Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]
Canada's Court of King’s Bench of Alberta denied injunction application of LC Applicant who sought to enjoin Beneficiary demand on standby LC.
![Pacific Atlantic Pipeline Construction Inc. v. Coastal Gaslink Ltd. [2023]](/content/images/size/w30/2024/08/pacific-atlantic-pipeline-case-2023.jpeg)
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.
Factual Summary:
To support its obligations for a gas pipeline project in British Columbia, Pacific Atlantic Pipeline Construction Inc. (Contractor/Applicant) applied for and caused HSBC Bank Canada (Issuer) to issue a CAD 117,162,384 standby letter of credit in favour of Coastal Gaslink Ltd. (Principal/Beneficiary).[[1]] Contractor/Applicant, a wholly owned subsidiary of Bonatti, S.p.A. (Contractor Owner), was engaged by Principal/Beneficiary in 2012 to build certain sections of the liquid natural gas pipeline (the Contract). Construction, however, “experienced significant challenges” due to the pandemic, which included a five-month suspension of work pursuant to a Public Health Order.
Read next
Questions and Observations on the Shinetec Case
A dispute involving an ISP98 standby and litigation in two jurisdictions raises a host of considerations. Here, Carter Klein comments on five facets of the Shinetec (Australia) Pty Ltd. v. The Gosford Pty Ltd Australian appellate court decision.
Hard Cases – Taking Stock of How Trader Defaults and Geopolitical Events Shaped LC Court Decisions in 2024
In the first of a two-part article, Robert Parson looks back at major LC court cases of 2024 and their impact on an increasingly complex environment for trade finance.
Consolidated Electrical Distributors, Inc. v. United Renewable Energy Co. [2024]
Applicant Consolidated Electrical Distributors ex parte motion for temporary restraining order against issuer Bank of America.
Pakistani Businessman Charged with Export, Banking Fraud
After receiving dozens of containers filled with soil, gravel and stones instead of the valuable natural minerals it had agreed