N.V. KONINKLIJKE SPHINX GUSTAVSBERG v. CO?PERATIEVE CENTRALE - RAIFFEISEN-BOERENLEENBANK B.A

Dates of Hearing : 15-16 November 2005

Date of Judgment : 24 November 2005

-----------------------

J U D G M E N T

 ----------------------------

Hon Woo VP:

Introduction

1. By this action, which was commenced in 1997, the plaintiff claimed against the defendant bank on an irrevocable standby letter of credit (“LC”) which was issued by the Hong Kong branch of the defendant on 8 February 1995, as security for the price of porcelain sanitary products to be supplied by the plaintiff to Siu Fung Ceramics Holdings Ltd, a Hong Kong company now in liquidation, pursuant to a sales agreement dated 14 October 1994. 

2. The action was heard for 4 days in March 2004 before Stone J who, on 7 May 2004, gave judgment in favour of the defendant and dismissed the plaintiff’s claim with costs.  The plaintiff now appeals. 

Background

3. The LC was expressly subject to the Uniform Customs and Practice for Documentary Credits (1993 revision), commonly known as “UCP 500”, and governed by Hong Kong Law.

4. The LC was in the sum of NLG 2,000,000.  After its issue, it was amended twice with the agreement of the parties.  Taking into account the undisputed amendments, the material parts of the LC read as follows:

“TO:   RABOBANK NEDERLAND, UTRECHT NEDERLAND (TLX NO. 40200)

FROM:   RABOBANK NEDERLAND, HONG KONG BRANCH

DATE:   FEB 08, 1995

SUBJECT:    STANDBY LETTER OF CREDIT – N.V. KONINKLIJKE SPHINX GUSTAVBERG [ie, the plaintiff]

TEST 78/2656 ON NLG2,000,000.00 DATED 08 95 BETWEEN YOURGOODSELVES AND US

IRREVOCABLE STANDY LETTER OF CREDIT NO. ILC00102 FOR NLG2,000,000.00 (SAY DUTCH GUILDERS TWO MILLION ONLY) AT THE REQUEST OF DUBOIS (HK) COMPANY LIMITED, … HONG KONG IN CONSIDERATION OF THE BENEFICIARY GRANTING OF A DOCUMENT AGAINST ACCEPTANCE FACILITY TO SIN (sic) FUNG STRATEGY LIMITED (THE SECURED PARTY) UNDER A SALES AGREEMENT DATED OCT 14, 1994 (SALES AGREEMENT) ENTERED INTO BY THE SECURED PARTY AND THE BENEFICIARY, WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN FAVOUR OF THE BENEFICIARY TO SECURE THE DUE FULFILMENT OF THE SECURED PARTY’S OBLIGATIONS UNDER THE SALES AGREEMENT.

THIS STANDBY LETTER OF CREDIT, IF EXERCISED, IS AVAILABLE UPON RECEIPT BY US OF EITHER (A) 1. THE BENEFICIARY’S FIRST DEMAND THROUGH ITS BANKER TO US ACCOMPANIED BY THE BENEFICIARY’S STATEMENT DECLARING THE AMOUNT DUE AND UNPAID BY THE SECURED PARTY UNDER THE SALES AGREEMENT. 2. THE BENEFICIARY’S DRAFT FOR THE UNPAID AMOUNT DULY ACCEPTED BY THE SECURED PARTY. AND 3. INSPECTION CERTIFICATE BY CERTIFIED PUBLIC SURVEYOR CERTIFYING THAT NO COLOUR DIFFERENCE OF WHOLE CONSIGNMENT OF GOODS UNDER THE SALES AGREEMENT BEEN OBSERVED OR (B) THE BENEFICIARY’S CERTIFICATE, AUTHORIZED SIGNATURE(S) ON WHICH HAS/HAVE DULY BEEN VERIFIED BY THE BENEFICIARY’S BANKER, EVIDENCING THAT THE SECURED PARTY FAILS TO TAKE DELIVERY OF GOODS IN ACCORDANCE WITH THE SALES AGREEMENT

THIS STANDBY LETTER OF CREDIT SHALL BE VALID FROM FEB 08, 1995 TO JAN 31, 1996 [amended by agreement to 31 October 1996], THIS STANDBY CREDIT WILL EXPIRE 30 DAYS AFTER TERMINATION OF THE SALES AGREEMENT AT THE COUNTER OF OUR PRINCIPAL OFFICE IN HONG KONG, BEING AT THE DATE HEREOF, AT … HONG KONG.  PARTIAL DRAWING IS NOT ALLOWED [this sentence was deleted by agreement]. 

ALL BANKING CHARGES OUTSIDE HONG KONG INCLUDING NEGOTIATION CHARGES ARE FOR THE ACCOUNT OF BENEFICIARY.

EXCEPT SO FAR AS EXPRESSLY STATED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 AND SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG.

THIS TELEX IS THE OPERATIVE INSTRUMENT.  NO MAIL CONFIRMATION WILL FOLLOW.”

(Pp 36-37 of Core Bundle) (Emphasis added)

5. It is to be noted that:

(a)  the plaintiff was the beneficiary as described in the LC;

(b)  it was Siu Fung Strategy Company Ltd which was described as the secured party in the LC, and not Siu Fung Ceramics Holdings Ltd, the buyer under the Sales Agreement;

(c)  two alternative ways are provided for drawing on the LC, which is common ground between the parties herein, namely, route A signified by the terms of the LC as to the availability of it under sub-paragraph (a) and route B as set out in sub-paragraph (b) under the same paragraph; and

(d)  the two alternative ways are set out in the third paragraph of the body of the LC.

6. By a letter stated 31 October 1996, which was the last day of the validity of the LC, ABN Amro Bank on behalf of the plaintiff sent to the defendant various documents for the purpose of drawing upon the LC (“Amro’s letter of 31/10/96”).  The letter reads:

“BILL AMOUNT: NLG*****1,667,225.50

WITH REFERENCE TO THE ABOVE LETTER OF CREDIT, WE ENCLOSE HEREWITH THE FOLLOWING DOCUMENTS FOR PAYMENT / ACCEPTANCE AS THE CASE MAY BE : -

--------------------------------DOCUMENTS----------------------*

1/1  INVOICE

1/1  BENEF STATEMENT

1/1  INSPECTION CERT

1/1  OFFICERS CERT

--------------------------INSTRUCTION/OBSERVATION----------*

-WE ENCLOSE THE ABOVE DOCUMENTS DRAWN UNDER YOUR STANDBY L/C FOR PAYMENT WITHOUT RECOURSE.

-IN CASE OF QUERIES, PLEASE CONTACT OUR MS FUNG AT TELEPHONE NO.: …

-WE CERTIFY THAT THE AMOUNT DRAWN HAS BEEN ENDORSED ON THE REVERSE OF THE LETTER OF CREDIT.

-PLEASE NOTE THAT THE UNPAID BENEFICIARY’S DRAFT IS IN YOUR POSSESSION.

-------------------SETTLEMENT INSTRUCTIONS-----------------*

PLEASE REMIT NET PROCEEDS BY T/T TO THE CREDIT OF OUR NLG ACCOUNT WITH OUR AMSTERDAM OFFICE (A/C NO. 4363́522́73) UNDER THEIR TESTED TELEX/SWIFT ADVICE TO US QUOTING OUR REF.: LLC-CD614657

SUBJECT TO THE “UNIFORM CUSTOMS & PRACTICE FOR DOCUMENTARY CREDITS INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500.” (P 68 of Core Bundle)

7. One of the documents enclosed with the letter was a letter dated 29 October 1996 written by the plaintiff (“P’s letter of 29/10/96”), which reads:

“Re:       Your Stand by letter of credit – NLG 2,000,000 from Dubois (HK) Company Limited dated Feb. 08, 1995

Dear Sirs,

With reference to the conditions of the above L/C we hereby declare that the secured party under the L/C, Siu Fung Strategy, has failed to meet its payment and take obligations under the sales agreement, dated October 14, 1994 and signed on October 17, 1994.

