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Cite as: [2006] ScotSC 3

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SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT ABERDEEN

A2661/05

JUDGEMENT

SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC

in the cause

PEAK WELL MANAGEMENT LIMITED

Pursuers and Respondents

against

GLOBALSANTAFE DRILLING UK LIMITED

Defenders and Appellants

Act: Mr James Steel, solicitor, Raeburn Christie Clark & Wallace, Aberdeen

Alt: Miss Margaret Gibson, solicitor, Paull & Williamsons, Aberdeen

Aberdeen: 7^th February 2006

The sheriff principal, having resumed consideration of the cause, refuses the appeal and adheres to the interlocutor of the sheriff dated 10 November 2005; reserves meantime the question of the expenses of the appeal and appoints parties to be heard thereon at Aberdeen Sheriff Court on Monday 13^th February 2006 at 3.00 pm.

Note

[1] In this case the pursuers crave the court (1) to interdict the defenders from approaching, requesting, calling on or requiring the Royal Bank of Scotland to make payment to the defenders of the sum of US$219,212.50 purportedly due by the pursuers to the defenders in terms of the latters' invoice dated 21September 2005 addressed to the pursuers in the sum of US$219,212.50, (2) to interdict the defenders from drawing under or against the letter of credit issued to the defenders by the Royal Bank of Scotland in respect of this invoice and (3) to interdict the defenders from attempting to do any of the things narrated in craves 1 and 2 and from doing or attempting to do any of the things narrated in these craves through the hands of their officers, employees, agents or otherwise.

[2 ] By interlocutor dated 10 November 2005 the sheriff, having heard parties' procurators, granted interim interdict against the defenders in terms of craves 1 and 2 subject to the substitution of the sum of US$189,109.37 for the sum of US$219,212.50 (the pursuers having apparently accepted that the sum of US$30,103.13 was due to the defenders in respect of the invoice). The defenders moved the sheriff to grant leave to appeal this interlocutor to the Court of Session, but the sheriff refused this. On 23 November 2005 a note of appeal to myself was lodged on behalf of the defenders and the hearing of the appeal duly took place on 27 January 2006.

[3 ] The background to this dispute is that by written contract the parties agreed that the defenders would supply a mobile drilling rig to the pursuers for the purpose of drilling some wells in the North Sea. A copy of the contract has been produced, and now forms no. 5/1/3 of process. It was signed by the parties' respective representatives on 27 April 2005. It incorporates six separate Sections numbered I to VI dealing with different aspects of the agreement between the parties. Section II (a) in turn incorporates the CRINE General Conditions of Contract for mobile drilling rigs (a copy of which has been produced as no. 5/1/4 of process), and these latter conditions are in turn subject to various amendments which are specified in Section II (b) of the contract. The pursuers are designed throughout as the "COMPANY" and the defenders as the "CONTRACTOR".

[4 ] Section III of the contract specifies a variety of different rates of payment for the use of the drilling rig including (1) a mobilisation rate, (2) a demobilisation rate and (4) a standby rate, each at US$74,100 per day, and (3) an operating rate of US$75,000 per day.

[5 ] In terms of Clause 13.1 of the CRINE conditions it is provided that "the COMPANY shall pay or cause to be paid to the CONTRACTOR the amounts specified in Section III - Remuneration at the times and in the manner specified in Section III and in this Clause". In Section II (b) it is provided that Clause 13.1 should be amended by the addition of two further paragraphs as follows:-

An Irrevocable Standby Letter of Credit shall be set up as presented in Section II (c) of this CONTRACT prior to COMMENCEMENT DATE. Such Irrevocable Standby Letter of Credit shall remain in force until expiry date, unless CONTRACTOR, upon satisfaction of full payment of all presented invoices in respect of the DRILLING UNIT Day Rate and major third party services and reimbursables, returns the Irrevocable Standby Letter of Credit for cancellation.

The sum agreed within the Irrevocable Standby Letter of Credit may be reduced upon notice being given by CONTRACTOR to COMPANY that it is satisfied that all other DRILLING UNIT Day Rate payments except for the penultimate DRILLING UNIT Day Rate payment, has been received. Such reduced sum shall be agreed between CONTRACTOR and COMPANY and shall be for an amount no greater than the value of the remaining invoices.

