United Bank Ltd v Banque Nationale de Paris and Others

• Jurisdiction: Singapore
• Judge: Chao Hick Tin J
• Judgment Date: 07 June 1991
• Neutral Citation: [1991] SGHC 78
• Date: 07 June 1991
• Subject Matter: Whether plaintiffs' notice complied with art 8(e) and/or (f) of the Uniform Customs and Practice for Documentary Credits (1974 Revision),Whether advising bank failed to exercise reasonable care to bring amendments to beneficiary's attention,Whether plaintiffs entitled to reject on basis that there should be strict compliance with the terms in the letter of credit,Rejection of documents,Letters of credit,Amendment to letter of credit,Whether loss caused by that failure,Banking,Whether there was a proper rejection,Whether negotiating bank breached duty of care in negotiating letter of credit and paying to a party other than the beneficiary named in the letter of credit
• Docket Number: Suit No 658 of 1982
• Published date: 19 September 2003
• Defendant Counsel: Howard Cashin and Myint Soe (Murphy & Dunbar),Tan Kok Quan and Lee Han Tiong (Lee & Lee)
• Court: High Court (Singapore)
• Plaintiff Counsel: KS Chung (Harry Elias & Partners) and Mirza Namazie (Mallal & Namazie)

Cur Adv Vult

This action concerns a letter of credit and is instituted by an issuing bank against a negotiating bank, an advising bank and the applicant for the letter of credit.

The plaintiffs are and were a bank carrying on business in the United Arab Emirates. The first defendants were the bank that negotiated the letter of credit on behalf of the beneficiary. The second defendants were the advising bank of the plaintiffs. The third defendant was the customer on whose application the plaintiffs issued the letter of credit. In this judgment I shall refer to the plaintiffs and the first and second defendants as `UBL`, `BNP` and `HSBC` respectively. In passing, I should add that the plaintiffs have already obtained a judgment in default of appearance against the third defendant.

The events which led to this action are as follows. In October 1980, the third defendant applied to UBL to open a letter of credit in the amount of US$220,000 in favour of a Singapore company called Pan Associated Ltd for the purchase of 1,000 metric tons of wheat bran, white and thick quality. On 1 November 1980 a letter of credit was duly issued by UBL in favour of Pan Associated Ltd of Suite 1908A, 19th floor, International Plaza, Anson Road, Singapore 0207 (AB24), subject to the provisions of the Uniform Customs and Practice for Documentary Credits (1974 Revision) (hereinafter called `the UCP`). Immediately on the issue of the letter of credit, a telex was sent on the same day by UBL to HSBC in these terms:

Opened credit AD80/1866 dtd 1.11.80 for about US$220,000 c&f Abu Dhabi fvg M/s Pan Associated Ltd Suite 1908A 19th International Plaza Anson Road Singapore 0207(.) Openers M/s Al-Afrah Stores Abu Dhabi. Merchandise about 1,000 m tons wheat bran white and thick quality. Shipment and negotiation latest by 30 Dec 1980. Details airmailing. (Emphasis added.)

On 3 November 1980, HSBC informed the beneficiary of the opening of the letter of credit. The letter of credit issued had these words written at the top right corner: `This is in confirmation of our cable dated 1 November 1980.`

The letter of credit was stated to be `unrestricted for negotiations`. It was posted by UBL to HSBC. In the meantime, on or about 6 November 1980, the third defendant requested UBL to amend the letter of credit to add two additional requirements: (i) `Documents should include certificate from M/s Naraina Trading (Pte) Ltd, 113 High Street Plaza, Colombo Court, Singapore, stating that the goods shipped are in good condition`; and (ii) `1% empty bags must be supplied free of charge`. These amendments were conveyed in a letter dated 6 November 1980 from UBL addressed to the beneficiary, Pan Associated Ltd, which also stated that `all the other terms and conditions remain unchanged`. This amendment letter was sent by UBL to HSBC for onward transmission. Three days later, on 9 November 1980, UBL sent a telex to HSBC in these terms:

8250 Nove 6th nil amount

Our credit AD80/1866 Nov 1st 1980 for about US dlrs 220,000.

(1) ... (as quoted above)

(2) ... (as quoted above)

Confirmation airmailing

This telex is hereinafter referred to as `the amendment telex.`

The original letter of credit was received by HSBC through the mail on 11 November 1980. It was duly forwarded to the beneficiary on 12 November 1980. On 19 November 1980, BNP negotiated the letter of credit in favour of Pan Associated Pte Ltd.

In the meantime, the amendment letter from UBL was received by HSBC on 18 November 1980. On 19 November 1980 HSBC telexed (hereinafter referred to as `the inquiry telex`) UBL as follows:

RYT dated 9 Nov 80

Your credit No AD80/1866 for USD220,000 favouring Pan Associated Ltd.

Applicant: Al Afrah Stores.

Please confirm by return telex today the name of beneficiaries should read as Pan Associated Ltd instead of M/s Naraina Trading Pte Ltd.

It should be noted that this telex referred to the amendment telex of 9 November 1980 and not the amendment letter of 6 November 1980 received the day before. It also referred to the beneficiary as Pan Associated Ltd.

