Credit Agricole Indosuez v Banque Nationale de Paris

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
JudgeChao Hick Tin JA
Judgment Date14 February 2001
Neutral Citation[2001] SGCA 12
Citation[2001] SGCA 12
Docket NumberCivil Appeal No 52 of 2000
Subject MatterWhether deferred payment credit or negotiation credit,Letters of credit,Banking,Examination of terms of letter of credit according to applicable UCP rules and where ambiguity exists
Published date19 September 2003
Plaintiff CounselSteven Chong SC, Toh Kian Sing and David Tan Yew Beng (Rajah & Tann)
Date06 April 2001
Defendant CounselChoi Yok Hung, Gan Kam Yuin and Rowena Chew Kiat (Bih Li & Lee)

(delivering the judgment of the court): This is an appeal against a decision of the High Court as to the construction of a letter of credit (LC). The High Court granted the respondents judgment for their claim of US$1,333,466.64, being the sum due under the LC. [See [2000] 4 SLR 254.

An alternative basis of the respondents` claim is as a holder in due course of two drafts drawn against the appellants under the LC. In view of its decision on the main issue, the High Court did not go on to consider this question.

A subsidiary issue raised concerns the question whether the court should, even though the action was commenced by way of an originating summons, have directed that the action proceed to trial as there are disputes on facts on which oral evidence would be required.

The background

The facts giving rise to the action are straightforward. On 20 March 1999, Solo Industries Ltd (`Solo`) of Sharjah, United Arab Emirates, applied to the Dubai branch of the appellants, Credit Agricole Indosuez (`CAI`), to establish an LC in favour of a Singapore company, Amerorient Pte Ltd (`Amerorient`). On the application form, Solo stated that the credit was to be `available with BNP, Singapore by deferred payment 180 days from the date of presentation of documents at BNP, Singapore.`

On 21 March 1999, CAI telexed BNP, Singapore (`BNP`) stating that CAI had, on the instructions of Solo, opened an irrevocable LC for up to US$1,333,600 in favour of Amerorient. The LC was stated to be subject to the Uniform Customs & Practice for Documentary Credits 1993 (`UCP 1993`). The relevant terms of the LC will be referred to later.

On 26 March 1999, BNP informed CAI by SWIFT Telex that the former had advised Amerorient as to the contents of the LC and had added its confirmation to the credit. The telex also stated that the LC amount was `available by def payment`. On the same day, BNP negotiated the LC and paid over to Amerorient the sum of US$1,333,466.64. Also on the same day, BNP sent to CAI two covering schedules, each enclosing a set of documents that were presented by Amerorient to BNP pursuant to the terms of the LC. The two schedules were for sums of US$654,264.16 and US$679,202.48. On the top right hand corner of each schedule was a box where in the column entitled `Tenor` it was stated `180 days from date of nego-due on 21 Sept 99`.

On 30 March 1999, CAI advised Solo of the receipt of the documents referred to in the two schedules and in the same note, CAI stated the following:

Tenor: 180 days from date of negotiation.

Due on: 21.09.99.



The date 21 September 1999 is exactly 180 days from 26 March 1999. However, it does not appear that this note was copied to BNP.

The next day, 31 March 1999, CAI advised BNP by tested telex that the two sets of documents were `accepted to mature for payment on 21 September 1999` and that `on the said date we will remit proceeds as per your instructions.`

Nothing thereafter transpired between the two banks until 22 April 1999 when CAI requested for copies of the bills of lading and the invoices tendered under the LC. This request was made because of CAI`s internal audit requirements and it was duly acceded to by BNP.

Shortly before 25 May 1999, as a result of investigations carried out, CAI discovered that Amerorient had conspired with Solo to defraud various banks in UAE through the issuance of LCs. Therefore, on that day, CAI advised BNP via SWIFT telex that `by reason of a serious fraud suspicion`, BNP should not make any payment to the beneficiary under the LC until further notice from CAI. BNP were further warned that if they should effect any payment in spite of this notification, then they would be doing so under their `own and exclusive responsibility.`

The next day, 26 May 1999, BNP responded, stating that they had `confirmed and negotiated documents in strict compliance with the LC terms` and expected payment on the due date, namely, 21 September 1999. On 27 May 1999, BNP further informed CAI that they had negotiated and discounted the bills under the LC on 26 March 1999.