[6 ] Clause 13.2 of the CRINE conditions provides that the CONTRACTOR shall submit to the COMPANY an invoice within thirty days of the end of each calendar month. In terms of Section II (b) of the contract Clause 13.2 was amended by the addition of a new paragraph as follows:-

COMPANY shall within twenty (20) days after receipt of invoice notify CONTRACTOR of any incorrectly prepared or inadequately supported invoice or any amount disputed, specifying the reason therefore (sic). Payment of any disputed amount may be withheld until the settlement of the dispute, but payment shall be made of any undisputed portion.

[7 ] Clause 13.5 of the CRINE conditions provides for payment by the COMPANY to the CONTRACTOR within thirty days from receipt of a correctly prepared and adequately supported invoice of the amount brought out in the invoice in (a) Sterling or (b) a foreign currency, as the case may be. In terms of Section II (b) Clause 13.5 was amended by the addition of a new Clause 13.5(c) as follows:-

Should COMPANY not pay said invoices within forty five (45) days of receipt of a correctly prepared and adequately supported invoice, subject always to Clause 13.2, then CONTRACTOR shall have the right to draw against the Irrevocable Standby Letter of Credit.

[8 ] Clause 13.6 of the CRINE conditions provides as follows:-

If the COMPANY disputes any items on any invoice in whole or in part or if the invoice is prepared or submitted incorrectly in any respect, the COMPANY shall return a copy of the invoice to the CONTRACTOR advising the CONTRACTOR of the reasons and requesting the CONTRACTOR to issue a credit note for the unaccepted part or whole of the invoice as applicable. The COMPANY shall be obliged to pay only the undisputed part of a disputed invoice in accordance with the provisions of Clause 13.5.

If any other dispute connected with the CONTRACT exists between the parties the COMPANY may withhold from any money which becomes payable under the CONTRACT the amount which is the subject of the dispute. The COMPANY shall not be entitled to withhold monies due to the CONTRACTOR under any other contracts with the COMPANY as set off against disputes under the CONTRACT, nor shall it be entitled to withhold monies due under the CONTRACT as set off against disputes under any contract.

On settlement of any dispute the CONTRACTOR shall submit an invoice for sums due and the COMPANY shall make the appropriate payment in accordance with the provisions of Clause 13.5.

[9 ] In terms of Section II (c) an irrevocable standby letter of credit dated 27 May 2005 was issued by the Royal Bank of Scotland to the defenders. A copy of this has been produced as no. 5/1/2 of process. This reads, inter alia,:-

We hereby issue our irrevocable standby letter of credit in your favour for the account of Peak Well Management Limited, 5 Queen's Terrace, Aberdeen AB10 1XL, for a sum of Five Million Six Hundred and Twenty Five Thousand ($5,625,000) U.S.Dollars, available by your sight draft on us, accompanied by the following:-

The draft hereunder must be presented to us at our office on or before 28 February, 2006 and must be marked "Drawn under the Royal Bank of Scotland plc, irrevocable standby letter of credit No. G108520, dated 27 May 2005" and must be accompanied by the sworn affidavit of a duly authorised officer of GlobalSantaFe Drilling UK Limited certifying that:-

"1. Prior to the date of the accompanying draft, GlobalSantaFe Drilling UK Limited ("GSF") notified Peak Well Management Limited in writing that GSF intended to draw under the Royal Bank of Scotland plc, irrevocable standby letter of credit No. G108520, and

"2. The amount of the draft accompanying this affidavit does not exceed the amount still owing to GSF, as of the date of this affidavit, under the terms of that certain contract dated 3March 2005, by and between GSF and Peak Well Management Limited".

Partial draws are permitted.

.....................................

We hereby agree with you that your sight draft drawn under and in compliance with the terms of this credit will be duly honoured by us if presented to us at our offices ...... on or before 28 February 2006. The irrevocable standby letter of credit shall terminate on 28 February 2006.

.....................................

(In passing, I should mention that it occurred to me while I was preparing this judgement that the question whether or not the defenders should be interdicted in the terms sought by the pursuers might be academic in light of what appeared to be the difficulty that the author of the affidavit here desiderated would encounter in swearing that any amount was due to the defenders "under the terms of that certain contract dated 3 March 2005", given that the original contract was signed by the parties' respective representatives on 27 April 2005. I heard parties further on this point on 6 February 2005 when it became apparent, for reasons that I need not dwell on here, that the question was by no means academic as I had first supposed. So I have proceeded to complete this judgement).

