The parties to Cooper Mechanical Oilfield Services Pte Ltd v Pauwels (Unreported) had entered into an agreement regarding the purchase and conversion of a ship. The agreement stated that the Defendant would provide US$30m of finance in the form of a standby letter of credit from a recognised bank. No such letter was ever produced.
The Claimant sought all sums it had paid to the Defendant, including US$130,000 in respect of SWIFT costs to the bank in respect of the letter of credit. Judgment in default was entered, and the Defendant was ordered to pay back all sums received, as well as damages to be assessed. The Defendant appealed.
The Defendant submitted that the Claimant could not be reimbursed the SWIFT costs as it had failed to fulfil certain conditions precedent in the agreement, i.e. that the Claimant had to obtain a conditional payment order before the letter of credit could be procured. Without the Claimant fulfilling that obligation, the Defendant argued, nothing else could be done.
The Court found in favour of the Claimant. The key question was whether the Defendant had failed to fulfil his side of the bargain, and he clearly had. The basis for the arrangement was that the Claimant could not raise the funds itself, and so an argument that the Defendant did not have to do anything until the Claimant obtained a conditional payment order made no sense. An argument that it was the Claimant who was in breach was unsustainable, because the Claimant could not do anything without the letter of credit. There was no evidence that the Defendant had done anything to secure the letter of credit. He had clearly failed to fulfil his side of the bargain, and so the default judgment was justified.