We hereby claim, on behalf of ourselves and on behalf of Deutsche Sphinx Sanitär GmbH, on first demand the amounts mentioned hereunder which are due and unpaid by Siu Fung Strategy Limited.

1.  Nlg 630.398,00, due and payable on 29/09/1996

2.  Nlg 616.612,00, due and payable on 27/10/1996

We have received information from ABN AMRO Bank that the accepted drafts are in your possession.

We also claim under the L/C the payment of goods not taken under the sales agreement as stated in the annexed certificate conform section 3(b) of the above L/C.

An inspection certificate pursuant to section 3 of the L/C issued by TNO you find herewith.

Further we claim the aggregate amount of Nlg 420.215,50 for the delivery of products conform annexed invoice number 200820-31.05.95, the payment of which products is due and payable at the date of the delivery of the last products to be delivered under the sales agreement.  As Siu Fung Strategy has not taken those last products, the invoice has become due and payable on 31^st October 1996.

Sincerely yours,

N.V. Koninklijke Sphinx Gustavsberg

T.C.A. Visser (signed)          A.G.M.L. van der Kolk (signed)” (Pp 62-63 of Core Bundle) (Emphasis added)

8. P’s letter of 29/10/96 appeared to be the “BENEF STATEMENT” referred to in Amro’s letter of 31/10/96.  An inspection certificate, an officers’ certificate, and an invoice were, together with P’s letter of 29/10/96, enclosed in Amro’s letter of 31/10/96.

9. The only invoice included in the documentation presented was intituled “pro forma invoice” consisting of two pages showing a net total amount of Nlg 419,689.20.  It was accepted by Mr Sussex SC, on behalf of the plaintiff, that the invoice referred to as “annexed invoice” in the last paragraph of P’s letter of 29/10/96 was not included in the presentation.  

10. The officers’ certificate referred to in both Amro’s letter of 31/10/96 and P’s letter of 29/10/96 was also enclosed.  The certificate, dated 29 October 1996, stated:

“Officers Certificate

The undersigned, T.C.A. Visser and A.G.M.L. van der Kolk, authorized signatories of N.V. Koninklijke Sphinx Gustavsberg, hereby state, pursuant to section 3(b) of the stand by letter of credit, issued by Rabobank Nederland, Hong Kong branch, dated February 08, 1995 with Siu Fung Strategy Limited as secured party, that the secured party fails to take delivery of goods in accordance with the sales agreement in the aggregate amount as specified on annexed pro forma invoice.

Signed in Maastricht on 29^th October 1996

by

T.C.A. Visser (signed) A.G.M.L. van der Kolk (signed)

The undersigned, ABN AMRO Bank N.V., Maastricht branch, hereby declare that T.C.A. Visser and A.G.M.L. van der Kolk are authorized to sign for N.V. Koninklijke Sphinx Gustavsberg.”

Maastricht, 29 October 1996

by ABN AMRO Bank N.V.

… G.A.J.M. Vromen (signed)        A.M.M. Elshoff (signed)”

(P 64 of Core Bundle) (Emphasis added)

11. The pro forma invoice referred to in this officers’ certificate appeared to be the two-page pro forma invoice which was the only “invoice” enclosed in Amro’s letter of 31/10/96, but not “annexed” as stated to be so.

12. By a SWIFT dated 6 November 1996 and timed 16:23 hours, the defendant notified ABN Amro Bank that the defendant refused to pay on the LC or accept the documents.  The SWIFT reads:

“Re: OUR REF IBP04042 YOUR REF LLC-CD614657
FOR NLG1,667,225.50 DRAWN UNDER DC NO.
ILC00102

PLS BE ADVISED THAT WE REFUSED TO PAY/ACCEPT THE ABOVE DOCUMENTS IN RESPECT OF THE FOLLOWING DISCREPANCIES :

1.  BENEFICIARY’S STATEMENT STIPULATING ‘ON BEHALF OF DEUTSCHE SPHINX SANITAR GMBH’ WHEREAS L/C EXTENDED CREDIT AGAINST ‘SALES AGREEMENT’ BETWEEN BENEFICIARY AND SECURED PARTY. I.E. N.V. KONINKLIJKE SPHINX GUSTAVSBERG AND SIU FUNG STRATEGY LTD.

2.  BENEFICIARY DRAFTS NOT PRESENTED.

3.  INSPECTION CERTIICATE SHOWING PARTY OTHER THAN SECURED PARTY.

4.  BENEFICIARY’S CERTIFICATE DOES NOT STATE AMOUNT CLAIMED.

WE ARE HOLDING THE DOCUMENTS AT YOUR DISPOSAL INSTRUCTIONS AND RISK.” (P 85 of Core Bundle) (Emphasis added)

13. The judge found that the documents presented on behalf of the plaintiff by ABN Amro Bank for seeking payment pursuant to route A were discrepant.  He also found that the documents presented for seeking payment through route B were discrepant.  He found that the notification of rejection was given by the defendant without delay.  Based on all these findings, the judge rejected the plaintiff’s claim against the defendant. 

Issues

14. A number of grounds of appeal had been raised on behalf of the plaintiff by Mr Sussex.  There is no challenge to the judge’s finding of the documents for the route A claim being discrepant.  All the grounds of appeal revolve around the following three main issues:

(1)  Whether the defendant was justified to refuse the documents presented on behalf of the plaintiff to trigger the LC under route B.

(2)  Even if the defendant were so justified, whether or not it was precluded from relying on any discrepancy other than that stated in the notice of rejection.

(3)  Even though there were admitted discrepancies in the documents presented under route A and even if the documents presented under route B are held to be discrepant, whether the defendant had failed to give notice of refusal to the presenter “without delay” following its decision to refuse the documents, so that it was precluded from rejecting the plaintiff’s route A and route B claims.

15. It will be noted that if the plaintiff succeeds on issue (3), there is no necessity to decide issues (1) and (2).  If issue (1) is decided in the plaintiff’s favour, it would be unnecessary to resolve issue (2).  I therefore consider it convenient to deal with the questions relating to delay first.

Issue (3) – delay – the contractual provisions

16. The parties have accepted that the provisions of the UCP 500 were incorporated into the LC as if they were contractual terms agreed by the parties.  For the purposes of this appeal, article 13 and article 14b., d.i. and ii. and e. of the UCP 500 are relevant.  They are set out below.

“Article 13.  Standard for Examination of Documents

a.  Banks must 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.  Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles.  Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit.

Documents not stipulated in the Credit will not be examined by banks.  If they receive such documents, they shall return them to the presenter or pass them on without responsibility.

b.  The Issuing Bank, the Confirming Bank, if any, or a Nominated Bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly.

c.  If a Credit contains conditions without stating the document(s) to be presented in compliance therewith, banks will deem such conditions as not stated and will disregard them.

Article 14

Discrepant Documents and Notice

b.  Upon receipt of the documents the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, must determine on the basis of the documents alone whether or not they appear on their face to be in compliance with the terms and conditions of the Credit. If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to take up the documents.

d.i. If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents.  Such notice shall be given to the bank from which it received the documents or to the Beneficiary, if it received the documents directly from him.

ii.   Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presenter.

iii.   …

d. If the issuing Bank and/or Confirming Bank, if any, fails to act in accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or return them to the presenter, the Issuing Bank and/or Confirming Bank, if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the Credit.”

