Lambias (Importers & Exporters) Co Pte Ltd v Hongkong & Shanghai Banking Corporation

• Jurisdiction: Singapore
• Judge: Goh Phai Cheng JC
• Judgment Date: 08 May 1993
• Neutral Citation: [1993] SGHC 102
• Docket Number: Suit No 38 of 1992
• Date: 08 May 1993
• Published date: 19 September 2003
• Year: 1993
• Plaintiff Counsel: Foo Soon Yien (Bernard Rada & Lee)
• Citation: [1993] SGHC 102
• Defendant Counsel: Scott Thillgaratnam with Kenny Chooi (Khattar Wong & Partners)
• Court: High Court (Singapore)
• Subject Matter: Documentary credit,Differences in weight described in different documents,Validity of 'house' bill of lading,Conformity of documents with the terms of the credit and UCP,Effect of fraud on document,Description of goods,Letter of credit transaction,Bills of Exchange and Other Negotiable Instruments

Cur Adv Vult

The defendants are a company incorporated in Hong Kong carrying on banking business and they have several branches in Singapore. This action arose out of a letter of credit issued by the defendants` Hong Kong North Point branch in favour of the plaintiffs for a sum of S$2,106,000 being the purchase price of 100,000 copies of two titles of a secondary school book.

The facts

The plaintiffs are a general trading company incorporated in Singapore with a paid-up capital of $1m. The two branches of the defendants involved in this action will be referred to as HSBC Singapore - a branch located at Ocean Building in Singapore at the material time, and HSBC North Point - a branch located at North Point in Hong Kong.

On 9 December 1985, the plaintiffs acquired the right to publish 100,000 copies of `Modern Mathematics for Secondary Schools` Books 1 and 2. Sometime in January 1986, the plaintiffs` managing director, Simon Ng Leong Fah (`Simon Ng`), met one Ting Sui Min (`Ting`), a Hong Kong businessman, who expressed an interest in purchasing these two titles. Simon Ng quoted Ting the price of S$190,000 for 50,000 copies of each title.

Around mid-January in Hong Kong, Ting showed Simon Ng a copy of an application for a letter of credit showing the price of the books as S$2,106,000. Simon Ng was shocked at the amount. Ting explained that he had to pay a big commission to a purchaser in Hong Kong and his end buyer in China. Ting told Simon Ng that the S$190,000 due to the plaintiffs was to be deducted upon receipt of the payment and the balance was to be remitted to a certain bank account in Hong Kong. Simon Ng objected to this on the basis that it would cause tax problems for him in Singapore. After much negotiation, Ting agreed to let the plaintiffs deduct S$500,000 and remit the balance to him.

On 4 February 1986, on the application of Maze Enterprises Ltd, a company in Hong Kong, HSBC North Point issued a letter of credit in favour of the plaintiffs. Prior to receiving the letter of credit, Simon Ng had not heard of Maze Enterprises Ltd. Nor had it been mentioned to him that they were the buying agents.

The letter of credit, to expire on 10 April 1986, was for an amount of S$2,106,000 for 100,000 copies of the two titles packed into seaworthy cartons at a price of `S$21.06 per each copy` c & f Hong Kong. It was expressed to be subject to the ICC`s Uniform Customs and Practice for Documentary Credits (1983 Rev) (`the UCP`). It was available by negotiation of drafts at sight drawn on HSBC North Point accompanied by the following documents:

(a) Invoices in triplicate.

(b) Full set original clean `On Board` bills of lading made out to shipper`s orders and endorsed in blank and marked `Freight Prepaid` and `Notify Applicant`.

(c) Packing list in triplicate.

(d) Quality and weight inspection certificate issued and signed by authorized signatories of applicant (whose signatures to be verified by the issuing bank) certifying that they have inspected the merchandise and found up to their satisfaction and countersigned by Mr Yau Ting Sang, holder of Hong Kong Identity Card No A422436 (whose signature to be verified by the issuing bank).

The letter of credit contained, inter alia, the following additional conditions:

(a) The destination and the latest shipment date were to be advised in the form of an amendment to the letter of credit.

(b) The credit would only be operative on receipt of an amendment issued by HSBC North Point advising shipment details.

(c) The credit was available with HSBC Singapore by negotiation.

(d) Documents had to be presented within 10 days after the issuance of the shipping documents but within the validity of the credit.

Under cover of a letter dated 7 February 1986, HSBC Singapore notified the plaintiffs of amendments made to the letter of credit in a document headed `Amendment to Documentary Credit` dated 6 February 1986 (`the first amendment`). The amendments were as follows:

(a) The requirement that the destination and latest shipment date was to be advised in the form of an amendment was deleted.

(b) The requirement that the credit would only to be operative on receipt of an amendment issued by HSBC North Point advising shipment details was deleted.

