Computer Place Services Pte Ltd v Malayan Banking Bhd

JudgeG P Selvam J
Judgment Date08 July 1996
Neutral Citation[1996] SGHC 135
Citation[1996] SGHC 135
Defendant CounselSarjit Singh and V Coomaraswamy (Shook Lin & Bok)
Published date19 September 2003
Plaintiff CounselHarpal Singh and B Mahtani (Harpah Wong & Partners)
Date08 July 1996
Docket NumberSuit No 1065 of 1993
CourtHigh Court (Singapore)
Subject MatterPayment made without draft,Whether materiality of draft was a factor,Non-compliance of terms and conditions of banker's documentary credit,Estoppel by conduct,Draft not presented,Letters of credit,Banking,Breach of terms and conditions of banker's documentary credit,Waiver and ratification of non-compliance,Documentary credit

Cur Adv Vult


This case concerns a banker`s documentary credit.
The circumstances which gave rise to the case are as follows. In October 1991 the plaintiffs, a Singapore company, had agreed to purchase a consignment of Philip Morris Malboro cigarettes from an American firm called HGS International of Atlanta, Georgia. The agreed country of origin and shipment of the goods was Mexico. To make payment of the price of the goods the plaintiffs on 11 October 1991 requested their bankers in Singapore, the defendants, to establish an irrevocable documentary letter of credit for US$864,580 in favour of the sellers. The request was contained in a standard application form of the defendants. The defendants issued the credit through First Interstate Bank of California, San Franciso (the advising bank). The defendants issued the credit on 16 October 1991. The credit was subject to the Uniform Customs and Practice for Documentary Credit, 1983 Revision (the UCP).

The latest shipment date stipulated in the credit application was 2 December 1991, that is 14 days before expiry of the credit, which was 16 December 1991.
The final destination of the goods was Bulgaria as the plaintiffs had resold the goods to Bulgarian buyers. The only Singapore connection to the transaction was that the openers and opening bank of the credit were in Singapore. The operative part of the credit read as follows :

We hereby issue in your favour this irrevocable documentary credit which is available by your drafts in duplicate at sight drawn on the above applicant for invoice value accompanied by the following documents (in duplicate unless otherwise specified). [Emphasis added.]

The credit went on to enlist the documents required by the plaintiffs beginning with signed commercial invoices in duplicate as stated in the application.
A draft was not one of them because it did not concern them. In this transaction the only function of the draft was to serve as a demand on the defendants for payment of the invoice by the defendants.

The defendants received the documents from the advising bank which was also the negotiating bank on 6 December 1991.
No draft was received. The next day (7 December 1991) the defendants sent a letter to the plaintiffs in the following terms :

We forward herewith the documents relating to the above-mentioned bill(s) for payment/acceptance and would like to draw your attention to the following discrepancy/discrepancies:

1 Description of goods differ from LC.

(2) Insurance policy shows claims payable at destination instead of Singapore.

(3) Insurance policy dated later than shipment date.

(4) Shipper/packing list presented i/o packing list.

(5) Insurance claused `not older than 90 days`.

(6) Gross weight on BL differs from other docs.

(7) All docs except invoices and cert of origin claused `Made in USA`.

(8) Cert of freshness/inspection -

(a) FOB value USD864,500 & CIF value USD950,000.

(b) B/L No and date of invoice differs from actual docs.

If the documents are acceptable to you please confirm by signing and returning us the attached reply form to enable us to instruct the negotiating bank to release the guarantee held in respect of this/these bill(s).

[Emphasis added.]

Notwithstanding the above, the guarantee held will be released on payment of the bill(s) or the issuance of trust receipt unless otherwise instructed.

It is important to observe that the `the documents` were forwarded for their approval and the plaintiffs were asked whether `the documents` were acceptable.
No draft was sent as one of `the documents` as the defendants did not receive it. I shall call the above `the discrepancy letter`.

On 9 December 1991 the defendants sent another letter in standard printed form the material part of which read as follows :

Please note that we have received the undermentioned documents on yourselves. ...

