Grains and Industrial Products Trading Pte Ltd v Bank of India and another

• Judge: Lee Kim Shin JC
• Judgment Date: 30 December 2014
• Neutral Citation: [2014] SGHC 274
• Defendant Counsel: Sarjit Singh Gill, Probin Dass and Ng Wenling (Shook Lin & Bok LLP),Tan Teng Muan and Loh Li Qin (Mallal & Namazie)
• Year: 2014
• Docket Number: Suit No 802 of 2012
• Published date: 02 January 2015
• Citation: [2014] SGHC 274
• Plaintiff Counsel: Winston Kwek, Winston Wong and Max Lim (Rajah & Tann Singapore LLP)
• Subject Matter: Bills of Exchange and Other Negotiable Instruments,letter of credit transaction
• Hearing Date: 19 February 2014,25 February 2014,21 July 2014,07 April 2014,09 May 2014,18 February 2014,21 February 2014,20 February 2014,28 March 2014,11 August 2014,27 February 2014,22 August 2014,04 April 2014,26 February 2014
• Court: High Court (Singapore)

Lee Kim Shin JC: Introduction

The plaintiff, Grains and Industrial Products Trading Pte Ltd, is a company within the Bunge group of companies and it is responsible for the Bunge group’s trade and structured finance functions in Singapore. Suit No 802 of 2012 (“S 802”) was a claim by the plaintiff for sums allegedly owing to it under a letter of credit issued by the second defendant, Indian Bank (“the Indian Bank LC”), and under which the first defendant, Bank of India, was named as “Nominated Bank”.

The Indian Bank LC was issued by the second defendant on 24 February 2012. The initial credit amount was US$6,500,000.91. This was amended twice, to US$8,299,995.51 on 27 February 2012, and to the final amount of US$9,993,239.54 on 29 February 2012. The Indian Bank LC had an expiry date of 25 March 2012. The Indian Bank LC was stated to be available by acceptance with the first defendant. The Indian Bank LC was governed by the Uniform Customs and Practice for Documentary Credits (2007 Revision) (International Chamber of Commerce Publication No 600) (“UCP 600”), this being a set of rules expressly incorporated into the Indian Bank LC.

On 15 March 2012, the plaintiff sent the documents required under the Indian Bank LC (“the LC Documents”) for presentation to the first defendant through Standard Chartered Bank. Standard Chartered Bank was the plaintiff’s Collecting Bank. The first defendant received the LC Documents the next day, 16 March 2012, that is, prior to the expiry date of the Indian Bank LC. The first defendant then transmitted the LC Documents to the second defendant on 18 April 2012, after the expiry date of the Indian Bank LC. On 19 April 2012, the second defendant notified the first defendant that it was rejecting the LC Documents and would not honour the Indian Bank LC on the grounds of late negotiation and expiry of the Indian Bank LC.

On 25 September 2012, the plaintiff instituted S 802 against the first and second defendants.

The plaintiff’s claim against the first defendant was based upon the first defendant being the “Confirming Bank” and/or the “Negotiating Bank” under the Indian Bank LC, in addition to being the “Nominated Bank”. Pertinently, the plaintiff alleged that the first defendant had orally agreed to confirm and/or honour and/or negotiate the Indian Bank LC during a telephone conversation between the plaintiff’s Mr Bhasi and the first defendant’s Mr Prabhu on 24 February 2012 (“the 24 February 2012 Telephone Conversation”).

Alternatively, the plaintiff claimed that the first defendant was the Confirming Bank because the second defendant had asked the first defendant to confirm the Indian Bank LC and the first defendant had not informed the second defendant that it was not prepared to do so.

To the extent that the first defendant was alleged to be the Confirming Bank, the plaintiff claimed the full amount of US$9,993,239.54 against the first defendant. To the extent that the first defendant was alleged to be the Negotiating Bank, the plaintiff claimed the discounted amount of US$9,890,408.63 against the first defendant. This was on the basis that the first defendant had allegedly agreed to discount the Indian Bank LC as part of negotiating it.

The plaintiff’s claim against the second defendant was based on the second defendant’s liability as the Issuing Bank under the Indian Bank LC. The plaintiff asserted that because a complying presentation of the LC Documents had been made to the Nominated Bank (that is, the first defendant) within the validity period of the Indian Bank LC, the second defendant was obliged to honour the Indian Bank LC and pay the plaintiff the full amount of US$9,993,239.54.