(Emphasis added)

Issue (3) – delay – the judge’s findings

17. In relation to the question of delay in sending the notice of rejection, the judge gave a very detailed account ofevidence in his judgment.  He said:

“46.  The evidence as to what had occurred in the defendant bank upon receipt of this particular documentary presentation came from the defendant’s two witnesses of fact, Mr Cheung, head of the bills department, and Miss Kennis Yu, then a supervisor of bill checkers within the bank.

47.  Notwithstanding the extraordinary lapse of time which has occurred since the events of this case, they each did their best to assist the court in charting the progress of the checking of these documents and the evaluation of this presentation.  They were strongly cross-examined, but I am satisfied that they were witnesses of truth, and I accept their evidence.

48.  From Rabobank’s internal documentation it is possible to identify the stages through which these documents passed as they were checked and evaluated within the import bills department.

49.  It is clear that the process of checking commenced on Friday 1 November 1996, when a handwritten checklist was prepared bearing that date; this appears to have been initialled by three checkers.  After his subordinates’ work on the checklists, Mr Cheung himself considered the position and prepared his own handwritten document divided into two parts : the claim under ‘condition A’ and that under ‘condition B’.  This was intended to be the final list of discrepancies, and, he said, was probably created on Monday 4 November 1996.

50.  Mr Cheung went on to say that after he had produced this final list he began the process of deciding whether to reject the presentation, and that this decision was made late on the following day, that is, on Tuesday 5 November 1996.  A draft rejection notice was produced at about 6pm on that day, but this was not sent; the evening ‘cut off’ time for sending SWIFT messages had passed, and in any event the defendant bank had received from the plaintiff a letter of 5 November purporting to remedy certain discrepancies.  The background to this was that on Monday 4 November the defendant had telephoned ABN Amro with the information that the documents presented contained a number of discrepancies, in turn ABN Amro had faxed this information to KS, and this letter had sought to correct the position.

51.  On Wednesday 6 November 1996 a new draft notice of discrepancies was produced around midday, and following request for a test key the final version was sent at 4.23hrs on that day.

52.  Mr Cheung was strenuously cross-examined as to when he made his decision to reject, but he repeated, and I accept, that the rejection decision was made on the evening of Tuesday 5 November 1996.  I note in this connection that a draft SWIFT, which sought to elicit clarification from the plaintiff on the ‘route A’ and ‘route B’ elements of the presentation, appears to have been prepared at about 4.35pm on Tuesday 5 November, and I further accept Mr Cheung’s evidence that ultimately this was not sent because, as discrepancies existed under either route, it would have been pointless to have inquired further, and thus his decision to reject came, or became crystallized, shortly thereafter.

53.  Against this factual background, can it be said that the defendant infringed the requirements of Article 14d i so as to attract the preclusionary sanction within Article 14e?

54.  The answer, in my view, is clearly ‘No’, and I so find.  In the circumstances of this case a rejection notification of two days, in my judgment, does not fall foul of the contractual requirement to act “without delay”, whilst of course the defendant bank was well within the overall time limit of “no later than the close of the seventh banking day following the day of receipt of the documents”.

55.  In my view it is surprising that the plaintiff has seen fit to pursue this case, which has been brought to trial an extraordinary 7.5 years after issue of the writ.  The standby L/C in question had been extended for nine months, and the documentary presentation was made on the day of its expiry.  Against this background it is ironic that the defendant bank should now be castigated for having taken too long, in terms of a day, or perhaps even in terms of hours, to notify the plaintiff of its decision to refuse a presentation which was described by Mr Bartlett, in my view with considerable justification, as a ‘shambles’, and a hasty shambles at that.” (Pp 16-18 of Core Bundle)

18. Against the judge’s findings, Mr Sussex SC raised six grounds of appeal.  Albeit that some of the grounds are couched in terms that the judge erred in fact and in law in his findings and conclusion, they amount to the allegation that the findings and conclusion were contrary to the weight of the evidence.

Issue (3) – law on challenge on facts

19. Thus, Mr Sussex is confronted with an uphill task because the function and powers of an appellate court on findings of fact made by a tribunal or a trial judge are very limited: see paragraph 59/1/48 of Hong Kong Civil Procedure, 2004 Vol. 1 and the cases referred to therein.  It is only necessary to cite two passages from the authorities which aptly deal with the situation here. 

20. In Ting Kwok Keung v Tam Dick Yuen & Ors [2002] 1 HKC 601, Bokhary PJ said at 613E:

“42. … The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.  The Court of Appeal should intervene if so satisfied.  But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness.”

21. In Tang Kwok Ming v Daxprofit Scaffolding Ltd [1999] 1 HKC 657, at 663G, Godfrey JA observed:

“It is important for counsel and solicitors (and for the legal aid authorities) to remember the very limited extent to which this court will interfere in a case in which the appellant seeks to dispute the judge’s findings of fact.  If it is necessary to disturb an adverse finding of primary fact, the appellant has to demonstrate either (1) that there is no evidence to support it; or (2) that it is contrary to documentary or other incontrovertible evidence which the judge overlooked.  It is not enough to show that there is little evidence to support the judge’s finding, or that it was ‘contrary to the weight of the evidence’.  The weight of the evidence is a matter for the trial judge.  It does not matter how many witnesses say one thing, and how few say the contrary.  The judge is perfectly entitled to prefer the evidence of the few to that of the many.”

Issue (3) – law on reasonable time and delay

22. On the law relating to the reasonable time referred to in article 13b. and article 14d.i. of UPC 500, Mr Sussex referred us to Seaconsar v Bank Markazi [1999] 1 Lloyd’s Rep 36 where Sir Christopher Staughton stated at pages 41-42:

“The time needed for checking documents must necessarily be somewhat vague; it depends how many documents are required by the credit, what detail they must contain, and how clearly or (as the case may be) obscurely that is spelt out.  But once that is done and the decision taken, it will ordinarily be a fairly simple task to give notice to the beneficiary.  We can see no reason why the bank, if it has checked the documents with greater dispatch than normal, should be allowed to carry forward a period of time as a credit against its next obligation.  The Judge thought they could but we cannot agree.  If this seems stern doctrine, the answer is that the letter of credit law is and has to be precise; it is not concerned with merits.”

“The words ‘without delay’ mean what they say, and nothing is to be gained by paraphrasing them.  Where a decision to reject documents is made at or about the close of business on a Friday, as may have happened in this case, we would expect the obligation to give notice without delay to require that it be given on the Monday, which was the next banking day; Mr Mansouri appears to have accepted that in cross-examination.  It may well be that, in other cases the obligation requires notice to be given on the same day as the decision is taken.  But the difficulty that we face is that we have no precise information as to what was done on Monday Dec. 7, 1987; and the reason why we have no such information is not the fault of Bank Melli but of Seaconsar, who did not take any point on the words ‘without delay’ until years afterwards.”

23. In Bankers Trust Co. v State Bank of India [1991] 1 Lloyd’s Rep 587, Hirst J had this to say on the “reasonable time” to be taken for examination of documents presented at page 600:

“I do not think the requirement of ‘a reasonable time’ in art. 16c [c.f. article 13b. of UCP 500] was intended to allow, let alone encourage, an intricate minute-by-minute examination of the issuing bank’s work of the kind undertaken here, but rather to require consideration in broad herms whether the issuing bank set about its work conscientiously and, viewed overall, handled the matter with reasonable promptness, either by reference to an appropriate fixed time-limit or generally.  This was an unusually (though not uniquely) onerous checking exercise.  Having seen BT’s witnesses, I am satisfied that they fully complied with these requirements during stage (1), and consequently reject all the above criticisms.”