Please note that the documents relating to this bill are available for your inspection at any time during office hours. If no objection to the contrary is received by us within one week from the date of this advice we shall take it that the documents are in order and no subsequent objection as to these documents can therefore be entertained.

I shall call the above `the invitation to inspect the documents`.

On 11 December 1991 the plaintiffs signed and sent the following letter to the defendants.
The draft of this letter had been prepared by the defendants. All the plaintiffs did was to sign and send it to the defendants.

We have examined the documents relating to the abovementioned bill(s) presented to us for payment/acceptance and have noted the following discrepancy/discrepancies, to which our attention has been drawn.

[The letter reproduced the discrepancies set out in the defendants` discrepancy letter.]

Nevertheless, the documents are acceptable to us and we hereby authorise you to instruct the negotiating bank to release the guarantee(s) held by them in respect of this/these bill(s).

I shall call the above `the letter of acceptance of discrepancies`.

The second letter read as follows :

We have examined the documents relating to the abovementioned bill presented to us for payment and have noted the various discrepancies contained therein. Nevertheless, the documents are acceptable to us and we hereby authorise you to instruct the negotiating bank to release the guarantee held by them in respect of the said bill.

I shall call this `the letter of payment authorization`.

The plaintiffs do not appear to have responded to the invitation to inspect the documents at the premises of the defendants.
They, however, asked for the release of the documents against payment and the defendants complied with the request on 12 or 13 December 1991. The plaintiffs did this because they wished to take delivery of the cargo or transfer the documents to their buyers. It is clear that when they received the documents they were not bothered about the absence of the draft which obviously was not there.

Following the receipt of the plaintiffs` letters, on 13 December 1991 the defendants instructed the advising bank which was also the negotiating bank to claim reimbursement.
This meant that the discrepancies as well as the documents were acceptable and that the negotiating bank could make payment to the sellers and seek reimbursement from the defendants` correspondent bank. It was not in dispute that this had been done.

It should be observed that the plaintiffs signed their letters and received the original documents three or four days before the date of expiration of the credit.
The defendants instructed the advising bank to claim reimbursement three days before the date of expiration. The defendants then debited the plaintiffs` account with the amount due in respect of the credit. The receipt of the documents by the plaintiffs thus accomplished the plaintiffs` intentions and there was nothing further for the defendants to do.

The plaintiffs subsequently discovered that a fraud had been perpetrated on them.
No goods had been shipped. The shipping documents in other words had been faked. The sellers could not be tracked. The plaintiffs thus faced a huge loss. They had no claims against the insurers because there was no loss or damage to goods since there were no goods. In these circumstances they decided to focus their attention on the defendants to see if they could obtain recompense from them. So, some ten months after the plaintiffs signed the discrepancy letter and received the original documents the plaintiffs wrote to the defendants on 9 September 1992 asking for copies of a complete set of documents on an urgent basis. The documents they asked for fell under six categories, the first of which was:

All documents submitted by negotiating bank to claim payments from you.

(Drafts, commercial invoices, B/L insurance policy/certificates, certificate of origin, packing list, certificate of freshness, certificate of inspection, beneficiary`s certificate for (a) proof of merchandise, (b) performance bond etc etc.)

On the following day the defendants responded to the above letter.
The material part of it read as follows:

We refer to your letter of 9 September 1992 regarding your request for copies of documents drawn under the above-mentioned letter of credit.

We regret to advise you that we are unable to provide you the documents asked for in para No 1 of your letter. Our records indicate that all relevant documents drawn under this L/C have already been released to you, and the amount debited to your T/R account on 13 December 1991. It is also not our bank`s policy to make extra photo-copies of such documents.

Nothing further happened for some 15 months.
Then the plaintiffs` solicitors on 17 March 1993 wrote to the defendants as follows:

We act for Computer Place Services Pte Ltd of 19 Kallang Avenue #06-159 Singapore 1233.

We have been instructed by our clients that you have failed to comply with the terms and conditions of the

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