Sophie Melchers

The appellants challenged a permanent injunction restraining a Canadian bank from honouring a letter of counter-guarantee in favour of a Greek bank.

The Greek bank had paid the beneficiary of an underlying letter of guarantee despite an interim order of an ICC arbitral tribunal prohibiting payment, and despite knowledge that the final arbitral award was imminent.

The majority held that where a beneficiary of a counter-guarantee has knowledge of and participates in a third party's fraud under the primary letter of guarantee, that fraud becomes the beneficiary's own and the fraud exception to the autonomy of letters of credit applies.

The dissent would have allowed the appeal, finding that the Greek courts' determination that the demand for payment was valid could not be disregarded, and that the beneficiary was innocent of any fraud.

Appeal dismissed, Karakatsanis and Côté JJ. dissenting.

Mercer International Inc. applied to the Ontario Securities Commission for a simultaneous hearing with the Québec Bureau de décision et de révision to consider whether AbitibiBowater's take-over bid for Fibrek Inc. should be cease traded.

The Commission acknowledged it had jurisdiction to hear the application, as Fibrek is a reporting issuer in Ontario and the bid affected Ontario shareholders.

However, the Commission declined to exercise its jurisdiction, noting that the Bureau was already seized of the matter, the applicable securities laws were substantially similar, and a simultaneous hearing would not advance the harmonization and co-ordination of securities regulatory regimes.

The application was dismissed.

The appellant appealed a decision of the Quebec Court of Appeal affirming the dismissal of his application for an injunction and a declaration regarding a proposed sale of shares.

The Supreme Court of Canada dismissed the appeal, agreeing with the Court of Appeal that the appellant did not validly exercise the right of first refusal contained in the Articles of Continuance of Sulconam Inc.