[10 ] Clause 26.4 of the CRINE conditions provides:-

Notices

All notices in respect of the CONTRACT shall be given in writing and delivered by hand, by telex or telefax or by first class post to the relevant address specified in Appendix 1.1 to Section I - Form of Agreement and copied to such other office or offices of the parties as shall from time to time be nominated by them in writing to the other.

Such notices shall be effective:

(a) if delivered by hand, at the time of delivery;

(b) if sent by telex or telefax, on the first working day following the date of sending;

[11 ] After the first well had been drilled it was agreed between the parties that the contract should be temporarily suspended while the drilling rig was used by Applied Drilling Technology International (ADTI) to drill a well for a third party. ADTI is described in some of the correspondence as "a Division" of the defenders. The terms of this suspension were agreed in a document (see no. 5/1/5 of process) which recorded in terms that it was dated 17 May 2005 although it does not appear to have been signed on behalf of the parties until 13 and 14 July 2005 respectively. For present purposes nothing turns on the provisions on this particular document.

[12 ] After the single well had been drilled for the third party it appears that it was originally intended that the drilling rig should be towed directly to a location known as "Wherry" where the second well was to be drilled for the pursuers. But difficulties were evidently encountered in obtaining the necessary permissions to operate the drilling rig at the Wherry location as the result of which it was towed to a location off Great Yarmouth. It seems that it remained there for a day or so before it was towed out to the Wherry location. It seems too that it was the necessity to tow the drilling rig to Great Yarmouth and thereafter to the Wherry location rather than directly to this location that was the source of the present dispute between the parties.

[13 ] Some time on or after 1 September 2005 the defenders submitted a billing sheet to the pursuers which was evidently intended by the defenders to form the basis of a charge against the pursuers for the use of the drilling rig at the standby rate of US$74,100 per day for a total period of seventy one hours. This period was made up of twenty three hours on 29 August 2005 (the drilling rig having apparently arrived off Great Yarmouth at 01:00 that day), twenty four hours on 30 August 2005 and twenty four hours on 31 August 2005 (on which date the drilling rig apparently arrived off the Wherry location at 14:15). The pursuers evidently took exception to this billing sheet and on 13 September 2005 their drilling superintendent Mr Martin Booth sent an email (of which no. 5/1/11 of process is a copy) to a representative of the defenders in which he stated:-

I cannot sign the billing sheets you left for me for time up to 1415 hrs on the 31st Aug, the rig was still on contract to ADTI and from 1415 hrs Peak/Centurys position is that the rig was not on day rate as explained in a previous e mail to Martin Nuttall.

[14 ] On 27 September 2005 the pursuers received an invoice from the defenders dated 21 September 2005. It had attached to it the billing sheet (or a copy thereof) to which reference has just been made. This had been signed by a representative of the defenders but the space indicated for the signature of Mr Booth was vacant. Copies of these documents now form no. 5/1/15 of process. Near the head of the invoice various rates for the use of the drilling rig are stated under reference to the various clauses in Section III of the original contract. Thus the operating rate of US$75,000 per day correctly refers to Clause III of Section III and the standby rate of US$74,100 per day correctly refers to Clause IV of Section III. The invoice also mentions what is described as a moving rate of US$74,100 per day. The reference here is to Clauses I and II of Section III which in fact describe what are respectively referred to as the mobilisation rate and the demobilisation rate. Each of these rates is stated to be US$74,100 per day.

[15 ] The invoice goes on to show the details of the amount to be charged by the defenders to the pursuers. It is specified that the charge was for the period from 01:00 on 29 August 2005 through 23:59 on 31 August 2005 namely "71.00 hrs @ 74,100.00 Moving Rate". The total thus brought out as due was US$219.212.50.

[16 ] The pursuers having evidently taken exception to this amount, there appear to have been various communications and meetings between the parties to resolve the dispute, all without success. The upshot was that a letter dated 21 October 2005 (of which no. 5/1/12 of process is a copy) was sent by the defenders to the pursuers. This stated inter alia:-

We refer to our invoice ref: 0509321016 dated 21 September 2005 for the sum of $219,212.50 issued relative to the subject Contract, which as of today, remains unpaid.

We write to advise that should payment remain outstanding fourteen days from the date of this letter, it is our intention to draw the outstanding sum under the Irrevocable Standby Letter of Credit Reference G108520 dated 27 May 2005 issued by the Royal Bank of Scotland relative to the subject Contract.