However, on 20 November 1980, before a reply was received from UBL, HSBC forwarded the original amendment letter to M/s Pan Associated Ltd. Yet on 22 November 1980, HSBC sent a telex reminder to UBL asking the latter to reply to the inquiry telex of 19 November 1980. UBL replied on 23 November 1980 stating that the beneficiary had not changed; the only change was that a further certificate should be obtained from Naraina Trading (Pte) Ltd. Only on 24 November 1980 did HSBC send the amendment telex of 9 November 1980 to the beneficiary, Pan Associated Ltd. On 3 December 1980 Pan Associated Pte Ltd replied to HSBC to say that the amendments could not be accepted as shipment of the goods had already been effected.

Having negotiated the letter of credit and reimbursed itself of the amount due thereunder, BNP forwarded all the documents to UBL by registered airmail. These were received by UBL on 29 November 1980. On 30 November 1980 UBL sent out a telex to BNP pointing out certain discrepancies and asking for a refund. As this is one of several communications which is crucial to this action, I shall set it out in full:

Your ref No 546640 and 546641 dtd 19.11.80 our LC No AD80/1866 dtd 1.11.80 documents for USdlrs 110,000 and USdlrs 110,000 total USdlrs 220,000.

Above documents received and observed following discrepancies:

(1) Documents of M/s Pan Associated Pte Ltd. Have been negotiated whereas L/C established in favour of M/s Pan Associated Ltd.

(2) A certificate from M/s Naraina Trading (Pte) Ltd 113 High St Plaza Colombo Court Singapore stating that the goods shipped are in order, has not been submitted alongwith documents as per our amendment telex dtd 6.11.80.

(3) Invoice and B/L not evidencing shipment of one percent empty bags shipped free of charge.

Documents treated on collection basis(.) Kindly refund the negotiated amount alongwith eighteen percent uptodate interest plus USdlrs 20 cable cost to our account with our NewYork office(.) Telex confirm(.) Urgent(.)

On 3 December 1980 BNP replied to UBL, rejecting the contention that the documents were not in order. BNP also pointed out that the telex of 30 November 1980 from UBL did not comply with art 8(e) and (f) of the UCP. This is another important communication, and its full contents are as follows:

Beneficiaries` name with `Pte` is not a discrepancy at all since we as negotiating bank are satisfied that they are one and the company mentioned in your elcee Stop Moreover the address is the same and they maintain an account with us Stop

Secundo

For so-called discrepancies nrs two and three, regarding your tlx amendment of Nov 80 beneficiaries have only recd confirmation of such amendment advised by advising bank of 20 Stop But since shipment already effected on 17 Nov 80 as evidenced by blading and documents negotiated by us on 19 Nov 80 this amendment thus became invalid Stop

In view of foregoing and the untenable nature of discrepancies raised by your bank we disagree with your contention that documents stand rejected and insist that documents negotiated were in full confirmity [sic] with credit terms Stop

Moreover your unilateral action in claiming that documents treated on collection basis is not in accordance with the provisions of article 8E of UCP 290 Stop By the provisions of article nr 8F of UCP 290 your failure to act in accordance with article nr: 8E have precluded your bank from claiming that the relative negotiation was not affected in accordance with terms and conditions of the elcee referred Stop As such we are unable to comply with your request for refund our ref 546640/1 Stop

On 4 December 1980 UBL responded to BNP in these terms:

Rytlx of date in respect of captioned documents (.) Please note the following:

(I) You may refer the guide to documentary credit operation of LCC The World Business Organization No 305 on p 35 to check that beneficiaries name and address are shown correctly(.) We do not agree to your contention to accept beneficiary with different name(.)

(II) The amendment to include a certificate from M/s Nariana Trading (Pte) Ltd. Certifying that goods shipped are in order and one percent empty bags must be supplied free of charge was advised by us vide our telex message No 004 on 9.11.90 ie much before negotiation (.)

(III) Due to discrepancies pointed out by us we feel that openers would face difficulties in clearing the goods from customs department in view of strict local laws(.)

As the documents are not drawn strictly in conformity with LC terms we insist that negotiated amount alongwith uptodate interest must be refunded under telex advice to us(.) Meanwhile advice disposal instructions(.) Documents holding at your risk and responsibility (.) All rights reserved (.) Rush confirmation (.)

By this action UBL seek to recover the sum of US$220,000 from BNP on the ground that BNP was in breach of the duty of care in negotiating the letter of credit and paying to a person other than the beneficiary named in the letter of credit. Further, as the letter of credit was issued subject to the UCP, UBL also claim that by their telexes of 30 November 1980 and/or 4 December 1980, they are entitled, pursuant to art 8(4) thereof, to a refund of the money paid out to BNP under the letter of credit.

UBL`s claim against HSBC is for the loss and damage they have suffered on account of HSBC`s failure to exercise reasonable diligence, skill and care as advising bankers in promptly notifying the beneficiary and/or his bankers of the requested amendments, and/or in seeking agreement to such amendments.

Before I proceed to examine the issues in this action, let me first set out the relevant provisions of the UCP:

Art 8

(a) In documentary credit operations all parties concerned deal in documents...