DBS Bank Ltd v Carrier Singapore (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Andrew Ang J
• Judgment Date: 09 April 2008
• Neutral Citation: [2008] SGHC 53
• Date: 09 April 2008
• Subject Matter: Elements of tort of deceit,Whether beneficiary liable to issuing bank in deceit for representation made in document presented to issuing bank,Damages,Whether contributory negligence applies in reducing quantum of damages awarded for tort of deceit,Whether issuing bank suffering loss,Whether chain of causation broken,Letter of credit transaction,Whether issuing bank having cause of action in negligent misrepresentation against beneficiary for misrepresentation made in document presented to issuing bank,Bills of Exchange and Other Negotiable Instruments,Quantum of damages arising from deceit of beneficiary
• Docket Number: Suit No 660 of 2006
• Published date: 10 July 2008
• Defendant Counsel: Khoo Boo Teck Randolph, Loo Teck Lee Johnson and Keow Mei-Yen (Drew & Napier LLC)
• Court: High Court (Singapore)
• Plaintiff Counsel: Lee Eng Beng, Poon Kin Mun Kelvin and Loke Pei-Shan (Rajah & Tann LLP)

9 April 2008 Judgment reserved.

Judith Prakash J:

1 This was an action framed in deceit and, alternatively, in negligence brought by DBS Bank Ltd (“DBS”) against Carrier Singapore (Pte) Ltd (“Carrier”) arising out of a representation made by Carrier in a Delivery Order No 50191 (“DO50191”). Carrier was the beneficiary under a letter of credit (“the LC”) issued by DBS on 30 June 2006 on the application of its customer Lee Meng Brothers (S) Pte Ltd (“Lee Meng”). DO50191 was one of the documents that Carrier was required to present under the LC.

2 The LC was secured against two export letters of credit obtained by Lee Meng from its Vietnamese customer, Duc Khai Corporation (“the Export LCs”) which would cover 85% of the value of the LC.

3 The documents required under the terms of the LC were the following:

(a) Carrier’s signed tax invoice in three originals and two copies;

(b) Packing list in three originals; and

(c) Delivery order in three originals and two copies signed by Carrier made out to Lee Meng:

(i) indicating the LC number;

(ii) stating the delivery date as not being later than 15 July 2006;

(iii) showing delivery of goods from Carrier’s warehouse to Lee Meng’s warehouse; and

(iv) stamped and countersigned by one authorised signatory of Lee Meng, acknowledging receipt of the goods in good order and condition.

Those documents were to be presented within 14 days after delivery date and within the validity period of the LC.

4 In DO50191, Carrier stated that 3,936 sets of Toshiba RAS-10GKPX-V/GAX-V air-conditioners, 1,003 sets of Toshiba RAS-12NKPX-V/NAX-V air-conditioners and 450 sets of Toshiba RAS-18NKPX-V/NAX-V air-conditioners (“the Goods”) had been delivered in “1 lot” from Carrier’s warehouse to Lee Meng’s warehouse. DO50191 also stated that the “Delivery Date” of the Goods was “30 June 2006”. A representative of Lee Meng signed on DO50191, acknowledging receipt of the Goods.

5 In fact, only US$424,292.40 in value of such Goods were delivered on 30 June 2006. However, according to Carrier, it had, in the course of its dealings with Lee Meng, earlier supplied the latter with similar goods in April, May and June 2006 which totalled more than the amount of US$1,391,726.70 payable under the LC.

6 During the trial, it emerged that DO50191 was actually prepared in two stages. A skeletal DO50191 was first prepared before Carrier had received a copy of the LC. The only details contained in the skeletal DO50191 were:

(a) the delivery date of 30 June 2006;

(b) the words “1 lot” in the left-most column; and

(c) the phrase “Toshiba Air Conditioners”.

From the evidence, it appeared that Carrier’s credit control manager, Lim Soon Meng (“Lim”) had decided that DO50191 would cover past goods and would represent 30 June 2006 as the delivery date of the Goods even before he saw the LC.

7 Lim, in his affidavit of evidence-in-chief, testified that Carrier had been having credit issues with Lee Meng for some time since April 2006. His account of how the LC came about was, in short, that Lee Meng had agreed to obtain the LC to reduce outstanding debts owing to Carrier in respect of past deliveries of goods. For this reason, he saw no wrong in consolidating past deliveries of goods as “deemed delivery” under DO50191. Carrier’s position was that the LC was not restricted to purchases of fresh goods but could be used to pay for goods already delivered.

8 Lim had formed this view despite the fact that the bankers he had spoken to were themselves unsure “whether the LC can be used to pay for past goods”. Lim himself admitted during the trial that he had never encountered a letter of credit that covered previous deliveries.

9 According to Lim, the bankers he had spoken to had told him, “so long as you are compliant with the terms of the LC, you get paid”. The only document which he had sight of when preparing the skeletal DO50191 was the LC application form that Lee Meng had submitted to DBS on 26 June 2006. That application form contained only a sketch of the bare commercial terms of the LC.

10 On the morning of 20 June 2006, Lim brought the skeletal DO50191 to Jenny Lee (“Lee”) of Lee Meng for her signature. At the time Lee signed DO50191, it did not state the amount of the Goods that was allegedly delivered.

