Credit Agricole Indosuez v Banque Nationale de Paris

• Jurisdiction: Singapore
• Judgment Date: 27 June 2000
• Date: 27 June 2000
• Docket Number: Originating Summons No 49 of 2000
• Court: High Court (Singapore)

Banque Nationale de Paris

Plaintiff

and

Crédit Agricole Indosuez

Defendant

[2000] SGHC 117

Judith Prakash J

Originating Summons No 49 of 2000

High Court

Banking–Letters of credit–Negotiable credit–Deferred payment credit–Documents indicating credit as available for certain number of days from date of negotiation–Whether credit negotiable or deferred–Whether issues can be disposed off summarily

The defendant bank issued a letter of credit expiring on 21 May 1999 in favour of a Singapore company, Amerorient Pte Ltd (“Amerorient”). The credit was to be available with the plaintiff bank's Singapore branch. The plaintiff negotiated the letter of credit on 26 March 1999 and made payment to Amerorient. The plaintiff sent all the required documents to the defendant and indicated in the covering schedule that the tenor of the letter of credit was “180 days fr Date of nego- due on 21 Sept 1999”.

On 25 May 1999, the defendant advised the plaintiff that it should not pay to Amerorient because of the suspicion of fraud. The plaintiff responded that it had complied with the terms of the credit and that the defendant was to pay the plaintiff on the due date. The defendant did not pay the plaintiff on 21 September 1999 or thereafter. The plaintiff then sued for reimbursement.

The court had to decide whether the matter should go to trial or whether it could be determined summarily. The two issues before the court were first, whether the credit in question was a deferred payment credit or a negotiation credit, and second, whether there were questions of fact that could not be resolved by way of an originating summons.

Held, allowing the plaintiff's claim:

(1) The proper construction of the credit showed it to be a negotiation credit and so the defendant was legally obliged to reimburse the plaintiff at maturity. The most important sentence in the credit was the one that stated, “Available against presentation of drafts at 180 days from the date of negotiation by deferred credit”. The vital points in that sentence were that in order to obtain payment under the credit, drafts would have to be presented for payment 180 days from the time those drafts had been negotiated. This interpretation was supported by further references to negotiation that appeared in two special conditions in the letter of credit. Also, the defendant's own conduct indicated that before May 1999, it either took the view that the credit was a negotiation credit or was content for the plaintiff to act according to such a notion: at [16], [22] and [31].

(2) There was no reason why the issues could not be disposed of summarily: at [31].

Banco Santander SA v Bayfern (9 June 1999) (Queen's Bench Division,UK) (folld)

Sinotani Pacific Pte Ltd v Agricultural Bank of China [1999] 2 SLR (R) 970; [1999] 4 SLR 34 (distd)

Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG [1993] 3 SLR (R) 86; [1993] 3 SLR 686 (refd)

Woo Bih Li SC and Gan Kum Yuin (Bih Lih & Lee) for the plaintiff

Toh Kian Seng and Priya Selvam (Rajah & Tann) for the defendant.

Judith Prakash J

1 The question that I had to decide in this originating summons was whether a particular letter of credit issued by the defendant bank and negotiated by the plaintiff bank was, on its true construction, a deferred payment credit or a negotiation credit.

2 The matter arose in the following way. On 21 March 1999, the Dubai branch of the defendant sent a telex to the plaintiff's Singapore branch stating that the defendant had opened an irrevocable letter of credit for up to US$1,333,600 in favour of a Singapore company, Amerorient Pte Ltd (“Amerorient”) on the instructions of Solo Industries Ltd of Sharjah, in the United Arab Emirates.

The letter of credit

3 The letter of credit (so far as material) provided that:

By order of Solo Industries Limited, …

We open our irrevocable letter of credit No P900262 favouring Amerorient Pte Ltd …

Expiring on 21 May 1999 for not exceeding US$1,333,600…

Available against presentation of drafts at 180 days from the date of negotiation by deferred payment.

Documents required: (in duplicate unless otherwise stated)

Covering shipment of 40,000 kgs lead silver alloy 33 pct.

…

Documents required:

1. (1) … clean on board ocean Bills of Lading …

2. (2) … Commercial Invoices

3. (3) Packing List

4. (4) Certificate of Russian Origin …

5. (5) …

6. (6) …

7. (7) Shipping Marks: ? SIL SHJ? Must be mentioned on Bills of Lading.

Special Conditions:

1. 1 …

2. 2 …

3. 3 …

4. 4 Non legalized/non certified Certificate of Origin issued by exporter acceptable for negotiation in which case Beneficiary's Certificate stating that the original legalized and certified Certificate of Origin will be sent directly to the Applicant must accompany the documents presented for negotiation.

5. 5 …

6. 6 …

7. 7 All documents to be forwarded to Credit Agricole Indosuez … Dubai, UAE by courier in one lot.

   1. - …

   2. - Credit available with Banque Nationale de Paris, Singapore and to be confirmed by Bank National de Paris, Singapore.

   3. - We hereby engage that documents presented in conformity with the terms of this credit will be duly honoured at maturity.

   4. - Negotiation under reserve/guarantee not acceptable without prior reference to us.

…

This telex is the operative credit instrument and is subject to Uniform Customs and Practice for Documentary Credits 1993 Revision Brochure No 500 International Chamber of Commerce, Paris, France.…

The course of events

4 On 26 March 1999, the plaintiff sent the defendant a letter stating that it had advised the content of the credit to the beneficiary, Amerorient, and had added its confirmation to the credit. In the same letter, the plaintiff gave particulars of the credit and stated that it was for an amount of US$1,333,600 which was “available by def payment”.

5 On the same day, 26 March 1999, the plaintiff negotiated the letter of credit and made payment to Amerorient of the amount of US$1,333,466.64. Contemporaneously it sent to the defendant two documents each entitled “Covering Schedule – Export Bills”. Under cover of each of these schedules, the plaintiff forwarded to the defendant all the documents called for under the letter of credit including two drafts. Each draft was for the sum of US$654,264.16. There was a box at the top of each covering schedule. This box was divided into four compartments bearing the following headings,viz“Our reference”, “L/C Number”, “Amount” and “Tenor”. In each box entitled “Tenor”, the plaintiff inserted the words “180 days fr Date of nego- due on 21 Sept 99”. The plaintiff had obtained the due date of each payment by the defendant by taking 180 days from 26 March 1999. Each schedule also requested the defendant to please confirm the maturity date as soon as possible by tested telex or SWIFT.

6 On 31 March 1999, the defendant sent the plaintiff two telexes, one referring to each of the two sets of documents forwarded to it by the plaintiff. The two telexes were in practically identical terms and after giving the...