SOUTHLAND RUBBER CO LTD v. BANK OF CHINA

1996, No.CL208

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

COMMERCIAL LIST

_____________

_____________

________________

J U D G M E N T

________________

Background

1. The Plaintiff Southland Rubber Company Limited is the beneficiary under an irrevocable unconfirmed letter of credit issued by the Defendant which is the Hong Kong branch of the Bank of China. The Applicant of the letter of credit is one Nan Shing Development Co. Ltd. The Credit is expressly stated to be subjected to the Uniform Customs and Practice for Documentary Credits (1993 Revision) ICC Publication No.500 ("UCP 500"). The underlying contract was a shipment of 1,000 metric tonnes of natural rubber from Thailand to the port of Shantou in China.

2. In early November 1995 the Defendant presented to the Bank of China through the Export-Import Bank of Thailand the set of document required under the terms of the Credit. The Defendant, upon examination of the documents presented, refused to accept the documents and effect payment under the Credit. The reasons for refusal was stated by the Defendant's fax to the Export-Import Bank of Thailand dated 6 November :

" We have found the following discrepancy in the Documents.

1. B/L not showing name of carrier, name of stamp chop in 'on board notation' differ from the heading and not showing his capacity. ..."

The position taken by the Defendant is that the bill of lading presented by the Plaintiff did not comply with the requirements of Article 23(a)(i) of the UCP 500 which reads :

"a. If a Credit calls for a bill of lading covering port-to-port shipment, banks will, unless otherwise stipulated in the Credit accept a document, however named, which :

i. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by :

(a) the carrier or a named agent for or on behalf of the carrier, or

(b) the master or a named agent for or on behalf of the master.

Any signature or authentication of the carrier or master must be identified as a carrier or master, as the case may be. An agent signing or authentication for the carrier or master must also indicate the name and the capacity of the party, i.e. carrier or master, on whose behalf the agent is acting, and

ii. indicate that the goods have been loaded on board, or shipped on a named vessel."

3. Article 13a of the UCP 500 requires a bank to :

"... examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the Credit."

4. The wording of this article is sufficiently clear that the obligation placed upon the bank is not an unqualified obligation to determine whether the documents are correct but to determine whether they "appear, on their face" to comply with the terms of the credit. In fulfilling this function, a bank is not required to look at each set of document presented for payment with microscopic scrutiny or as if it is embarking on a fault finding mission. Equally so a bank is not required to engage itself in a speculation or guessing exercise either. That being said, the overriding consideration must still be strict compliance with the terms of the credit. The case of Equitable Trust Co. of New York v. Dawson Partners Ltd. (1926) 27 LI LR 49 is authority on this point.

The Bill of Lading

5. The Bill of Lading in question is numbered SST-01 and it bears the date stamp of 27 October 1995. I consider the following notations to be material in determining the issue before me :

(a) nowhere on the document does the word "carrier" appear;

(b) the name of "P.T. KEMAH NUSASEMESTA" is printed on the letterhead. Immediately below the name is the description "Ship Owner's, Export-Import, General Contractor";

(c) there appears in the "shipped on board" notation box :

(i) a handwritten signature;

(ii) the impression of a stamp which shows the name "PT. BAHTERA BINTANG SELATAN, UJONG PANDANG", the name of the vessel "MV. SARAH" and the word "MASTER" underneath;

(iii) the pre-printed name "PT. KEMAH NUSASEMESTRA";

(d) there is also a printed term which states :

" Agents signing this Bill of Lading on behalf of the said Shipowner or Line have only the limited authority at common law of a vessel's Master signing a Bill of Lading". There is however no indication of the capacity of the person who had appended his signature in the "on board notation" box.

The issue

6. This case turns on the construction of Article 23(a)(i) and the only issue is : whether the bill of lading presented by the Plaintiff complies with Article 23(a)(i) of the UCP 500 and more particularly, whether the document "appears on its face to indicate the name of the carrier ... and to have been signed by the master or a named agent of the master". To succeed, the Plaintiff must be able to prove firstly, the document it submitted appears on its face to indicate the name of the carrier and secondly, it was signed by the master of the vessel or a named agent of the master.

