Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]

Pacific Atlantic Pipeline Construction Inc. v.
Coastal Gaslink Ltd. [2023]
2023 ABKB 736 (Can. Alta. K.B. Dec. 22, 2023) [Canada]

Type of Case: Applicant sought to enjoin Beneficiary demand on standby LC.

Topics: Arbitration; Autonomy (Independence) Principle; Contract Formation; Fraud; Good Faith; Injunction; Standard of Proof; Standby LC

Parties:
• Plaintiff/Contractor/Applicant – Pacific Atlantic Pipeline Construction Inc.
• Second Plaintiff/Contractor Owner – Bonatti, S.p.A.
• Defendant/Principal/Beneficiary – Coastal Gaslink Ltd.
• Issuer – HSBC Bank Canada

Underlying Transaction: Construction of liquid natural gas pipeline.

LC: Standby LC for CAD 117,162,384. Choice of law and practice rules not mentioned.

Decision: The Court of King’s Bench of Alberta, Whitling, J., denied the injunction application.

Rationale: Absent strong prima facie showing of fraud or of an express agreement by beneficiary to refrain from demanding sums under a letter of credit, anti-beneficiary injunction cannot issue under Canadian law; no breach of duty of honest performance (good faith) where demand for sums under standby made by beneficiary with bona fide belief.