24. Regarding the notice of rejection to be sent to the beneficiary of the LC “without delay”, Hirst J continued at page 601:

“That telex did not, however, comply with art. 16d [c.f. article 14d.i. of UCP 500], since it did not specify the discrepancies, an essential requirement since it enables the presenting bank to decide for themselves whether the items relied upon by the issuing bank are in fact discrepant; I reject Mr. Goldsmith’s suggestion that this telex can be read together with the later telex in order to surmount this problem.  Mr. Scott submits that, in consequence, the issuing bank failed to give notice of its decision to refuse the documents ‘without delay’ in breach of art. 16d.  Mr. Goldsmith submits that the words ‘without delay’ relate both to decision and its basis, and that therefore until BT had the opportunity to check H & J’s discrepancies, they were not guilty of delay.  I am unable to accept Mr. Goldsmith’s construction, which does not accord with the clear language of art. 16d, and I therefore hold that BT failed to give notice of their decision to refuse the documents without delay, and therefore infringed the first part of art. 16d.”

25. In Hing Yip Hing Fat Co. Ltd v Daiwa Bank Ltd [1991] 2 HKLR 35, Kaplan J observed at page 58C-E as follows:

“There are two points which I believe are important to bear in mind.  Firstly Daiwa are not, on the evidence before me, a large bank and Hirst J specifically stated that ‘for a smaller bank with smaller resources a reasonable time limit might be longer’.  That is longer than the three days that Barclays set themselves generally and contended for in the Bankers Trust case.  Secondly and I think more importantly it has to be borne in mind that most checkers of documentary credits in Hong Kong will not have English as their mother tongue.  This must add time to the checking process and must justify a fairly rigorous checking procedure and hierarchy.”

Issue (3) – analysis

26. With the above judicial observations in mind, I come to examine Mr Sussex’s complaints against the judge’s findings.  He asserts that the judge’s finding that the defendant’s decision to reject the documents was made on Tuesday 5 November 1996 was contrary to the weight of the evidence and took no account of the evidence given by Mr Sunny Cheung during cross-examination.  He complains that the judge took no sufficient account of the fact that it was the decision to reject the documents, and not the decision or instruction to send out a rejection notice, which triggered the contractual obligation to act without delay.  He submits that Mr Sunny Cheung gave clear evidence (which the judge accepted) that he created his own shortlist of discrepancies on Monday 4 November 1996, at the latest.  Mr Sunny Cheung also stated clearly that if (as happened) he identified discrepancies which he considered to be valid, he would not waive those discrepancies.  In the circumstances, Mr Sussex argued that it was wholly artificial for the judge to conclude that, having produced his shortlist of discrepancies, Mr Sunny Cheung “began the process of deciding”.  Mr Sussex’s reasoning is that there was no such process, and the decision was made when the discrepancies were identified.  Mr Sussex submitted that whether there was delay could only be determined by reference to the time which it should have taken the defendant to prepare and transmit a rejection notice, but no evidence was advanced by the defendant of factors which delayed that process, and therefore taking two days to perform the purely administrative act of preparing and transmitting a rejection notice could not be characterised as “without delay”.

27. Mr Sussex referred us to certain passages in the transcript of the cross-examination of Mr Sunny Cheung in support of his allegation that Mr Sunny Cheung had identified the discrepancies on Monday 4 November 1996.

28. On the other hand, Mr Bartlett on behalf the defendant, pointed out the following steps taken by the defendant in dealing with the documents presented by ABN Amro Bank, which are all borne out by the evidence:

(i)   After his subordinate had finished with the checklist of discrepancies of the documents presented, Mr Cheung prepared a reduced or final list of discrepancies;

(ii)  This list was created either on Friday 1 November 1996 or Monday 4 November 1996 but more probably the latter;

(iii) After he had produced this final list he proceeded to consider whether to reject the presentation; and

(iv) The decision was made late on Tuesday 5 November 1996.

29. Mr Bartlett accepted that at one point in cross-examination, Mr Sunny Cheung appeared to accept that the decision to reject was made on Monday 4 November 1996 rather than Tuesday 5 November 1996.  However, in the later part of cross-examination, Mr Cheung emphatically repeated to the plaintiff’s counsel that the decision was made late on Tuesday 5 November 1996.  

30. The judge must have been acutely aware of Mr Sunny Cheung’s evidence, especially when he was cross-examined, for the judge had referred twice to his judgment (paras 47 and 52 thereof, cited above) that Mr Cheung was strongly or strenuously cross-examined.  The judge’s finding of the time when the decision to reject was made is a finding of primary fact, coming from the mouth of a witness, Mr Sunny Cheung.  I see no justification for this Court to interfere. 

31. The judge has also pointed out that after the decision to reject was made late on Tuesday 5 November 1996, the defendant received a letter of 5 November 1996 written by the plaintiff purporting to remedy certain discrepancies.  Mr Sunny Cheung was aware of this letter, which must have delayed the sending of the rejection notice through SWIFT, albeit not for a substantial period of time. 

32. Mr Bartlett has also drawn our attention to various matters that should have been taken into account in the consideration of “reasonable time” and “without delay”.  The documentation presented caused difficulties to the defendant in ascertaining whether there were discrepancies.  The process of bill checking through the defendant’s internal procedures involved a 5-level hierarchy.  English was not the mother tongue of the defendant’s staff involved.  The defendant’s branch in Hong Kong, to which the documents were presented was of a small size, with a workforce of 20 persons divided into three teams.  On the other hand, there were approximately 40 inwards bills to be dealt with.  Because of the difficulties with the documents presented in this case, which might involve potentially highly contentious matters, there can be no complaint that the defendant’s staff involved devoted added care and caution to the exercise.  Moreover the defendant’s staff had little or no experience with claims under standby LCs, which according to Mr Sunny Cheung were “very very rare”, and even the plaintiff’s expert accepted that a claim under a standby LC was a rare occurrence. 

33. There is no evidence to show that the judge was not fully appreciative of all these factors when making his findings and reaching his conclusion that the notice of rejection was sent on 6 November 1996 without delay.  As the judge commented in para 55 of his judgment (cited under para 17 above), the defendant’s witnesses gave evidence before him “an extraordinary 7.5 years after issue of the writ.”  Any complaint as to the tenacity of their memory would hardly be justified.  The judge was well placed to decide on the weight to be attached to particular answers given by the witnesses on facts.  I do not think his findings on this score can properly be criticised.  Grounds 1 to 6 of appeal are therefore rejected.

Issue (1) – route B discrepancies

34. In his judgment, the judge referred to the discrepancies of the document required for payment under route B, namely,

(1)   the document which the plaintiff presented was intituled “officers’ certificate” and not a “beneficiary’s certificate” as stated in the LC;

(2)   the officers’ certificate purported to state the amount by reference to another document which was stated to be “the aggregate amounts as specified on the annexed pro forma invoice”, but no such document in fact was annexed, although a document bearing that description, dated 28 October 1996, in the amount of Nlg 419,689.20 had been included in the presentation, but as a “loose” document;

(3)   the beneficiary’s statement appeared to state “in its last paragraph” a “route B” claim for failure to take delivery of goods in the aggregate amount of Nlg 420,215.50, a different amount, under a different invoice, which had not been included in the presentation at all.  

Before us, Mr Bartlett relied on two more discrepancies, namely,

(4)   the pro forma invoice presented to the defendant in a loose form was issued by one Deutsche Sphinx and not the plaintiff; and

(5)   Amro’s letter of 31/10/96 covering the presentation of the documents stated in its caption that the bill amount was Nlg 1,667.225.50, which is the sum total of Nlg 630,398, Nlg 616,612 and Nlg 420,215.50 expressly stated in P’s letter of 29/10/96, and did not include the sum of Nlg 419,689.20 that was shown in the pro forma invoice and referred to in P’s letter of 29/10/96 as a route B claim.

