THAI LONG INVESTMENTS LTD v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

HCCL 4/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 4 OF 2006

____________

____________

_________________________________

REASONS   FOR   DECISION

_________________________________

Introduction

1.  At the end of the summons day on 24 March 2006, I extended the ex parte injunction order made by Dep. J. A. To on 15 February 2006 to 4 pm on 31 March 2006 or the determination of the inter partes summons dated 14 March 2006 (whichever is the earlier).  The summons itself was adjourned to 10 am on 31 March 2006 before the summons judge with costs reserved.  The following are the reasons for the decision.

2.  This action was commenced by the plaintiff, in its capacity as the drawer of a letter of credit (“the L/C”), against the paying bank of the L/C.  The plaintiff’s case is essentially that forged documents have been presented by the beneficiary of the L/C (one of the plaintiff’s sellers of goods) in an attempt to obtain payment.  It is also alleged that there was an element of fraud.  The beneficiary of the L/C has however not been named in this action; there is no indication on the records that the beneficiary will be sued either here or overseas.

3.  By a letter dated 16 March 2006, the paying bank indicated that it would not attend the hearing of the inter partes summons and would abide by an order made by the court.

4.  The plaintiff relied on two authorities in support of the application to continue the ex parte injunction until judgment in this action or further order.

5.  Bolivinter Oil S.A. v. Chase Manhattan Bank, Commercial Bank of Syria and General Company of Homs Refinery [1984] 1 Ll LR 251 concerned the discharge of an ex parte injunction restraining the paying banks to make payment under the letters of credit.  The point to note is that the beneficiary thereto was also sued in that action.

6.  R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. [1978] 1 QB 146 concerned a paying bank’s application to discharge an injunction restraining it from making payment under a letter of credit.  In the course of his judgment, Kerr J said:-

“Before I deal with the substance of the contentions I must explain the nature of the plaintiffs’ claims as endorsed on the writs in all three cases.  These are identical.  The writs claim (1) injunctions against the bank and the Egyptian banks from paying under the respective guarantees and against the buyers from obtaining such payments, and (2) ‘A declaration against each of the defendants that [the buyers] have no right to draw on the said performance guarantee.’  It follows that the only cause of action pleaded against the bank and the Egyptian banks is a declaration, and that the declaration claimed is merely that the buyers are not entitled to payment under the guarantee.  The only direct relief claimed against the bank and the Egyptian banks is therefore an injunction. …

All this is very unconvincing and contrived. I am very doubtful whether the court would entertain these declarations at all.  A claim for a declaration against A and B that C is not entitled to do something, without claiming any declaratory relief against A or B themselves, is most unusual.  [The plaintiffs] said that other causes of action would or might be added at a later stage … I find all the claims and potential claims highly unconvincing.  They merely provide a contrived basis for seeking to obtain interlocutory relief against the bank and the Egyptian defendants, and for seeking to bring the Egyptian defendants within the jurisdiction. … ” (emphasis supplied) (at pp. 154C-155A).

7.  The endorsement in the writ herein bears at least some resemblance to those mentioned in Harbottle.

8.  I enquired with the plaintiff whether any action had been taken against the sellers (Building Blocks Group Incorporation in Hong Kong and/or Kei Two Co. Ltd. in Korea).  The plaintiff informed me there were without prejudice negotiations with Building Blocks, but apparently nothing has been done with regard to Kei Two (who allegedly presented the forged documents).

9.  Even if the ex parte injunction was properly granted (which I assumed to be the case on 24 March 2006), if the matter is left like that, effectively it will mean the plaintiff has obtained an injunction without the need to go through trial.  It is unlikely either the plaintiff or the paying bank will be interested in spending time or money to take the matter further.

10.  By reason of the above matters, at the end of the hearing on 24 March 2006, I required the plaintiff to inform the summons judge by 31 March 2006 what has been (or will be) done to ensure that the dispute, which was really one between the plaintiff and its sellers (especially Kei Two), will be properly resolved either by agreement or through the legal process (whether here or overseas).