Bond issuers who are reluctant to pay out on a bond will raise either:
- A formal defence, for example that the demand is invalid because it is in the wrong form, signed by the wrong person, or not accompanied by the right documents (as in AES v Alstom or MUR Joint Ventures BV v Compagnie Monegaseque de Banque).
- A fraud defence, that the demand is invalid because it contained a false statement or the beneficiary had no honest belief that the sums were due (as in NIDCO v Banco Santander SA or Tetronics v HSBC Bank).
Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV), heard by Butcher J in the Commercial Court a couple of weeks ago, is a formal defence case, which grapples with the situation where the original beneficiary has tried to assign the benefit of the bond to a third party, and problems with that assignment cause problems for the ultimate beneficiary. Continue reading