35. The judge’s findings on discrepancies and inconsistencies and his conclusion can be found in the following paragraphs of his judgment, and it is to be noted that he only dealt with certain inconsistencies as he had identified:

“33.  I agree with Mr Bartlett’s analysis of the position.  The Certificate was inconsistent with the other documents in the presentation, and as such these documents were inconsistent on their face contrary to Article 13(a) of the UCP 500.  Where the defendant bank was, as here, presented with documentation that on its face raised an uncertainty, it was entitled to raise a discrepancy and to consider the presentation a bad tender.”

“36.  Reference to this other document [i.e. the pro forma invoice], which in any event was not annexed, was directed by the specific wording of the Certificate, and it is equally clear that the difficulty perceived by the bank focused upon identifying the precise amount thus claimed under the ‘route B’ tender, and this in a situation in which the amount appearing on the face of a non-annexed document did not tally with the amount appearing on the face of the Beneficiary’s Statement.  In the circumstances the bank stated the nature of the complaint in the manner in which it did, which shortly indicated the nature of the difficulty that was perceived.  Other formulations may well have been better, but it is established that it is not necessary for an advice as to discrepancies to be treated like a pleading, and in my judgment the criticism thus levelled does not get the plaintiff home.

37.  I find in favour of the defendant on the ‘route B’ claim.” (Pp 11-12 of Core Bundle) (Emphasis added)

36. It will be remembered that the defendant in its notice of rejection dated 6 November 1996 gave four reasons for rejecting the plaintiff’s presentation.  There could be little doubt that the first three reasons all related to the route A claim, whereas the only reason for rejecting the route B presentation reads:

“Beneficiary’s certificate does not state amount claimed.”

37. In my judgment, the judge’s conclusion that the documentation presented for making the route B claim was discrepant is plainly wrong because he had overlooked the evidence before him borne out by the undisputed documents.  I will deal with the alleged discrepancies one after another. 

38. Although the plaintiff presented an “officers certificate”, as opposed to a “beneficiary’s certificate”, it is apparent from the content of the certificate that it was a certificate issued by two authorised officers of the plaintiff (the beneficiary), who signed on behalf of the plaintiff, and their signatures were verified by ABN Amro Bank.  That was well understood by the defendant to be the “beneficiary’s certificate” as demonstrated in its notice of rejection that “beneficiary’s certificate does not state amount claimed”.  While there should be strict compliance with the LC conditions, as required by article 13a. and article 14b. of the UCP 500, that strictness “does not extend to the dotting of the i’s and the crossing of the t’s or to the obvious typographical errors either in the credit or documents”, as observed by Gutteridge & Megrah’s Law of Bank’s Commercial Credits, 8^th Ed.

39. Since the officers’ certificate referred to “the aggregate amount as specified in the annexed pro forma invoice”, a complaint was raised on behalf of the defendant that the pro forma invoice was included in the presentation as a “loose” document and not “annexed”.  The evidence revealed that there was only one “invoice” included in the documents presented and that was the pro forma invoice.  It would be crystal clear to anyone who checked the documents, and it was the duty of the defendant’s officers to do so, to appreciate that the pro forma invoice was stated to be “pro forma invoice” on its face, and that apart from this invoice no other invoice was included in the presentation.  Anybody reading and checking with any care all the documents presented would not have failed to appreciate this.  The evidence of Mr Sunny Cheung was that the documents caused them difficulties and extra care was given to check the documents and identified the discrepancies.  In my view, there can be no justification for being confused as to which document the officers’ certificate was referring to, whether “annexed” as stated in the certificate or as a “loose” document that was simply included in the documents presented. 

40. As to the amount of Nlg 419,689.20 set out in the pro forma invoice, being different from the amount of Nlg 420,215.50 stated in the last paragraph of P’s letter of 29/10/96 that was said to create an inconsistency, the amount of Nlg 420,215.50 was stated in that last paragraph to be an amount claimed for the goods that “Siu Fung Strategy has not taken” and “conform annexed invoice number …”.  This must have been apparent to any careful reader of the documents presented, that the alleged “annexed invoice” bore a date, number and amount different from those shown in the pro forma invoice.  Moreover, the LC stated very clearly to distinguish between the route A claim and the route B claim by using “either” and “or” documentation required for making the LC funds available upon receipt of different sets of documents, namely, three documents under route A and only one document, ie a beneficiary’s certificate under route B.  The beneficiary’s statement, which was contained in P’s letter of 29/10/96 declaring the amount due and unpaid by the secured party under the sales agreement was one of the documents required under route A, but not route B.  Only a single beneficiary’s certificate “evidencing that the secured party fails to take delivery of the goods in accordance with the sales agreement” was required under route B.  There was no reason for mixing up the documents presented under route B with the documents presented under route A.  A proper reading of the LC terms encumbers the defendant to examine the officers’ certificate which it understood to be the beneficiary’s certificate under route B, to “ascertain whether or not” it “appears, on” its “face, to be in compliance with the terms and conditions of the Credit” (in terms of article 13a. and article 14b. of the UCP 500). 

41. P’s letter of 29/10/96 regarding the route B claim when stating “we also claim under the LC payment of goods not taken under the Sales Agreement as stated in the annexed certificate conform section 3(d) of the above LC” was clear and did not admit of any misunderstanding.  It is crystal clear that the “section 3(b)” stated in the letter referred to the third section or paragraph of the LC and the item under the alternative (b).  The annexed certificate was obviously the officers’ certificate as annexed, for that was the only certificate annexed.  

42. The last paragraph of P’s letter of 29/10/96 referring to the larger sum of Nlg 420,215.50 was not stated to be supported by any certificate that conformed to the route B claim.  Insofar as this last paragraph purported to be a claim for the price of goods of which the secured party had not taken delivery it was doomed to failure because of the lack of the beneficiary’s certificate required by the LC under route B.  Nor was the invoice for this larger sum claimed to be annexed in fact annexed or included in the presentation.  This purported claim for Nlg 420,215.50 was expressly stated, after referring to “We hereby claim” in respect of the two sums each exceeding Nlg 600,000 and “We also claim” in respect of the payment for goods “as stated in the annexed certificate”, to be “Further we claim …”.  One would not be able to mix up the two claims under route B unless one were trying to get reasons for rejecting the presentation.  Even where one engages the provision of article 13a. of the UCP 500 that “Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit”, I am of the view that on any careful reading of the last paragraph of P’s letter of 29/10/96 on the one hand and the claim “as stated in the annexed certificate”, together with the officers’ certificate and the pro forma invoice on the other hand, the documents do not appear on their face to be inconsistent with one another.

43. The officers’ certificate clearly stated that it was made pursuant to section 3(b) of the LC and that

“the secured party fails to take delivery of goods in accordance with the Sales Agreement in the aggregate amount as specified on annexed pro forma invoice.”

44. That statement is sufficient to evidence “the secured party fails to take delivery of goods in accordance with the Sales Agreement” as required in terms of the LC for a route B claim. 

45. Regarding Mr Bartlett’s argument that the pro forma invoice was not issued by the plaintiff but issued by Deutsche Sphinx, two points can be made.  First, in the notice of rejection, the defendant did not rely on this difference.  It was not relied upon for rejecting either the route A claim or the route B claim.  Secondly, the beneficiary’s certificate required for the route B claim never prescribed for any invoice or other documents in support, save that the certificate must evidence that the secured party had failed to take delivery of the goods under the claim.  Insofar as the plaintiff’s authorised officers had on behalf of the plaintiff certified that the secured party had failed to take delivery of the goods shown in the pro forma invoice, its total price being Nlg 419,689.20, in my judgment, the condition for making a route B claim was satisfied.  Whether the pro forma invoice was issued by the plaintiff or issued by anyone else was of no consequence, as the purpose of the pro forma invoice was to identify the goods and the price of the goods which the secured party had failed to take up. 

