Korea Industry Co Ltd v Andoll Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 28 September 1989
• Neutral Citation: [1989] SGCA 12
• Docket Number: Civil Appeal No 59 of 1986
• Date: 28 September 1989
• Published date: 19 September 2003
• Year: 1989
• Plaintiff Counsel: Kenneth Tan (Rajah & Tann)
• Citation: [1989] SGCA 12
• Defendant Counsel: G Raman (G Raman & Partners)
• Court: Court of Appeal (Singapore)
• Subject Matter: Interlocutory injunction,Fraud exception,Whether evidence of framed approaches required standard,Letter of credit transaction,Injunctions,Letter of credit transactions,Bills of Exchange and Other Negotiable Instruments,Injunction to restrain payment under irrevocable letter of credit

Cur Adv Vult

This was an appeal from an order of a judge by which he continued an injunction granted to the respondents, the plaintiffs in the action, restraining the second defendant bank (the bank) from making payment under an irrevocable letter of credit issued by the bank in favour of the appellants at the request of the respondents. [See [1987] 2 MLJ 425 .] The bank was not a party to the appeal, having throughout taken a neutral stand in the dispute between the appellants and the respondents.

The facts were that the respondents had contracted to purchase, and the appellants to sell, a quantity of what was described in the contract as `low speed diesel oil (gas oil)` of a stipulated flash point and sulphur content, for delivery in Bangkok, payment to be made by a letter of credit in favour of the appellants.

The respondents, in pursuance of the contract, arranged for the bank to open a letter of credit for the purchase price in favour of the appellants. However, when the cargo arrived in Bangkok, the respondents concluded that what the appellants sought to deliver was not `low speed diesel oil` as called for in the contract. They rejected the cargo and applied for and obtained an ex parte interim injunction restraining the bank from making payment under the letter of credit.

In their statement of claim, the respondents alleged that the appellants had delivered `fuel oil or a blend of fuel oil and crude oil instead of low speed diesel oil as agreed`, resulting in the respondents` buyers refusing to take delivery because the commodity was `entirely different from what was contracted for`. No fraud was alleged.

In his affidavit affirmed in support of the application for the interim injunction, Loy Chee Yan, of the respondents, claimed that the cargo which the appellants sought to deliver was `very different from the commodity that was contracted for`, and supported that assertion by exhibiting two inspection reports in which the cargo was described as `fuel oil` and `light fuel oil` respectively, with a flash point substantially lower than that called for under the contract, and a sulphur content which was also off specification. Loy Chee Yan went on to state:

There is therefore being [sic] gross misrepresentation bordering on fraud and the first defendants (the appellants) are therefore not entitled to be paid the price for the said cargo.

That was as close as the respondents got to alleging fraud at the ex parte stage, and it was on the basis of this evidence that they were granted the interim injunction restraining the bank from effecting payment under the letter of credit.

The respondents applied by motion to continue the injunction; the appellants by summons, to discharge it. The appellants` application was put on two grounds; first, that the respondents had no cause of action against the bank; and secondly, that notwithstanding any dispute between a buyer and seller in relation to an underlying contract, the seller is entitled to payment under an irrevocable letter of credit opened by the purchaser pursuant to the contract.

At the hearing of the respondents` motion to continue the injunction (which was tried together with the appellants` summons to discharge it), counsel for the respondents asserted that there was fraud on the part of the appellants. He referred to a related action Suit No 2523 of 1986, in which the respondents were the defendants. The plaintiff in that suit (Wanda Trading) was the party to whom the respondents had on-sold the cargo purchased by them from the appellants. Wanda Trading had obtained an injunction against Banque Nationale de Paris restraining that bank from making payment under a letter of credit opened in favour of the respondents, on the grounds of the respondents` fraud.

In the course of argument before the learned judge, counsel for the respondents apparently produced for visual inspection by the learned judge, a sample of the oil contracted for by Wanda Trading, and a sample of the cargo actually tendered at Bangkok by the appellants. The learned judge said:

In the course of arguments counsel for the plaintiffs, Mr G Raman, pointedly claimed that a fraud had been perpetrated against the plaintiffs by the first defendants who had presented documents purporting to evidence the shipment of diesel when in truth and in fact sludge or light fuel oil with flash point from 97 to 57 degrees were shipped and tendered in Bangkok. At this stage I did not have to find nor would I be entitled to find that the first defendants had perpetrated a fraud against the plaintiffs. I was, however, satisfied from comparing the contract sample and the sample taken of the goods found on board the vessel that the latter was clearly murky and black; that from the inspection by the end buyers in Bangkok and from the results of the independent surveys carried out, there were substantial evidence that sludge was in truth and in fact tendered as diesel oil which, if proved, would constitute a fraud on the plaintiffs. I was satisfied that sufficiently grave cause had been shown by the plaintiffs why Banque Paribas, who were duly apprised of the evidence adduced in these interlocutory proceedings, should be restrained from accepting the documents tendered and since fraud would vitiate all, I felt that I should follow what Shientag J said in the famous American case of Sztejn v J Henry Schroder

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