[17 ] The pursuers' response to this letter was a letter dated 28 October 2005 (of which no. 5/1/13 of process is a copy) which was sent by the pursuers' operations manager to the defenders. In this letter it was stated inter alia (Peak refers to the pursuers and GSF to the defenders):-

In accordance with the provisions of Clause 13.2 of the Contract Peak confirm that GSF have been notified, on more than one occasion, whether by email, at or during meetings and through telephone conversations that Peak are in dispute with GSF regarding the time of delivery of the Rig and the invoiced amount pertaining thereto. In addition to the foregoing, Peak also advise that they notified GSF's Rig Manager that they would not authorise the Monthly GSF Billing Sheet that would have provided adequate support to the GSF invoice under dispute. Subsequently this unauthorised Billing Sheet has been submitted as back-up to the invoice in question.

Peak take this opportunity to advise GSF that a draw down, against the Irrevocable Standby Letter of Credit, in respect of "any amount disputed" would be non-compliant with the obligations of the terms of Clause 13.5(c), of Section II (b) Special Conditions of Contract, of Contract Number PWM/C001/04 and accordingly in breach of Contract.

[18 ] It seems that the parties thereafter tried once again to resolve matters, but without success. In an email dated 8November 2005 (of which no. 5/1/14 of process is a copy) an official of the defenders referred to a meeting that was due to take place between the parties on the following day and confirmed that the defenders would not call the sum due under the letter of credit before Friday 11 November 2005. The present action was then raised by the pursuers and, as indicated, after a hearing on 10 November 2005 the sheriff granted interim interdict against the defenders.

[19 ] On 23 November 2005 a note of appeal was lodged on behalf of the defenders in which it was asserted that the sheriff had erred in law in granting interim interdict in favour of the pursuers in terms of her interlocutor dated 10 November 2005 and that there had been no relevant material placed before her to entitle her to conclude that a prima facie case entitling the pursuers to interdict and accordingly interdict ad interim had been made out. In particular it was said that in order for a court to interfere with the operation of an irrevocable letter of credit there must be relevant averments of fraud at the instance of the beneficiary under the letter of credit (in this case the defenders), of which there were none. In any event it was said that, esto the sheriff was entitled to have regard to the underlying contractual provisions (which was denied), she had erred in concluding that on the material placed before her the pursuers had available to them a prima facie case that the defenders were not entitled to call up the letter of credit in respect of the invoice dated 21 September 2005. It was pointed out in particular that the only written documentation produced by the pursuers which post-dated the invoice was the letter dated 28 October 2005 and it was said that there had been no notification by the pursuers within the period of twenty days specified in the amended Clause 13.2 of the CRINE conditions so that the defenders were entitled to call up the letter of credit as they sought to do.

[20 ] In response to the defenders' note of appeal the sheriff wrote a note in which she outlined the parties' submissions and mentioned various authorities to which she had been referred by the defenders' solicitor to the effect that, in the absence of an allegation of fraud, a bank which has issued a letter of credit must honour it irrespective of any dispute that there may be between the beneficiary under the letter of credit and a third party. The sheriff also referred to various authorities on the issue of balance of convenience and the equitable and discretionary nature of the remedy of interdict and concluded (Mr Steel was the pursuers' solicitor and Miss Gibson the defenders'):-

Having heard the whole argument and considered the authorities it seemed to me that in the first place, there was more than a little merit in Mr Steel's argument that the authorities referred to by Global were not directly in point he having raised his action at an earlier stage. Further it seemed to me there was force in the point made that Global could not comply with the terms of the letter of credit standing the dispute between parties as to the amount owing by Peak Well to Global. That last point also relates to the dicta of Lord Abernethy in Centri-Force quoting Lord Denning that "The bank must pay if the documents are in order and the terms of the credit are satisfied". I was of the view that there was force in Mr Steel's argument that the documents would not be in order and the terms of the credit would not be satisfied. It has to be borne in mind, of course, that at the stage of interim interdict the court is dealing with matters ex parte, but I noted that Miss Gibson had no answer to that point.

In the whole circumstances it appeared to me that matters were by no means as clear cut as argued for by Miss Gibson. Accordingly applying the principles relevant to the granting or refusal of interim interdict as canvassed above, I came to the view that the balance of convenience lay with the pursuers and that interim interdict should be granted.