46. Mr Bartlett also relied on the total sum of bill amount stated in the caption of Amro’s letter of 31/10/96, namely, Nlg 1,667,225.50, being precisely the sum total of the three sums expressly stated in P’s letter of 29/10/95 to say that the sum total, apparently not including the sum of Nlg 419,689.20, gave rise to an inconsistency upon which the defendant was entitled to find the documents stipulated under the LC discrepant. 

47. This inconsistency does not appear to be one taken up by the judge for his conclusion that the documents were discrepant (see para 35 above) and there is no respondent’s notice for raising this point.  Be that as it may, I shall proceed to consider its merit.

48. Mr Bartlett argued that Amro’s letter of 31/10/96 made the beneficiary’s demand through its banker in purported compliance with the LC terms.  The demand was required for satisfying the prescribed item 1 under (A) and thus it was one of the documents stipulated in the LC which the defendant was required and entitled to examine under article 13a. of the UCP 500.  Although the route B claim for Nlg 419,689.20 appeared to be supported by the pro forma invoice referred to in the officers’ certificate, the presentation by the plaintiff was a composite presentation under the same LC and thus the defendant was required to examine all the documents stipulated in the LC to see if there was any inconsistency.  It is argued that by comparing that sum with the total sum captioned in Amro’s letter of 31/10/96 the defendant was understandably troubled by the inconsistency and was fully entitled to rely on it to reject the claim.

49. Article 13a. of the UCP 500 states:

“Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit.”

50. In Banque De L’ Indochine v JH Rayner [1983] 1 QB 711, 729-730, Donaldson MR stated:

“I approach this aspect of the appeal on the same basis as did the judge, namely, that the banker is not concerned with why the buyer has called for particular documents (Commercial Banking Co. of Sydney Ltd. v. Jalsard Pty. Ltd. [1973] A.C. 279), that there is no room for documents which are almost the same, or which will do just as well, as those specified (Equitable Trust Co. of New York v. Dawson Partners Ltd. (1926) 27 Ll.L.Rep. 49), that whilst the bank is entitled to put a reasonable construction upon any ambiguity in its mandate, if the mandate is clear there must be strict compliance with that mandate (Jalsard’s case [1973] A.C. 279), that documents have to be taken up or rejected promptly and without opportunity for prolonged inquiry(Hansson v. Hamel and Horley Ltd. [1922] 2 A.C. 36) and that a tender of documents which properly read and understood calls for further inquiry or are such as to invite litigation are a bad tender (M. Golodetz & Co. Inc. v. Czarnikow-Rionda Co. Inc. [1980] 1 W.L.R. 495).” (Emphasis added)

51. In my judgment, the total sum stated in Amro’s letter of 31/10/96 had little relevance to the plaintiff’s claim under route B as supported by the officers’ certificate, on an examination of the documents presented with reasonable care, as required by article 13a. of the UCP 500.  It is abundantly clear from the terms of the LC that only for a route A claim three items of documentation were required, including a demand through the plaintiff’s bank, but only a beneficiary’s certificate was required for a route B claim.  As P’s letter of 29/10/96 made reference to three monetary claims, one relating to the two sums each exceeding Nlg 600,000, another one supported by the officers’ certificate and yet another one supported by a numbered and dated invoice which was not to be found in the presentation, there was no part of the defendant’s task under article 3a. of the UCP 500 to go beyond the officers’ certificate to compare the amount stated in the pro forma invoice referred to in that certificate with the separate claim for Nlg 420,225.50, although this latter sum was also alleged to be for goods not taken by the secured party and purported to be another route B claim.  A fortiori, it was no task of the defendant to compare the sum of Nlg 419,689.20 with the demand through ABN Amro Bank required only for a route A claim for discovering an inconsistency which did not appear on the face of the officers’ certificate or the pro forma invoice.  I am not persuaded that the fact that the claim for Nlg 420,225.50 which was stated to be for goods not taken was by mathematics found to be included in the demand letter would alter the position, for the proper thing to do is to treat Nlg 420,225.50 either as a route A claim and reject it for the same reasons used for rejection of all the route A claims as a whole, or as a route B claim which did not satisfy the LC requirement of being supported by a beneficiary’s certificate.  The documents presented being “properly read and understood”, to quote from Donaldson MR’s judgment cited above, I do not think it legitimate to rely on the demand for a sum total of Nlg 1,667,225.50 for identifying an inconsistency with the sum of Nlg 419,689.20 so as to reject the route B claim for the latter sum, which on the face of the officers’ certificate and the pro forma invoice fully complied with the requirement under (b) of section or paragraph 3 of the LC.  The proper reading and understanding of the documents might call for further inquiry relating to the total amount claimed as shown in Amro’s letter of 31/10/96 as to why it included Nlg 420,225.50 that appeared to be also a route B claim, but that inquiry should not, in my judgment, affect the claim for Nlg 419,689.20.  There was no valid inconsistency that appeared on the face of the documents if reasonable care was taken to read the documents properly, and the defendant claimed in evidence to have taken extra care, when it would not be difficult to discern that the plaintiff was making totally separate claims pursuant to the LC.  The inconsistencies could only relate to the sum of Nlg 420,225.50 that appeared to be a route B claim and yet was included in the sum total stated in Amro’s letter of 31/10/96 as if it had been a route A claim.  The plaintiff had satisfied the requirement of the LC in making the route B claim for Nlg 419,689.20, and it had to be paid accordingly.  This is merely giving effect to the strict compliance with the terms of the LC.

52. In my judgment, the judge was wrong to compare the clear statement of the amount claimed for the goods as set out in the pro forma invoice which was certified not to have been taken up by the secured party to which the officers’ certificate referred with “other documents in the presentation” so as to find that there were inconsistencies on their face contrary to article 13a. of the UCP 500.  The judge seemed to refer only to the “inconsistency” between the amount stated in the pro forma invoice and that stated in the last paragraph of P’s letter of 29/10/96.  As I said above, on proper analysis, the judge was wrong to make such a holding because P’s letter of 29/10/96 was either the beneficiary’s statement required for a claim under route A or its statement relating to a “further” claim under route B, both of which had nothing to do with the claim as stated in the officers’ certificate.  Even if it can be argued that the judge was also referring to the inconsistency between the amount set out in the caption of Amro’s letter of 31/10/95 and the amount shown in the pro forma invoice, for the reason I stated above, this would not help the defendant.

53. The reason “beneficiary’s certificate does not state amount claimed” as stated in the notice of rejection was blatantly wrong, because that certificate did refer to the pro forma invoice, which had been included in the documentation presented to the defendant. 

54. The judge had implicitly accepted that the reason for rejection of the route B claim stated in the notice of rejection could equally be read as the following examples given by Mr Palmer, the defendant’s expert who testified as to banking practice before the judge:

“Beneficiary’s certificate alludes to an amount which is erroneous” or

“Beneficiary’s certificate does not as it sets out to do state the amount claimed and in referring to the ‘annexed’ document introduces inconsistencies”.

55. In my judgment, regardless of whether an expert on banking practice is entitled to give his opinion on the interpretation of documents, the amount stated in the pro forma invoice referred to in the officers’ certificate was neither erroneous nor did it introduce inconsistencies.  It was only by what I consider to be improper comparisons with documents which are irrelevant to the claim under route B for Nlg 419,689.20 that the so-called error or inconsistencies arose.  These documents other than the officers’ certificate and the pro forma invoice were not required for the claim under route B as set out in the LC.