11 The details of the Goods and the LC number were only later inserted by Carrier at its office. According to Lim’s evidence, it was Lee who provided the quantity of the Goods stated in DO50191. Carrier’s witnesses also confirmed that DO50191 was designed to conform to the terms of the LC.

12 Concurrently, Carrier prepared a packing list and a tax invoice that it intended to present to DBS under the LC. Carrier’s witnesses testified that DO50191 and its corresponding packing list and invoice were generated solely for presentation to DBS under the LC. None of the previous deliveries had a packing list. During the trial, Carrier’s logistics manager Toh Wee Seng (“Toh”) conceded that DBS would have had reason to reject the previous deliveries due to the absence of packing lists.

13 The packing list presented described the Goods as being packed into cartons numbered 1 to 5,389. Toh conceded that the packing list described an imaginary packing process. He also conceded that the packing list, when read with DO50191, would convey to a reader the impression that all the goods were delivered in a single lot on 30 June 2006. Both Lim and Toh agreed that the packing list, when read with DO50191, served to confirm that the Goods were delivered “all in one lot”. DBS therefore contended that the unmistakable purpose behind this was to convey to DBS the false notion that the Goods were all shipped in a single lot when in fact they were not.

14 On 12 July 2006, Carrier’s banker, The Hongkong & Shanghai Banking Corporation Ltd (“HSBC”) presented DO50191 (duly signed by Lee Meng) with a tax invoice, the packing list and a bill of exchange for US$1,391,726.70 to DBS for acceptance under the LC. In the tax invoice, Carrier stated that the price for the Goods was US$1,391,726.70. This figure tallied exactly with the amount stated in the bill of exchange. The packing list described the number of cartons in which the Goods were allegedly packed and delivered.

15 As the documents that Carrier presented conformed, on their face, to the terms of the LC, DBS accepted the bill of exchange for US$1,391,726.70 on 13 July 2006. On 12 September 2006, DBS paid out US$1,395,748.02 (comprising principal and interest) due under the bill of exchange after it had matured.

16 By that time, Lee Meng had become insolvent; DBS had placed Lee Meng under receivership on 11 September 2006. In the course of the receiver’s review of Lee Meng’s records, he discovered that the Goods could not have been delivered all in one lot on 30 June 2006 as represented in DO50191. On 18 September 2006, the receiver duly informed DBS of his findings. That led to these proceedings.

17 Carrier admitted that not all the Goods were delivered on 30 June 2006. Carrier also admitted that it had delivered only US$424,292.40 in value of the Goods to Lee Meng on 30 June 2006. Of these, part was delivered by Lee Meng to its Vietnamese customer as a result of which DBS received payment of US$224,070 under the Export LCs. Carrier’s Lim admitted that US$127,575 in value of the Goods were subsequently repossessed by Carrier in September 2006 together with other goods.

18 Carrier was, of course, aware that not all the Goods were delivered on 30 June 2006. Indeed, its own account was that a vast majority of the Goods had been delivered on 28 April 2006, 26 May 2006 and 26 June 2006.

19 DBS’s case was that if DO50191 had stated those delivery dates, it would not have accepted the bill of exchange accompanying DO50191 since, by the terms of the LC, the Goods delivered on those dates would not have been covered.

20 In particular, DBS pointed out the following:

(a) Field 48 of the LC required all documents to be presented within 14 days of the delivery date. Given that HSBC had presented the documents to DBS on 12 July 2006, more than 14 days had therefore elapsed between the alleged delivery dates and the presentation date.

(b) Field 46A of the LC also required the delivery order presented to state the LC number. The delivery orders for the Goods allegedly delivered on 28 April 2006, 26 May 2006 and 26 June 2006 could not have indicated the LC number since the LC was issued only on 30 June 2006.

(c) The amount drawn under the bill of exchange (US$1,391,726.70) would not have tallied with and would have greatly exceeded the value of the Goods actually delivered on 30 June 2006 (US$424,292.40).

(d) Lim admitted that payment for the delivery allegedly made on 26 June 2006 came from a different letter of credit. Accordingly, the LC could not have covered that lot of goods.

21 In fact, through Lim’s testimony, Carrier had stated that neither the Goods described in the LC nor the amount of the LC could be related to any particular lot of new goods or even of any previous purchases allegedly delivered on 28 April 2006, 26 May 2006 or 26 June 2006. DBS contended therefore that DO50191 did not only misrepresent the date of delivery of the Goods, it represented a completely fictional delivery.

22 DBS contended that, in reliance upon the truth of the statements in DO50191, DBS paid out US$1,395,748.02 – a sum that it would not have paid had it known the truth. In the circumstances, DBS submitted that Carrier was liable for the loss and damage that DBS sustained in that regard.

23 DBS therefore advanced two causes of action against Carrier: one in deceit and an alternative claim in negligent misrepresentation.

The issues

24 The following are the issues in regard to the cause of action in deceit:

(a) Did Carrier represent that all the Goods were delivered on 30 June 2006 (“the Representation”)? (“Issue 1”)

(b) Was the Representation false? (“Issue 2”)

(c) If the Representation was false,...