[21 ] Opening the appeal, the defenders' solicitor submitted under reference to Burn-Murdoch on Interdict at page 3 that the sheriff had erred in law in granting interim interdict in favour of the pursuers. She accepted that there had been an element of discretion available to the sheriff and that she had been entitled to have regard not only to the averments in the initial writ but also to the content of the submissions made to her. But she had fallen into error as she had not properly focused the question whether or not the pursuers had a prima facie case against the defenders. Instead she had directed her mind at once to the question whether or not the balance of convenience favoured the award of interim interdict.

[22 ] Turning to the question whether or not the pursuers had a prima facie case against the defenders, the defenders' solicitor submitted under reference to the Stair Memorial Encyclopaedia Re-Issue 2 - Banking, Money and Commercial Paper, paragraph 282, United City Merchants (Investments) Limited v Royal Bank of Canada 1983 1AC 168, Centri-Force Engineering Limited v Bank of Scotland 1993 SLT 190 and Cairn Energy plc v Royal Bank of Scotland plc 2000 SLT 1098 that it was an established principle that a bank could not be prevented from paying out to the beneficiary under a letter of credit unless there had been fraud on the part of the beneficiary (in this case the defenders). There were no averments of fraud in the initial writ (and this the pursuers' solicitor readily acknowledged). Moreover, said the defenders' solicitor, the beneficiary under the letter of credit could not be prevented from applying to the bank for payment in the absence of an averment that such an application would be tainted by fraud. In these circumstances it could not be said that the pursuers had made out a prima facie case entitling them to the award of interim interdict which had been made by the sheriff.

[23 ] In response to this part of the argument for the defenders, the pursuers' solicitor accepted that in the absence of an allegation of fraud on the part of the beneficiary a bank could not be prevented from honouring a letter of credit provided that the documents which accompanied the draft were in proper form. But he pointed out that the authorities to which the defenders' solicitor had referred were all cases in which the bank had been approached by the beneficiary for payment and the issue had been whether or not the bank was obliged to honour the letter of credit. This was not the same issue as that which arose in the present case, namely whether the defenders could be interdicted from seeking payment from the bank under the letter of credit in the first place. As for the proposition that the defenders could not be prevented from applying to the bank in the absence of an averment that such an application would be tainted by fraud, no authority had been cited in support of it (and this the defenders' solicitor accepted) and it was unsound in law.

[24 ] In my opinion the submissions for the pursuers on this branch of the case are to be preferred. The question here is not whether the bank should be interdicted from making payment to the defenders under the letter of credit, but whether the defenders should be interdicted from making an application for payment to the bank in the first place. It was acknowledged that no authority had been found to support the proposition that such an application could not be prevented in the absence of an averment that it was tainted by fraud, and it seems to me that the obvious explanation for this is that, as the pursuers' solicitor submitted, the proposition is unsound in law. In my opinion the question whether or not the defenders can be interdicted from making an application to the bank must depend upon the terms of the contract between the parties to this action. The issue thus comes to be whether the pursuers have made out a prima facie case to the effect that, if they made an application to the bank for payment under the letter of credit, they would be in breach of their contract with the pursuers.

[25 ] Turning to this question, the defenders' solicitor drew attention to the terms of the additional paragraphs which had been incorporated into Clauses 13.2 and 13.5 of the CRINE conditions and which I have quoted in paragraphs [6] and [7] above. She pointed out that the effect of the additional Clause 13.5(c) was that, if the pursuers did not pay a correctly prepared and adequately supported invoice within forty five days of its receipt, then the defenders had the right to draw against the letter of credit subject always to the additional paragraph in Clause 13.2. This gave the pursuers the opportunity within twenty days after receipt of the invoice to notify the defenders of any incorrectly prepared or inadequately supported invoice or any amount disputed, specifying the reasons therefor. In the present case the only written documents bearing on the invoice which had been produced by the pursuers were the email sent on 13 September 2005, the letter sent by the defenders to the pursuers on 21 October 2005 and the pursuers' response dated 28 October 2005 - see paragraphs [13], [16] and [17] above. The invoice itself had been received by the pursuers on 27 September 2005 so that on any view the letter dated 28 October 2005 came too late for the purposes of Clause 13.2. The only other possibility here was the email which had been sent on 13 September 2005 but, so it was submitted, this did not satisfy the terms of Clause 13.2 since (1) it had been sent a fortnight before the date upon which the invoice had been received by the pursuers, (2) it had not complied with the provisions of Clause 26.4 in the CRINE conditions about the giving of notice (see paragraph [10] above), (3) it had not in terms notified the defenders of any incorrectly prepared or inadequately supported invoice having been received by the pursuers, and (4) it had not been stipulated in the parties' contract that an invoice submitted by the defenders to the pursuers required to be accompanied by a billing sheet such as had been referred to in the email sent on 13 September 2005. It followed that, the pursuers having failed to comply with the terms of Clause 13.2, the defenders had the right under Clause 13.5(c) to draw against the letter of credit. So for this reason too the sheriff had erred in concluding (if indeed she had considered the question at all) that the pursuers had made out a prima facie case entitling them to an award of interim interdict.