The first and second defendants also filed a claim and a counterclaim against one another respectively. The first defendant claimed an indemnity or contribution from the second defendant in the event that it was found to be liable to the plaintiff as the Confirming Bank or the Negotiating Bank under the Indian Bank LC. The second defendant, on the other hand, counterclaimed for an indemnity or contribution from the first defendant in the event that it was found to be liable to the plaintiff as the Issuing Bank, for various alleged breaches of the first defendant’s obligations under the Indian Bank LC. My Decision

On 21 July 2014, I delivered a brief oral judgment where I: dismissed the plaintiff’s claim against the first defendant; allowed the plaintiff’s claim against the second defendant with interest to run from the date of the judgment; dismissed the second defendant’s counterclaim against the first defendant; and made no order on the first defendant’s claim against the second defendant.

On 22 August 2014, I delivered my decision on the remaining issues of pre-judgment interest and costs. I was not satisfied that the plaintiff had made out a case for pre-judgment interest to be awarded and therefore made no order on this. As for costs, my orders were as follows: the plaintiff shall pay the first defendant’s costs in defending the plaintiff’s claim against the first defendant from the date of the writ to the date of the judgment, to be taxed if not agreed. the second defendant shall pay the first defendant’s costs in defending the second defendant’s counterclaim against the first defendant from the date of the counterclaim to the date of the judgment, to be taxed if not agreed; and the second defendant shall pay the plaintiff’s costs in prosecuting its claim against the second defendant from the date of the writ to the date of the judgment, to be taxed if not agreed.

I was not minded to make a Bullock or a Sanderson order, such as to require the second defendant to pay or contribute towards the plaintiff’s costs in prosecuting its claim against the first defendant.

The plaintiff has since filed an appeal against my decision to dismiss its claim against the first defendant and my orders on pre-judgment interest and costs. The second defendant has filed a cross-appeal against the whole of my decision. I therefore set out the grounds of my decision in full.

The Plaintiff’s Claim against the First Defendant

The plaintiff’s claim against the first defendant depended on whether the first defendant was the Confirming Bank and/or the Negotiating Bank under the Indian Bank LC. This was critical because if the first defendant had not assumed either of these roles, the first defendant would not have incurred any liability towards the plaintiff to honour or negotiate the Indian Bank LC. This flows from the plain language of Art 12 of UCP 600, which provides as follows:

Nomination

a. Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.

b. By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank.

c. Receipt or examination and forwarding documents by a nominated bank that is not a confirming bank does not make that nominated bank liable to honour or negotiate, nor does it constitute honour or negotiation.

[emphasis added]

It is also instructive to refer to the definition of “Confirming Bank” set out in Art 2 of UCP 600:

Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank’s authorization or request.

“Confirmation” is in turn defined in Art 2 of UCP 600 to mean:

Confirmation means a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation.

[emphasis added]

The Alleged Oral Agreement

In this respect, the plaintiff’s principal case at trial hinged on whether the first defendant had orally agreed to confirm, honour or negotiate the Indian Bank LC, within the meaning of Art 2 of UCP 600, during the 24 February 2012 Telephone Conversation between the plaintiff’s Mr Bhasi and the first defendant’s Mr Prabhu.

The subject matter of the 24 February 2012 Telephone Conversation

The obvious difficulty with this part of the plaintiff’s case was that the 24 February 2012 Telephone Conversation related to a different letter of credit, issued by Bank of Baroda (“the Bank of Baroda LC”) instead of Indian Bank. Therefore, even if an oral agreement to confirm, honour or negotiate had been reached on 24 February 2012, the agreement would have been in relation to the Bank of Baroda LC and not the Indian Bank LC.

When this was put to Mr Bhasi in cross-examination, he agreed that the 24 February 2012 Telephone Conversation concerned the Bank of Baroda LC. However, he suggested for the first time in the proceedings that there was a second telephone conversation between himself and Mr Prabhu sometime between 24 February and 1 March 2012 (“the Second Alleged Telephone Conversation”). According to Mr Bhasi, the first defendant had agreed to confirm, honour or negotiate the Indian Bank LC during the Second Alleged Telephone Conversation. When the plaintiff’s other witnesses, Mr Chew and Ms Yeo later took the stand, they too, incredibly, sang from the same hymn sheet.

I did not believe their evidence. To begin with, the Second Alleged Telephone Conversation was never pleaded by the plaintiff. None of the affidavits of evidence-in-chief (“AEICs”) of Mr Bhasi, Ms Yeo and Mr Chew make any mention of the Second Alleged Telephone Conversation even though this was clearly an important fact given the plaintiff’s case. In my view, Mr Bhasi had fabricated his evidence relating to the Second Alleged Telephone Conversation on the stand upon his realisation then that there was a missing link between the alleged oral...