justinian's Institutes, 4.6.8, Digest 13.5, Code 4.18.2 and R Zimmerman, The Law of Obligations: Roman Foundations of the Civilian Tradition (Juta & Co, 1990) at 514.
35. Mugasha, The Law of Letters of Credit and Bank Guarantees at 59.
36. Ibid.
37. See, eg, Boral Formwork v Action Makers [2003] NSWSC 713 at [35]-[36].
38. Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 551.
39. Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] QB 159 at 171 (quoted with approval in Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443 at 457-8).
40. See similarly Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443 at 445.
41. "ANZ will pay the Amount … without regard to the performance or non-performance of the Customer or Principal under the terms of the [underlying] contract or agreement".
42. See, eg, Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309 at [38].
43. See Wood Hall v Pipeline Authority at 445.
44. See, eg, United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 at 182-3; Boral Formwork v Action Makers at [32]; Wood Hall v Pipeline Authority at 445.
45. See, eg, Contronic Distributors Pty Ltd (receiver & manager appointed) v Bank of New South Wales [1984] 3 NSWLR 110 at 114-16; Inflatable Toy Company Pty Ltd v State Bank of New South Wales (1994) 34 NSWLR 243 at 249-51. Other exceptions to the autonomy principle have been accepted: see Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd [2008] FCAFC 136 at [77]ff.
46. Equitable Trust Co of New York v Dawson Partners Ltd (1927) 27 Ll L Rep 49 at 52.
47. See, eg, Westpac Banking Corporation v 'Stone Gemini' [1999] FCA 434 at [84] (extremely minor spelling errors); Forestal Mimosa Ltd v Oriental Credit Ltd [1986] 2 All ER 400 at 407-8 (date given as "2 July" was clearly meant to be "22 July" - this issue was not reported in [1986] 1 WLR 631). See further discussion of the cases below; see also E Adodo, Letters of Credit: The Law and Practice of Compliance (Oxford University Press, 2014) at [6.11]-[6.29].
48. Banque de l'Indochine et de Suez SA v J H Rayner (Mincing Lane) Ltd [1983] QB 711 at 721 (affirmed on appeal at 730).
49. Kredietbank Antwerp v Midland Bank plc [1999] 1 All ER (Comm) 801 at 806.
50. Fortis Bank SA/NV v Indian Overseas Bank [2010] 1 Lloyd's Rep 227 at 231.
51. See, eg, Moralice (London) Ltd v E D & F Man [1954] 2 Lloyd's Rep 526; Soproma SpA v Marine and Animal By-Products Corporation [1966] 1 Lloyd's Rep 367.
52. See, eg, Gian Singh & Co Ltd v Banque de l'Indochine [1974] 1 WLR 1234 at 1238-9; United City Merchants (Investments) Ltd v Royal Bank of Canada at 184.
53. Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279 at 286, citing Midland Bank Ltd v Seymour [1955] 2 Lloyd's Rep 147.
54. Banque de l'Indochine et de Suez SA v J H Rayner (Mincing Lane) Ltd at 730.
55. See, eg, Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd at 286.
56. Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd at 285; see also Kredietbank Antwerp v Midland Bank plc at 806.
57. Gian Singh & Co Ltd v Banque de l'Indochine at 1240.
58. Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd's Rep 236 at 240.
59. Kredietbank Antwerp v Midland Bank plc at 806.
60. See, eg, IE Contractors Ltd v Lloyds Bank Plc [1990] 2 Lloyd's Rep 496 at 500; Siporex Trade SA v Banque Indosuez [1982] 2 Lloyd's Rep 146 at 159.
61. As summarised above at [50].
62. (1927) 27 Ll L Rep 49.
63. (1926) 24 Ll L Rep 261.
64. (1926) 25 Ll L Rep 90.
65. (1927) 27 Ll L Rep 49 at 51.
66. (1927) 27 Ll L Rep 49 at 52.
67. [1943] 1 KB 37.
68. [1943] 1 KB 37 at 42-3.
69. [1991] 2 SLR(R) 60.
70. [1991] 2 SLR(R) 60 at 71-2.
71. [1991] 2 SLR(R) 60 at 73.
72. Dessaleng Beyene and Jean M Hanson v Irving Trust Co 762 F 2d 4 (2nd Cir, 1985).
73. Bank of Montreal v Federal National Bank & Trust Co of Shawnee 622 F Supp 6 (D Okla, 1984).
74. Summarised in [1991] 2 SLR(R) 60 at 72-3.
75. [1991] 2 SLR(R) 60 at 73.
76. [1991] 2 HKLR 35.
77. [1991] 2 HKLR 35 at 45.
78. [1999] 1 All ER (Comm) 801.
79. See further P Ellinger, 'The Doctrine of Strict Compliance: Its Development and Current Construction' in F Rose (ed), Lex Mercatoria: Essays on International Commercial Law in Honour of Francis Reynolds (LLP, 2000) at 195-8.
80. (1979) 141 CLR 443.
81. (1979) 141 CLR 443 at 451.
82. (1979) 141 CLR 443 at 445.
83. (1979) 141 CLR 443 at 457.
84. Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335.
85. As summarised in (1979) 141 CLR 443 at 451-2.
86. [2015] NSWCA 29. Special leave to appeal to the High Court was refused on 7 August 2015: [2015] HCATrans 174.
87. See [2015] NSWCA 29 at [26].
88. See [2015] NSWCA 29 at [55].
89. [2015] HCA 37 at [46].
90. [2015] HCA 37 at [50].
91. [2015] HCA 37 at [52].
92. [2015] HCA 37 at [120].
93. [2015] HCA 37 at [120].
94. [2014] HCA 7; 251 CLR 640 at 656-7.
95. [2001] HCA 70; 210 CLR 181 at 188.
96. [2006] WASCA 215 at [36].
97. Ibid.
98. See, eg, Electricity Generation Corporation v Woodside Energy Ltd at [35].
99. See generally N Enonchong, The Independence Principle of Letters of Credit and Demand Guarantees (Oxford University Press, 2011) at [4.55].
100. By the application of the ordinary principles of contractual construction.
101. This is proposed in A Malek and D Quest, Jack: Documentary Credits (4th ed 2009, Tottel) at [8.38].
102. See, eg, Burleigh Forest Estate Management Pty Ltd v Cigna Insurance Australia Ltd [1992] 2 Qd R 54 at 59.
103. (1979) 141 CLR 443 at 445.
104. The position may be different for letters of credit that are subject to the Uniform Customs and Practice for Documentary Credits - the current version, UCP 600, states in art 4: "Banks are in no way concerned with or bound by such [underlying] contract, even if any reference whatsoever to it is included in the credit".
105. [2011] UKSC 50; 1 WLR 2900.
106. [2011] UKSC 50; 1 WLR 2900 at 2903.
107. Ibid.
108. [2011] UKSC 50; 1 WLR 2900 at 2905.
109. [2015] NSWSC 176 at [43].
110. See Jack: Documentary Credits at [5.54]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 December 2015