56. The judge had overlooked that in the terms of the LC a route A claim was separately treated from a route B claim with the clear division by a pair of “either, or”, and the documents required for making a claim under the different routes were different.  Had he properly regarded the route B claim and the documentation in support as required separately from the route A claim and its supporting documentation, he may well not have fallen into error.

Pro forma invoice to be disregarded

57. The analysis of the case I have conducted above assumes that the pro forma invoice formed part of the documents presented and it had been taken into consideration by the defendant’s staff who examined the presentation.  I consider that they were entitled to do so if they wished to, because the pro forma invoice could well be considered as having been incorporated in the officers’ certification by express reference.

58. Mr Sussex proffered an alternative way to view the matter by invoking article 13a. of the UCP 500 that “documents not stipulated in the Credit will not be examined by banks”.  Thus, he submitted, the pro forma invoice, not being a document stipulated in the LC, which only required a beneficiary’s certificate for a route B claim, may be disregarded by the defendant.  If the defendant ignored the reference to the “the aggregate amount as specified on annexed pro forma invoice”, the officers’ certificate was a document stipulated in the LC and there could not possibly be any inconsistency, because there would have been no amount to compare with that stated in P’s letter of 29/10/96 or with Amro’s letter of 31/10/96.  Where there was no inconsistency, the officers’ certificate could not be discrepant.

59. If this submission is correct, the same argument can equally apply to the last paragraph of P’s letter of 29/10/96 and Amro’s letter of 31/10/96, neither of which was a document stipulated in the LC for a claim under route B which merely required a beneficiary’s certificate evidencing the failure on the part of the secured party to take deliver.  Thus these two letters, being other than the officers’ certificate and the pro forma invoice alleged to be “annexed” to it, “will not be examined” by the defendant for not being a document stipulated in the LC required for a route B claim, according to article 13a. of the UCP 500 which the parties had agreed to be incorporated into the LC.  In my view, this is but another route of reaching the same conclusion that I stated above, which I prefer.

Issue (2) – whether the alleged discrepancies could be relied on

60. Because of my conclusion of lack of discrepancy regarding the presentation in respect of the route B claim for Nlg 419,689.20, it is unnecessary for me to deal with the interesting question whether the reason as stated in the notice of rejection of the route B claim could be read to include the alleged discrepancies relied on by the defendant at the time of the trial but not at the time of rejection.

61. I have had the advantage of reading my colleagues’ judgments in draft.  I agree with Yuen JA’s judgment that the ground for rejecting the route B claim for Nlg 419, 689.20 as stated in the defendant’s notification of rejection was invalid.

Conclusion

62. For the above reasons, I would allow the appeal in respect of the claim for Nlg 419,689.20 which, the parties agreed, is equal to Euros 190,449.66.  I would uphold the remainder of the judgment, apart from that sum.  The parties have not fully addressed us on the questions of interest and costs.  If they cannot reach an agreement, we have to convene to hear them before we decide on these two matters.

Hon Yuen JA:

63. I agree with the Vice-President that the appeal should be allowed to the extent of the Euro equivalent of Nlg 419,689.20.  My reasons are as follows.

Presentation of documents

64. The presentation of documents by the Plaintiff to the Defendant Bank left a great deal to be desired.  There were two “Routes” (to adopt the judge’s words) for drawing under the Standby Letter of Credit ("the L/C"), and partial drawings were allowed.  As the documents required under each Route were different, it would have been prudent for the beneficiary making this last-minute presentation to have presented the documents separately, or if there were to be a composite presentation as was done by ABN AMRO in this case, it should have been clearly indicated which documents were being presented under which Route.

65. If that had been done, the drawing under Route A would have involved the presentation of:

- a demand made through ABN AMRO - as required under (A)1 of the L/C - for Nlg 630,398 and Nlg 616,612 (totalling Nlg 1,247,010);

- with the documents (such as they were) relevant to that route;

whilst the drawing under Route B would have involved the presentation of:

- a drawing made by the Plaintiff itself for the amounts of Nlg 420,215.50 (albeit unsupported) and Nlg 419,689.20,

- with the Officers Certificate (being the Beneficiary’s Certificate required under the L/C) and the Pro Forma Invoice supporting the drawing for Nlg 419,689.20.

66. If that had been done, it would have avoided the confusion in the mind of Miss Ku (the supervisor of the Defendant Bank’s bill-checking team) which was caused by the ABN AMRO "Bill Amount" quantum of Nlg 1,667,225.50, which was the sum of the two Route A drawings (Nlg 1,247,010) and only one of the Route B drawings (Nlg 420,215.50). 

67. It is true that the Plaintiff’s letter of 29 October 1996 (which served also as the required Beneficiary’s Statement for the drawing under Route (A)1) stated that there were 4 amounts claimed:-

"We hereby claim ... the amounts mentioned hereunder which are due and unpaid ...

1. Nlg 630.398,00, ...

2. Nlg 616,612, ...

...

We also claim under the L/C the payment of goods not taken under the sales agreement as stated in the annexed certificate conform section 3(b) of the above L/C [the Officers Certificate referring to an annexed Pro Forma Invoice for Nlg 419,689.20].

...

Further we claim the aggregate amount of Nlg 420,215.50 for the delivery of products conform annexed invoice [none annexed] ... not taken ..." (emphasis added).

Inconsistency

68. However, there was in my view, plainly an inconsistency on the face of the documents presented because the "Bill Amount" in the ABN AMRO demand indicated that only 1 amount (Nlg 420,215.50) was being drawn under Route B (thereby disavowing, as it were, the other claim for Nlg 419,689.20), whereas the Plaintiff’s letter indicated that 2 amounts (Nlg 420,215.50 and Nlg 419,689.20) were being drawn under that Route.

69. I do not with respect agree with the view that there was no discrepancy.  This is not a case where a beneficiary makes two discrete claims, and one is supported by the necessary documents and the other is not.  In that situation, one may ignore the unsupported claim.  The valid claim is not rendered discrepant simply because the other claim is. 

70. Here, the documents presented were inconsistent in what was actually being claimed under Route B. 

-        On the one hand, the ABN AMRO "Bill Amount" showed that only one amount (Nlg 420,215.50) was being claimed under Route B.  That amount was also referred to in the Plaintiff’s letter, supposedly supported by an “annexed invoice number 200820-31.05.95".  Although that invoice was not in fact presented, the quantum of the Bill Amount on the face of the document of the presenting bank had the effect of disavowing the claim for Nlg 419,689.20 (which was a different claim from the claim for Nlg 420,215.50 as it was supported by a Beneficiary’s Certificate referring not to the numbered invoice but to a Pro Forma Invoice). 

-        On the other hand, the Plaintiff’s letter stated that two amounts were being claimed under Route B, albeit one supported by the necessary documents and the other not.  But of course if both amounts were being claimed, that was contrary to the lower quantum of the “Bill Amount”.

71. In my view, that inconsistency on the face of the documents would have entitled the Defendant Bank to refuse to accept the drawings.  Article 13.a. of the UCP 500 provides that “documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit”.  Indeed the inconsistency had been identified as Item No. 4 in the Defendant Bank’s DC Documents Check List :

“ PROFORMA INV ISSUED BY DEUTSCHE SYPHINX SANITAR GMBH FOR AMT NLG419,689.20 DIFFER FROM THE CLAIM AMT FOR NLG420,215.50".

Actual ground for refusal

72. However, the Defendant Bank did not in fact refuse the documents because of that inconsistency.  Mr Cheung, the head of the Bills Department of the Defendant Bank, did not include Item No. 4 in the final Notice of Refusal.  The Route B drawing was instead refused because “Beneficiary’s Certificate does not state amount claimed”.

