United Bank Ltd v Banque Nationale de Paris

• Jurisdiction: Singapore
• Judge: Chua F A J
• Judgment Date: 01 August 1989
• Neutral Citation: [1989] SGCA 10
• Docket Number: Civil Appeal No 77 of 1987
• Date: 01 August 1989
• Published date: 19 September 2003
• Year: 1989
• Plaintiff Counsel: KS Chung (Chung & Co) and Mirza Mohd Namazie (Mallal & Namazie)
• Citation: [1989] SGCA 10
• Defendant Counsel: HE Cashin and Dr Myint Soe (Murphy & Dunbar)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether actions joint or several,Equity,Payment under letter of credit to wrong party by negotiating bank,Whether action can be brought against other parties,Letter of credit transaction,Suit against negotiating bank for breach of letter of credit terms and for negligence,Default judgment obtained against one party,Suit against buyer for indemnity under terms of letter of credit agreement,Estoppel,Bills of Exchange and Other Negotiable Instruments,Election,Judgment obtained against buyer,Suit against advising bank for breach of contract and for negligence,Whether suit against others precluded

Cur Adv Vult

(delivering the judgment of the court):The plaintiffs, who are the appellants, are a bank in Abu Dhabi, United Arab Emirates. By an agreement in writing made in October 1980 (credit agreement) between the plaintiffs and the third defendant (the buyer), the plaintiffs agreed to issue a letter of credit in favour of Pan Associated Ltd (the beneficiary) of Suite 1908A, 19th Floor, International Plaza, Anson Road, Singapore in the sum of US$220,000 and the buyer agreed to reimburse the plaintiffs the amount due under the letter of credit or any charges and expenses incurred by the plaintiffs or their correspondents by reason of the establishment and/or negotiation or payment under the letter of credit. Pursuant to the credit agreement a letter of credit (the letter of credit) was issued on 1 November 1980 in favour of the beneficiary in the sum of US$220,000. The letter of credit was expressed to be subject to the Uniform Customs and Practice for Documentary Credits (1974 Revision) ICC Publication No 290 (UCP).

The plaintiffs appointed the second defendants, The Hongkong and Shanghai Banking Corporation (HSBC), who are the second respondents, as the advising bank for the purpose of transmitting the letter of credit to the beneficiary. On 1 November 1980 the plaintiffs sent to HSBC a cable advice of the opening of the credit and sent by airmail the letter of credit. Subsequently, on or about 6 November 1980, the buyer requested the plaintiffs by cable to amend the letter of credit and the amendments consisted of the following additions:

(a) `Documents should include certificate from Messrs Naraine Trading (Pte) Ltd ... stating that the goods shipped ar in order`, and shipped are in order`, and

(b) `One percent empty bags must be supplied free of charge`.

The plaintiffs airmailed the amendments to HSBC on or about the same day, and also telexed the same to them on or about 9 November 1980. HSBC received the telex on the same day and the airmailed letter of credit on 11 or 12 November and the airmailed amendments on or about 20 November 1980. HSBC said that they advised the beneficiary of the opening of the credit on 3 November, transmitted the credit to them (the beneficiary) on 12 November and informed them of the amendments on or about 20 or 24 November 1980.

The first defendants Banque Nationale de Paris (BNP), who are the first respondents, were the negotiating bank; they negotiated the letter of credit on or about 19 November 1980 and paid a sum of US $220,000 to or to the credit of Pan Associated Pte Ltd (Pan), which is a company incorporated in Singapore and having the same address as the beneficiary, on presentation by Pan of various documents. However, the plaintiffs alleged that the documents presented did not include the certificate from Naraina Trading (Pte) Ltd; nor did they comply with the amendments made to the letter of credit as required by the buyer. Having paid Pan the amount BNP debited the account of the plaintiffs with that amount to reimburse themselves. According to the plaintiffs, Pan was not the beneficiary named in the letter of credit.

The plaintiffs therefore brought this action against BNP, HSBC and the buyer claiming as follows:

(a) against BNP, the sum of US$220,000 and/or damages and interest;

(b) against HSBC, damages and interest; and

(c) against the buyer, the sum of US$220,000 and interest and/or a declaration of their right to be indemnified by the buyer.

The claim was resisted by BNP and HSBC, each separately represented, and their respective defences were filed and delivered. The buyer, however, after having been served, failed to enter an appearance and a default judgment was entered against him on 10 March 1983. The plaintiffs not having obtained satisfaction of the judgment proceeded further with the action against BNP and HSBC.