Thereafter, solicitors for both parties came into the picture. On the due date, CAI still refused to pay. Thus the action.

Deferred payment or negotiation credit?

As BNP had already negotiated the documents when fraud was discovered, the question whether CAI were under any liability to reimburse BNP under the LC depends very much on whether the credit is a deferred payment credit or a negotiation credit. CAI contend that it is the former while BNP submit it is the latter. BNP can succeed on their claim only if it is established that the credit is a negotiation credit.

The issue is thus one of construction, taking into account the express terms of the LC as well as the rules of the UCP 1993. We will now set out the relevant terms of the LC:

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:

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

(2) ... Commercial Invoices.

(3) Packing List.

(4) Certificate of Russian Origin ...

(5) ...

(6) ...

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

Special Conditions:

1 ...

2 ...

3 ...

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 ...

6 ...

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

- ...

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

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

- 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 relevant rules of the UCP 1993 are the following:

Article 9

Liability of Issuing and Confirming Banks

a An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with:

i ...

ii If the Credit provides for deferred payment - to pay on the maturity date(s) determinable in accordance with stipulations of the Credit;

iii ...

iv If the Credit provides for negotiation - to pay without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as additional document(s).

b A confirmation of an irrevocable Credit by another bank (the `Confirming Bank`) upon the authorisation or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in additional to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with:

i ...

ii If the Credit provides for deferred payment - to pay on the maturity date(s) determinable in accordance with the stipulations of the Credit;

iii ...

iv If the Credit provides for negotiation - to negotiate without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as additional document(s).

Article 10

Types of Credit

a All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation.

b

i ...

ii Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorised to negotiate. Mere examination of the documents without giving of value does not constitute a negotiation.

c ...

d d By nominating another bank, or by allowing for negotiation by any bank, or by authorising or requesting another bank to add its confirmation, the Issuing Bank authorises such bank to pay, accept Draft(s) or negotiate as the case may be, against documents which appear on their face to be in...

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3 cases
  • Mizuho Corporate Bank Ltd v Cho Hung Bank
    • Singapore
    • High Court (Singapore)
    • 31 Julio 2004
    ...letter of credit must be construed in the manner proposed by them. They relied on Credit Agricole Indosuez v Banque Nationale de Paris [2001] 2 SLR 1 at 9, [21], where Chao Hick Tin JA, who delivered the judgment of the Court of Appeal, pointed out that where the meaning of a letter of cred......
  • UCO Bank v Golden Shore Transportation Pte Ltd
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    • High Court (Singapore)
    • 5 Abril 2005
    ...(Rajah & Tann) for the defendant. Aegean Sea, The [1998] 2 Lloyd's Rep 39 (folld) Crédit Agricole Indosuez v Banque Nationale de Paris [2001] 1 SLR (R) 285; [2001] 2 SLR 1 (refd) East West Corporation v DKBS 1912 [2003] QB 1509; [2003] 1 Lloyd's Rep 239 (folld) Elder Dempster Lines v Zaki I......
  • Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd
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    • Court of Three Judges (Singapore)
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    ...... to the court’s equitable jurisdiction ( Crédit Agricole Indosuez v Banque Nationale de Paris . ......
2 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2001, December 2001
    • 1 Diciembre 2001
    ...1 SLR 266; Banque Nationale de Paris v Hew Keong Chan Gary[2001] 1 SLR 300; Credit Agricole Indosuez v Banque Nationale de Paris [2001] 2 SLR 1; and Chew Pin Pin v AGF Insurance (Singapore) Pte Ltd[2001] 2 SLR 152 (it might also be noted, in passing, that although many cases dealing with li......
  • Banking Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2001, December 2001
    • 1 Diciembre 2001
    ...Agricole Indosuez[2000] 4 SLR 254 has since been reversed by the Court of Appeal in Credit Agricole Indosuez v Banque Nationale de Paris[2001] 2 SLR 1 on the ground that the letter of credit in question should more properly be construed as a deferred payment credit rather than a negotiable ......

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