RAINY SKY SA AND ORS V KOOKMIN BANK

[2011] UKSC 50, UK Supreme Court, Lord Phillips, Lord Mance, Lord Kerr, Lord Clarke, Lord Wilson, 2 November 2011

Shipping contracts - Construction of commercial contracts - Natural meaning of words in contract - Surprising and uncommercial result - Construction of shipbuilder's refund guarantee

The first six claimants were all buyers of ships under construction under separate contracts. The defendant bank had issued identical "Advance Payment Bonds" to each of the buyers in respect of the instalments they were paying to the shipyard before taking delivery of the ships. The shipyard went into debt reconstruction and the buyers claimed a refund of their paid instalments; a claim that had gone to arbitration because the shipyard disputed that it was obliged to repay the monies. This was the buyers' claim against the bank under the bonds, the bank arguing that on a correct construction of the bonds they did not cover a refund under article XII.3 of the shipbuilding contracts.