The action eventually came on for hearing before the High Court. At the commencement of the hearing, Mr Cashin for BNP raised a preliminary point. He submitted that the claims against BNP, HSBC and the buyer were alternative claims, and as the plaintiffs had entered judgment in default against the buyer, the plaintiffs had thereby elected not to proceed with the claims against BNP and HSBC, and, in consequence, were precluded from claiming against BNP and HSBC. Counsel for HSBC associated himself with that submission. That argument found favour with the learned trial judge and he dismissed the claims of the plaintiffs against BNP and HSBC. The learned trial judge held that the claims of the plaintiffs against the three defendants were not joint but in the alternative. It is implicit in his judgment (though he did not expressly say so) that the default judgment entered against the buyer was equivalent to an election which barred further proceedings against BNP and HSBC. He found support for his conclusion in the following authorities: Benjamin Scarf v Alfred George Jardine (1882) 7 App Cas 345, Morel Brothers & Co Ltd v Earl of Westmoreland & Wife [1903] 1 KB 64 and Moore v Flanagan and Wife [1920] 1 KB 919. The learned trial judge also relied on the following passage from Bullen & Leake`s Precedents of Pleadings (12th Ed) at p 104:

Where, however, two defendants are sued on a claim on which the plaintiff has a right of action alternatively, but not jointly or severally, a default judgment against one of them is equivalent to an election to sue that one, and a bar to further proceedings on the other.

and also the following statement of law from Odgers` Principles of Pleading & Practice (22nd Ed) at p 187:

Where two persons are liable in the alternative, judgment against one is a bar to an action against the other ( Morel Brothers).

Against the decision of the High Court this appeal is now brought. The issue before us is whether (i) the claim against the buyer and (ii) the claims against BNP and HSBC are alternative in the sense that they are mutually inconsistent so that taking judgment in default against the buyer by the plaintiffs amounted to an election which bars further proceedings against BNP and HSBC or either of them.

It is necessary in the first place to examine the statement of claim in some detail so as to determine the true nature of the plaintiffs` claim against each of the three defendants. The claim against the buyer is one purely based on the terms of the credit agreement and the letter of credit. In particular, in para 1 of the statement of claim the plaintiffs relied on the provision for reimbursement (appearing on the face of the agreement) which is in the following terms:

I/We hereby declare that the above goods will be shipped to a Gulf Port. I/We shall be bound to reimburse to you the amount due or any other charges and expenses incurred by you and your correspondents by reason of establishment and/or negotiations or payments under the letter of credit established under these instructions.

This credit shall be deemed to have been issued when advice thereof has been despatched to the beneficiaries.

In consideration of your opening an irrevocable letter of credit on the above terms and conditions I/we unconditionally agree as per terms and conditions overleaf . (Emphasis added.)

Of the terms and conditions `overleaf`, the plaintiffs relied only on cl 7 (cl 7) which is extremely involved and prolix, and it is best to set out below the whole of this lengthy clause verbatim:

The undersigned [the buyer] assumes all risks of acts of any person using the said credit who are hereby accepted as the agents for the undersigned, together with all responsibility for the character, kind, quality, quantity, delivery or existence of the merchandise purporting to be represented by any document and/ or for any difference of character, quality or quantity of merchandise shipped under this credit from that expressed in any invoice accompanying any of the said drafts and/ or for the validity, genuineness, sufficiency from or correctness of any documents, even if such documents should, infact, prove to be in any or all respects incorrect, defective, irregular, fraudulent or forged and/or for time, place, manner or orders in which shipment is made, and/or for partial or incomplete shipment, and/or for failure or omission to ship any or all of the merchandise, referred in the credit and/or for the character, adequacy validity or genuineness of any insurance, or policy or certificate of insurance of the solvency or responsibility of any insurer, or any other risk connected with insurance and/or for any delay, default, fraud, or deviation from instructions of the shipper or any one else in connection with the merchandise or the shipping or other documents with respect thereto and/or for delay in arrival or failure to arrive either of the merchandise or any of the said documents and/or for any breach of contract between the shippers or vendors and the undersigned hereby agree not to claim from you damages or hold you [the plaintiffs] in any manner responsible for any delay or oversight or mistake or negligence on your part or on the part of any of your agents or sub-agents in issuing the credit or in complying with any instruction of the undersigned or otherwise in relation to the applications of the said credit, and the undersigned will hold you (viz the plaintiffs) harmless from all loss or damage in respect of any such matters and from any and all damage and loss, whatsoever suffered by you by reason of any and all action taken by you or your correspondent in good faith in furtherance of your above request or due to errors, omissions, interruptions or delays in transmission or delivery, of any and all messages, by mail, cable, telegraph or wireless, whether or not the same be in cypher . If the above instructions request you to establish the credit by cable, I/we shall feel obliged by your sending such cable through your correspondent or...