Abani Trading Pte Ltd v BNP Paribas and another appeal

• Judge: George Wei JC
• Judgment Date: 06 June 2014
• Neutral Citation: [2014] SGHC 111
• Citation: [2014] SGHC 111
• Docket Number: District Court Appeal Nos 19 and 24 of 2013
• Published date: 14 July 2014
• Hearing Date: 19 December 2013
• Plaintiff Counsel: Sureshan s/o T Kulasingam (Sureshan LLC)
• Date: 06 June 2014
• Defendant Counsel: Toh Kian Sing SC and Jonathan Wong (Rajah & Tann LLP)
• Court: High Court (Singapore)
• Subject Matter: Letters of Credit,Pleadings,Banking,Civil Procedure,Costs

George Wei JC: Introduction

There are two appeals which arise from the learned District Judge’s (“the DJ’s”) decision in District Court Suit No 403 of 2011. The first appeal, District Court Appeal No 19 of 2013 (“DCA 19/2013”), is filed by the plaintiff of the original action, Abani Trading Pte Ltd (“Abani”). This appeal is on the issue of whether the defendant, BNP Paribas (“BNP”), breached its duty or the terms of the letter of credit, and failed to exercise due care in examining the relevant documentation that was presented to it. The second appeal, District Court Appeal No 24 of 2013 (“DCA 24/2013”), is filed by BNP against the DJ’s decision to award costs in favour of BNP on a standard basis, as opposed to an indemnity basis. The two appeals deal with different subject matters; the appeal in DCA 24/2013 will only be relevant if the appeal in DCA 19/2013 is dismissed. After considering the arguments made by both parties, I am dismissing the appeal in DCA 19/2013 and allowing the appeal in DCA 24/2013. I now give the reasons for my decision.

Background facts

The plaintiff, Abani, is a trading company based in Singapore which carries on the business of general wholesale trade, including the importation and exportation of goods. The defendant, BNP, is a bank operating in Singapore.

The letter of credit in question was obtained in connection with the underlying sale of a consignment of metal bars from Metal Market Dis Ticaret Ltd Sti (“Metal Market”) to Abani. In this respect, Abani had apparently bought the consignment of metal bars for the purpose of selling it to another party named Codiscomad.¹ One of the terms of the agreement with Codiscomad required the goods in question to be shipped between November and December 2008.²

On 9 December 2008, Abani made the application to BNP for a letter of credit to be issued in favour of Metal Market as the named beneficiary.³ The letter of credit in the amount of US$80,665 was issued in favour of Metal Market the next day on 10 December 2008. The terms of the letter of credit provided, amongst others, that the applicable rules were the “UCP Latest Version” and that the latest date of shipment was 30 December 2008.⁴ The latter condition was probably included so as to ensure that Abani could fulfil its contractual obligations to Codiscomad. For the purposes of this appeal, the material clauses of the letter of credit are reproduced as follows:⁵ 40E : Applicable rules

UCP LATEST VERSION

44C : Latest Date of Shipment

30-Dec-2008

46A : Documents Required

...

+ ORIGINAL FULL SET OF CLEAN ON BOARD BILL OF LADING ISSUED BY CARRIER OR AGENT

(FORWARDER BL NOT ACCEPTABLE.) ...

Given that the date of issuance was 9 December 2008, with reference to field 40E, the letter of credit was governed by the provisions of the Uniform Customs and Practice for Documentary Credits 2007 (International Chamber of Commerce Publication No 600) (“UCP 600”).

Subsequently, a bill of lading dated 30 December 2008 was issued by Karetta Uluslararasi Tasimacilik Ve Dis Tic Ltd Sti (“Caretta”).⁶ The bill of lading and other relevant documents were negotiated through Fortis Bank, which then sought reimbursement from BNP. On 12 January 2009, BNP received the bill of lading and other relevant documents from Fortis Bank.

After an exchange of emails and an alleged telephone call between BNP and Abani (both parties dispute what actually transpired during the telephone conversation), BNP eventually debited Abani’s account on 16 January 2009. It will be recalled that the agreement with Codiscomad required the goods to be shipped latest by December 2008. Whilst the bill of lading which had been negotiated was dated 30 December 2008, it appears that another bill of lading was issued later, which indicated that the shipping date was 2 January 2009.⁷ As a result, Codiscomad complained that Abani was in breach of its contractual obligations due to the late shipment. Given that the market price of the goods in question had fallen over the relevant time period, Abani asserted that it had no choice but to settle Codiscomad’s claim by deducting a sum of US$64,431.53 from the original sale price. Abani then brought the action against BNP to recover the sum of US$64,431.53, or alternatively, damages on the basis that BNP had breached its duty or the terms of the letter of credit and had failed to exercise due care in examining the relevant documentation before making payment.