(c) The condition as regards the quality and weight inspection certificate was amended to read, inter alia:

Quality and weight inspection certificate now countersigned by Mr Yau Ting Sang personally, holder of Hong Kong CI No ... in the presence of the Hongkong and Shanghai Banking Corp, imports and exports dept, Ocean Bldg, Collyer Quay, Singapore, as witnessed by an executive.

(d) The latest shipment date was stipulated as 31 March 1986.

On 6 February, unknown to the plaintiffs, HSBC North Point sent a telex to HSBC Singapore informing them of the first amendment in relation to the quality and weight inspection certificate (`QWI certificate`). The telex further stated that a copy of Yau Tin Sang`s certificate of identity was despatched on that day to HSBC Singapore.

A second `amendment to documentary cedit` dated 8 February 1986 (`the second amendment`) addressed `for the beneficiary`s information only`, advised the applicant that there would be no further amendments to the credit.

HSBC Singapore informed the plaintiffs of the second amendment on 12 February 1986 whereupon the plaintiffs made arrangements for the books to be printed by Eurasia Press for S$90,000, not including freight and packing charges.

In early March 1986, when he was in Hong Kong, Simon Ng informed Ting that the goods were ready for collection. He asked Ting to send Yau to Singapore to inspect the goods. Simon Ng was told that Yau was demanding that US$30,000 be paid to him as a service charge before he made the inspection of the goods. Simon Ng paid the said sum to Ting in cash.

On his return to Singapore, Simon Ng received a telex from Ting informing him that Yau was due to arrive in Singapore and requesting that he makes arrangements for Yau to inspect the goods between 15 and 20 March. Around 13 or 14 March 1986, a man contacted Simon Ng and informed him that he was the Yau Tin Sang referred to in the letter of credit. I shall refer to this man as `Yau`. On `Yau`s` request, Simon Ng met him at the lobby of the Mandarin Hotel. Simon Ng had never met Yau Ting Sang before, so `Yau` gave him a short description of what he would be wearing so that Simon Ng could recognize him.

`Yau` was told that the goods would be ready for inspection within two days. On 14 March 1986 `Yau` contacted Simon Ng and they arranged to inspect the goods the next day. `Yau` accordingly inspected the goods at Eurasia Press and

The goods were loaded for shipment and on 17 March 1986, Simon Ng collected the bill of lading from the shipping company. Thereafter, he brought `Yau` to HSBC Singapore. They proceeded to the bills department where they met Ronnie Goh Yew Chye (`Goh`), who was then the officer in charge of HSBC Singapore`s import and export department.

Simon Ng`s evidence on his meeting with Goh was as follows:

I explained to Mr Goh why we were there that day and he instructed me to show him the letter of credit and all the necessary documents and later on he told me this is a very simple job and he asked me whether the person Mr Yau Tin Sang referred to in the letter of credit is around. So I introduced him immediately to Mr Goh. He asked us to wait because he had to wait for the file and he left us ... About 5 to 10 minutes later, Mr Goh came back. He told us to wait because he could not locate the file. For about a few minutes later, one of his female staff came and gave him a beige coloured file. Mr Goh started to look into the file. I don`t know what the file was. He closed the file and left it on the table and he asked Mr Yau whether he had the certificate of identity with him. Immediately Mr Yau gave him the certificate of identity and Mr Goh looked at the certificate of identity and asked me whether I had prepared the inspection certificate. I immediately showed him the inspection certificate and he asked Mr Yau Tin Sang to sign on the left. He asked me to sign as well and put the company chop. He compared the signatures on the inspection certificate and certificate of identity. He signed his name and put the Hongkong Bank chop on it.

Then he returned the certificate of identity to Mr Yau Tin Sang. Then I asked him since Hongkong Bank was not my banker, I would have my banker to present all the documents. I asked when could my banker negotiate the letter of credit. He told me Hongkong Bank Singapore might not negotiate the letter of credit but they would send to Hongkong Bank, North Point branch for collection ... Then we left the bank.

Shortly after Simon Ng left with `Yau`, Goh was able to locate the copy of the certificate of identity sent by HSBC North Point to HSBC Singapore. He compared the photograph in his file with the photograph in the copy he had made of the certificate of identity produced to him by `Yau`. That was when he realized that the person who was introduced to him by Simon Ng as Yau Tin Sang was an imposter. By then Simon Ng and the imposter had left the bank. Goh alerted the police, the plaintiffs` bank (Overseas Union Bank), and HSBC North Point. The police told Goh that he should lodge a report immediately after the documents were presented as until such time, no offence was disclosed.

After sending `Yau` back to his hotel on that day, Simon Ng presented all the documents to his banker at the main branch of Overseas Union Bank (`OUB`). By a letter dated 17 March 1986, OUB transmitted these documents to the defendants. This letter and the enclosed documents were received by the defendants at about 10.03am on 18 March 1986, and Goh lodged a report with the police at 11.15am the same morning.

On 18 March 1986, the solicitors for the plaintiffs, acting on the instructions of...