73. Before considering Mr Cheung’s Witness Statement and the pleadings, I had thought that perhaps straining the language of the Notice of Refusal, the ground given could have meant that the Defendant Bank considered that the Beneficiary’s Certificate did not state which amount was being claimed, which might perhaps have referred to the inconsistent amounts being claimed under Route B. 

74. However, it is unnecessary to consider whether that attempt to strain the language would be legitimate because it was clear from Mr Cheung’s Witness Statement (21 February 2001) that he had refused the documents because he did in fact consider that the Beneficiary’s Certificate did not on its face state the amount claimed and he regarded the Pro Forma Invoice (which specified an amount) as not having been “annexed” to the Beneficiary’s Certificate.  In para. 9 he said:

“The fourth document that was enclosed under the ABN AMRO Bank letter of 31^st October 1996 was an officer’s certificate ... The amount however was not claimed on the officer’s certificate, and the officer’s certificate had specifically referred to an ‘annexed proforma invoice’, and no proforma invoice was annexed” (emphasis added).

75. The Defendant Bank’s position is made even clearer by its pleadings at Points of Defence para. 6(4), in which it was pleaded as a particular of discrepancy that "a certificate presented by the Plaintiffs as required under the letter of credit ... did not state any amount claimed" (emphasis added).

Invalidity of ground of refusal

76. In my view, that was an invalid ground of refusal.  The Beneficiary’s Certificate tracked the language of the L/C and evidenced that the secured party has failed to take delivery of goods in accordance with the sale agreement “in the aggregate amount as specified on annexed pro forma invoice”.  That obviously incorporated the Pro Forma Invoice by reference, and that document specified an amount of Nlg 419,689.20.

77. Although the Beneficiary’s Certificate referred to an “annexed” pro forma invoice and the Pro Forma Invoice was apparently not physically attached, there was only one Pro Forma Invoice (indeed, only one invoice - pro forma or otherwise) in the documents presented, so there could have been no doubt that that was the document being referred to.  If more than one invoice had been presented, there might have been more scope for the argument that the word “annexed” required physical attachment for identification, but where there was only one, it was in my view pedantry to consider that the Pro Forma Invoice had not been “annexed” because it had not been clipped together.

78. In this respect, Mr Cheung may have mistakenly thought that the Pro Forma Invoice was not a pro forma invoice (i.e. a document prepared in anticipation of goods being delivered) but was an actual “invoice”.  In para. 7(2) of his Witness Statement he had said: 

“the invoice that was enclosed as the first document ... was unattached to any other document.  The invoice relates to Nlg 419,689.20, and did not seem to correspond to any of the amounts claimed.  The ABN AMRO Bank letter of 29^th October 1996 ... claimed for three amounts, being Nlg 630,398.00, Nlg 616,612.00 and Nlg 420,215.00.  These three figures totalled the claim amount of NLG 1,667,225.50.  The invoice appeared to be an irrelevant document, and I therefore ignored it”.

Although he may have been misled by ABN AMRO’s description of the document as “invoice”, the Pro Forma Invoice (i) stated clearly on its face that it was a Pro Forma Invoice, (ii) it did not have a number and (iii) it was described as a pro forma invoice by the checkers in the DC Documents Check List.  That was obviously the document that the Beneficiary’s Certificate was referring to.   

79. Accordingly, the Defendant Bank was not entitled in my view to refuse the documents on the ground which it advanced - that the Beneficiary’s Certificate did not state the amount claimed.  Whatever might have happened if the Defendant Bank had decided on 5-6 November 1996 to maintain its reliance upon the inconsistency in the documents that I have referred to, Mr Bartlett for the Defendant Bank did not dispute Mr Sussex’s submission that the UCP 500 required that all discrepancies relied upon had to be in the Notice of Refusal.

80. It is therefore not necessary in my view to decide if Mr Sussex SC was correct in his submission that it was not a requirement of the L/C that the beneficiary should have to specify the amount claimed under Route B.  That might have been the case under the original terms of the L/C - when Route A and Route B were true alternatives, and partial drawings were not allowed, but I prefer to express no view on whether that remained the case after partial drawings were allowed.  In any event, the Beneficiary’s Certificate did specify the amount claimed and I do not think the Defendant Bank could be criticized for not ignoring it.

Delay

81. As for delay, Article 14.e. of the UCP 500 expressly precludes the bank from claiming non-compliance if it fails to act in accordance with that article (Article 14).  Article 14.d.i provides that “if the ... bank decides to refuse the documents, it must give notice to that effect ... without delay but no later than the close of the seventh banking day following the day of receipt of the documents”. 

82. Mr Sussex submitted that the Defendant Bank had failed to give notice without delay after it had decided to refuse the documents.  That gave rise to the issue of the time when the Defendant Bank made that decision. 

83. The trial judge had found as a fact after seeing and hearing the witnesses that there was no delay, and an appellate court should be slow to interfere with a finding of fact as long as there was some evidence to support it.  The weighing of the evidence must be left to the judge.  That applies whether the issue  (as Mr Sussex puts it) is one of reliability of the witnesses rather than one of credibility. 

84. In the present case, there was contemporaneous documentary evidence that even in the afternoon of 5 November 1996 (one day before the Notice of Refusal was sent), Mr Cheung was approving a draft SWIFT message to ABN AMRO seeking clarification of the routes under which the claims were being made.  Mr Sussex attempted in cross-examining Mr Cheung to paint the picture that he had approved the draft “distractedly”.  He did not meet with any success.  Although the draft was not sent, it evidenced that even at that time, no final decision to refuse the documents had yet been made.  The trial judge was entitled to give more weight to this piece of contemporaneous documentary evidence (which he specifically mentioned in para. 52 of his judgment) than to answers in cross-examination at a trial which took place nearly 8 years after events took place.

85. In the circumstances, I do not see how this court can overturn the judge’s finding of fact that there had been no delay.

Expert evidence

86. Finally, however, and with the greatest respect to the judge, I have to express my surprise that the expert evidence was allowed to range as widely as it did in this case, including opinions given on the ultimate issue whether the documents presented were acceptable, although it is clear in this case that it did not affect the judge’s decision.

Hon Barma J:

87. I agree with Woo VP and Yuen JA that the appeal should be allowed to the extent of the Euro equivalent of Nlg 419,689.20.

88. However, I am unable to agree with the view expressed by Woo VP that there was no discrepancy in relation to the documents presented in respect of this claim.  I agree with Yuen JA that there was a discrepancy in relation to such documents arising out of the apparently inconsistent claims being made under the documents presented to the Defendant Bank by the Plaintiff.

89. I share Yuen JA’s view that the presentation made in this case left a great deal to be desired.  In my view, the documents presented appeared to suggest 3 possible scenarios in relation to the Route B claim:-

(1)  A claim for Nlg 420,215.50 as suggested by the ABN Amro Bill Amount (after deduction of the Route A claims) identified in the Plaintiff’s letter of 29 October 1996 included with the presentation as the Beneficiary’s Statement;

(2)  A claim for Nlg 419,689.20 as suggested by the Officer’s Certificate, read together with the pro forma invoice that was included in the presentation; or

(3)  A claim for both these amounts, as suggested by the Plaintiff’s letter of 29 October 1996.

90. In these circumstances, all the documents having been included in the same presentation, I think that it was clearly open to the Defendant Bank to have regard to all of the documents, and that on doing so, it was entitled to conclude that there were inconsistencies which justified rejection of the documents.

91. However, for the reasons given by Yuen JA in paragraphs 72 to 80 of her judgment, I agree that this discrepancy was not one on which the Defendant Bank was entitled to rely as against the Plaintiff.

92. So far as the question of delay is concerned, I respectfully agree with both Woo VP and Yuen JA that there is no basis for disturbing the learned trial judge’s conclusions in this respect, for the reasons which they have given.