The decision below

After a two-day hearing that took place on 22 and 23 January 2013, the DJ dismissed Abani’s claim (see Abani Trading Pte Ltd v BNP Paribas [2013] SGDC 243).⁸ In arriving at his decision, the DJ made a few key findings, summarised as follows: Under Art 49(a) of the UCP 600, it is clear that the obligation of the issuing bank to pay pursuant to a letter of credit is detached from the underlying transaction on which it is based. The established exception concerning cases where the seller had made a fraudulent presentation of documents containing material misrepresentations was not pleaded by Abani and did not, in any event, apply to the facts of the present case. It was not part of BNP’s duties to act on the information supplied to it by Abani or any constructive knowledge which BNP may possibly have acquired in the course of previous transactions involving the same parties. In fact, BNP was prohibited from doing so pursuant to the rules set out in the UCP 600, given that there was no evidence of fraud on the part of the seller. The bill of lading presented for negotiation, and on which payment was made, was a conforming document given that it was not a “forwarder bill of lading”. Abani failed to establish that it was unable to deliver the goods to Codiscomad as there was no evidence of any attempt being made to obtain delivery from the carrier on the strength of the bill of lading that had been presented for negotiation. On that basis, Abani failed to prove that it had suffered any loss as a result of BNP’s payment under the letter of credit. In the event that Abani was indeed placed in a position of having to negotiate with Codiscomad as a result of the breach of its contractual obligations, the settlement of US$64,431.53 was a reasonable sum.

After dismissing Abani’s claim on 5 June 2013, the DJ further directed both parties to tender written submissions on the issue of whether costs in favour of BNP should be taxed on a standard or an indemnity basis. This was because BNP had argued that it was entitled to costs on an indemnity basis, as provided for by cl 11.4 of BNP’s standard terms and conditions (“the STC”),⁹ which governed BNP’s grant of credit facilities to Abani. After considering the submissions of both parties, on 24 June 2013, the DJ ordered for costs in favour of BNP to be taxed on a standard basis. Whilst the DJ agreed with BNP that the scope of cl 11.4 of the STC was wide enough to cover claims brought by Abani against BNP, he was of the view that BNP’s failure to include its claim for indemnity costs in its pleadings was fatal given that the claim was based on a contractual provision.

The issues

The core issues that are raised in DCA 19/2013 are as follows: whether BNP had breached its duty or the terms of the letter of credit, and failed to exercise due care in examining the relevant documentation that was presented to it; whether Abani had given express instructions to BNP to accept the bill of lading presented by the seller, and to debit Abani’s account accordingly; and what losses were suffered by Abani.

The core issues that are raised in DCA 24/2013 are as follows: whether the DJ erred in holding that BNP was required to include in its pleading its claim for costs on an indemnity basis, specifically cl 11.4 of the STC; assuming that BNP was required to, whether the DJ erred in finding that Abani would suffer prejudice as a result of BNP’s failure to include its claim for indemnity costs in its pleadings; and assuming that BNP’s failure to include its claim in its pleadings was not fatal, whether cl 11.4 of the STC confers a contractual right to costs on an indemnity basis, and whether the contractual bargain between the parties should be upheld by the court.

The appeal in DCA 19/2013 Whether BNP had breached its duty or the terms of the letter of credit, and failed to exercise due care in examining the relevant documentation that was presented to it

There is no dispute that the letter of credit in question is governed by the UCP 600. As noted above, the documents required for payment under the letter of credit included a full set of clean on board bill of lading issued by the carrier or its agent. In fact, field 46A of the letter of credit specifically states that a “forwarder [billing of lading]” would not be acceptable.¹⁰

Abani’s claim against BNP was based on two broad grounds. First, Abani alleged that the bill of lading presented for negotiation was a freight forwarder’s bill of lading and thus should have been rejected for non-compliance with field 46A of the letter of credit. Second, Abani claimed that the bill of lading presented for negotiation was not a “true” bill of lading. Abani argued that the “true” bill of lading only surfaced later, revealing that the goods were shipped on 2 January 2009. This is of significance as the letter of credit specified the latest date of shipment to be 30 December 2008.

In determining whether the bill of lading presented was a conforming document, the DJ held that a relevant consideration was whether BNP was obliged to act on any information supplied by the applicant for the letter of credit (ie, Abani), or constructive knowledge that might possibly have been acquired in the course of previous transactions involving the same parties. This was relevant as Abani had advanced the argument that it was common knowledge that Caretta was a freight...