[26 ] In response, the pursuers' solicitor pointed out that the word used in Clause 13.2 was "notify" whereas Clause 26.4 dealt with "notices". Under reference to the definitions of these two words in the Shorter Oxford English Dictionary, he submitted that they were not synonymous. In this context he drew attention to Clauses 10.1, 10.2, 14.3, 14.4, 14.6, 16.4, 22.1(e) and 24.3 of the CRINE conditions where a variety of different expressions were used for, broadly, the passing of information from one party to the contract to the other and he posed the question whether Clause 26.4 applied to all these provisions or only those in which the word "notice" was used. Under reference to Litster v Forth Dry Dock & Engineering Company Limited 1989 SLT 540 and Mannai Investment Co Limited v Eagle Star Life Assurance Co Limited 1997 AC 749 he submitted that a purposive interpretation should be given to Clause 13.2, and he further argued under reference to Manorlike Limited v Le Vitas Travel Agency and Consultancy Services Limited 1986 1 ALL ER 573 that the expression "within twenty days" in Clause 13.2 should be taken to mean at any time before or at the expiry of twenty days after receipt of an invoice. In these circumstances, so it was submitted, while it admittedly did not comply with the terms of Clause 26.4, the email sent by the pursuers to the defenders on 13 September 2005 could be relied upon by the pursuers as giving sufficient notification to the defenders for the purposes of Clause 13.2.

[27] The question here is whether the pursuers have made out a prima facie case to the effect that they did notify the defenders for the purposes of Clause 13.2 within twenty days after receipt of the invoice which they received on 27 September 2005. If they did, it would follow that the defenders would not have the right under Clause 13.5(c) to draw against the letter of credit in order to obtain payment of so much of the amount brought out in the invoice as has been disputed by the pursuers. In my opinion the pursuers have at least a prima facie case to the effect that, in sending the email on 13 September 2005, they did satisfy the terms of Clause 13.2. Looking to the variety of expressions used in the CRINE conditions for the passing of information from one party to the other, I think that it is far from clear that the terms of Clause 26.4 applied to the requirement to notify in terms of Clause 13.2. At the very least, it seems to me to be arguable that the sending of an email would satisfy the requirement to notify in terms of Clause 13.2 notwithstanding the terms of Clause 26.4. As for the point that the email was sent a fortnight before the pursuers received the invoice, it is to be noted that the requirement to notify in terms of Clause 13.2 was "within twenty days after receipt of invoice". This could mean either that the pursuers had to notify the defenders during the period of twenty days which began with the date upon which they received the invoice or it could mean that at any time before the expiry of twenty days after receipt of the invoice they could notify the defenders that they disputed an amount claimed by it. It seems to me that in this latter event they would not necessarily have to wait until they received an invoice from the defenders if it was plain that, even before they sent the invoice, the defenders would be claiming an amount from the pursuers which was disputed by them. It is to be noted here that, as I understood what the pursuers' solicitor told me, the invoice sent by the defenders to the pursuers had attached to it, and purported to be vouched by, a copy of the very same billing sheet to which the pursuers' Mr Booth had taken exception in his email sent on 13 September 2005. As for the point made by the defenders' solicitor to the effect that this email did not in terms notify the defenders of any incorrectly prepared or inadequately supported invoice, the short answer is that it was sufficient for the purposes of Clause 13.2 that the pursuers should have notified the defenders of any amount disputed, specifying the reasons therefor, and it appears to me that in his email this is exactly what Mr Booth did (at least in respect of the time up to 14:15 hrs on 31 August 2005 which accounts for the proportion of the amount brought out in the invoice which is still in dispute). And as for the point that the parties' contract did not require an invoice to be accompanied by a billing sheet, I confess that I am at a loss to understand why this should prevent the email sent on 13 September 2005 from operating as notification to the defenders for the purposes of Clause 13.2.