7. It is the Plaintiff's pleaded case that the name of the carrier "PT. Kemah Nusasemesta", is apparent and sufficiently indicated on the bill of lading in question and the bill of lading was signed by the Master of the Vessel. It is submitted by counsel for the Plaintiff that Article 23(a)(i) is worded in such a way that there is no express requirement for the word "carrier" to appear on the bill of lading to describe the named carrier, it would therefore be sufficient compliance if the carrier is in fact named in the bill of lading and it is signed by the Master, provided that the signature is identified as that of the Master.

8. Mr Coleman for the Plaintiff cited, in support of his argument, Case 86 published in "Case Studies on Documentary Credits" (ICC Publication No.459) in which opinion was sought on whether banks should accept, on the basis of Article 26, which is the predecessor of Article 23, a marine bill of lading which :

(1) bear the vessel's stamp and

(2) appears on its face to have been issued by the vessel's master but

(3) does not mention anything about the carrier or his agent.

The view expressed by the ICC Commission is :

"A bill of lading which does not bear the letterhead or stamp of the carrier should however give the carrier's name in one way or another. A bill of lading bearing the vessel's stamp without addition of the carrier's name would not be acceptable."

Mr Coleman, however made no reference to Position Paper No.4 published on 1 September 1994 which was featured prominently in the evidence of Mr Henry Castro, the expert witness called by the Defendant.

9. Counsel for the Plaintiff submitted that the stance taken by the Defendant regarding the use of the word "carrier" is inflexible and flouts business common sense. It was suggested that if one is to adopt the "purposive approach" as stated in The Antaios [1985] AC 191, the conclusion must be that as long as the signature is identifiable as that of the carrier, the bill of lading would meet the requirements of the Article. This contention was however, never pleaded in the Defence and I think it is not open to the Defendant to pursue this line of argument. The only positive case advanced by the Plaintiff, so far as the signature is concerned, was that the bill of lading was signed by the Master in his capacity as Master of the vessel and not that of a named agent of the carrier.

10. I have before me the unchallenged evidence of Mr Henry Castro who appeared as an expert witness for the Defence. His report dated 26 September 1997 was placed before the court. Mr Castro has been with the Hong Kong and Shanghai Banking Corporation for 39 years and has a wealth of experience in making decisions and interpreting provisions in the UCP. On the Bill of Lading in question Mr Castro's opinion is :

"f. Although these names physically appear on the Bill of Lading, I do not consider that they 'indicate the name of the carrier' within Article 23a for the following reasons :

The Bill of Lading presented (No.SST-01) does not indicate on its face the name of the carrier (i.e. PT Kemah Nusasemesta not identified as carrier and cannot assumed to be). The party, PT Bahtera Bintang Selatan Ujong Pandang, the name appearing on the stamped chop in the shipped on board box does not indicate :

- his capacity

- the party on whose behalf he is acting

- the capacity of the party on whose behalf he is acting

g. In my experience, Bills of Lading in this form are treated as non-compliant with Article 23a and from my experience it is standard practice to reject documents in this form for such a discrepancy."

11. In his report Mr Castro referred to Position Paper No.4 published on 1 September 1994 which contains the collective views of the group of experts of the ICC. On the interpretation of sub-paragraph (a)(i) of Articles 23 their view is :

"1 The name of the carrier must appear as such (my emphasis) on the front of the document.

The expression 'the front of the document' means the side showing the details of the goods, vessel and voyage ...

Banks will therefore reject documents which fail to comply the requirement set out in '1' above, i.e. which fail to indicate the name of the carrier on the front of the document, even though the identity of the carrier may be indicated on the back of the document."

12. The overriding concern in the minds of the panel of experts must be that the institution that has been presented with the bill of lading must not be placed in a position whereby they had to speculate or to make an educated guess of the identity of the carrier. The key words are "the name of the carrier must appear as such" so that in my view, anything short of using the actual word "carrier" to identify the party acting as carrier would not have complied with the provisions of Article 23(a)(i) of the UCP. I consider one of the fundamental principles in any transaction involving documentary credit to be that of certainty of the identity of the parties involved in the contract of carriage. The approach by this court in the construction of the article is therefore not inconsistent with the views expressed by Lord Diplock in The Antaios.

13. Turning now to the bill of lading in question, I cannot say that on reading the document I am able to say that it appears, on the face of it, to indicate the name of the carrier although the name of PT Kemah Nusasemesta appeared twice on the front of the document. The bill of lading does not comply with Article 23(a)(i) of the UCP and I so find.

14. For the reasons given, the Plaintiff's claim is dismissed with cost with certificate for two counsel.