[28 ] In all the circumstances, while the position is by no means as clear as it might be, I think that the pursuers have at least made out a prima facie case for maintaining that, in sending the email on 13 September 2005, they did notify the defenders for the purposes of Clause 13.2 with the result that the defenders would be in breach of Clause 13.5(c) if they sought to exercise their right to draw against the letter of credit.

[29 ] For the sake of completeness, I should record that the pursuers' solicitor also submitted that the defenders could not in all conscience submit an affidavit to the bank stating that any amount was due to them under the contract between the parties given that in terms of the invoice they had sought to recover a moving rate from the pursuers which was not a rate to be found in Section III of the contract, and that in any event the defenders would not be entitled to exercise their right to draw against the letter of credit in terms of Clause 13.5(c) since the invoice which had been sent to the pursuers had not been correctly prepared and adequately supported in that it referred to this same moving rate. In view of what I have already said, I do not think that I need to deal with these particular submissions.

[30 ] The pursuers having made out a prima facie case against the defenders, the question arises whether the balance of convenience favours the award of interim interdict. On this the defenders' solicitor drew attention to Royal Bank of Scotland plc v Holmes 1999 SLT 563 and she pointed out that the present case dealt with the payment of money which could be reversed after proof in the event that the defenders were found not to be entitled to the money which they sought to recover by means of drawing against the letter of credit. There was no suggestion that the defenders would not be in the position to repay the money to the pursuers at the end of the day and therefore the balance of convenience did not favour the status quo. On the contrary, it favoured the defenders as the beneficiaries under the letter of credit given its nature as an autonomous contractual relationship between the defenders and the bank.

[31] In response, the pursuers' solicitor pointed out that the defenders had sought a variation of the contract between the parties to take account of what had happened after the single well had been drilled for the third party. The pursuers had not agreed this variation and the defenders were now seeking to enforce payment of the invoice in order to recover the costs of moving the drilling rig although there was no basis for this in the contract. It was unfair, said the pursuers' solicitor, that the defenders should seek to recover what they had described as a moving rate in the invoice despite the fact that this was not a contractual head of claim. In view of this unfairness the balance of convenience favoured the grant of interim interdict to maintain the status quo. If the interim interdict remained in place, the defenders could always sue the pursuers under the contract. On the other hand, if the interim interdict were to be lifted, the defenders would be able to draw against the letter of credit and the pursuers would then have to seek recovery of the amount paid out by the bank on a basis other than the parties' contract, such as recompense. This would be more difficult for the pursuers and this was another reason why the balance of convenience supported the retention of the interim interdict.

[32 ] On one view it may be said that the question where the balance of convenience lay was a matter peculiarly within the discretion of the sheriff so that I ought not to interfere with her decision on this aspect of the matter in the absence of any of the grounds which would ordinarily entitle an appeal court to interfere with the exercise of a discretion by a court of first instance. But in any event I am quite satisfied that the balance of convenience in this case does indeed favour the award of interim interdict in favour of the pursuers. I am conscious of course that the letter of credit will expire on 28 February 2006, and I have had regard to the relative strength of the parties' respective cases. Just as there has been no suggestion that the defenders would not be able to repay money to the pursuers, so there has been no suggestion that the pursuers would not be able to pay any amount that may be found due by them at the end of the day to the defenders. It is perfectly clear that, with the exception of the amount of US$30,103.13 which the pursuers accept was due to the defenders in respect of the invoice, the parties are in dispute about the amount brought out as due in the invoice, and have effectively been so since the end of August 2005. I heard nothing to suggest that the pursuers' position in relation to this dispute was, for example, manifestly unfounded or frivolous. In the circumstances it does not seem to me to be right that the defenders should be able to steal a march on the pursuers, so to speak, by drawing against the letter of credit to recover an amount which is still in dispute between the parties. Accordingly I am persuaded that the balance of convenience favours the award of interim interdict.

[33 ] For all the foregoing reasons I am satisfied that the sheriff reached the correct decision on 10 November 2005, and I have therefore refused the appeal.

[34 ] It was agreed that the question of the expenses of the appeal should be reserved for a subsequent hearing.