CACV000173/1989
IN THE COURT OF APPEAL
1989, No. 173
(Civil)
BETWEEN
Hing Yip Hing Fat Co Ltd
Plaintiffs
AND
The Daiwa Bank Ltd
Defendants
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Coram: Hon Sir Derek Cons, V-P, Kempster and Clough, JJA
Date of Hearing: 6 March 1990
Date of Judgment: 6 March 1990
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JUDGMENT
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Kempster, JA:
1. This is an appeal by defendants, the Daiwa Bank Ltd, against a hybrid order, which followed the terms of a hybrid summons, made by Mayo J on 30 October 1989. That order has not yet adequately been drawn up and is the subject of an undertaking on the part of the solicitors for the plaintiffs, Hing Yip Hing Fat Co Ltd.
2. The Order in question required the defendants to serve a list of documents, verified by affidavit, incorporating specific documents pursuant, it would seem, to RSC Order 24 rules 3 and 7. The defendants had already served a list of documents on 12 October.
3. The matter arises in an action commenced on 14 March 1989 whereby the plaintiffs claim from the defendants payment of US$376,000 under irrevocable letter of credit No LC853-00032 dated 23 August 1988 and amended on the 25th of that month. They plead tender of the required documents on or about 2 September 1988. By their Defence the defendants allege inadequacies and discrepancies in andbetween such documents vitiating the plaintiffs' right to payment. By their Reply the plaintiffs allege delay and rely upon certain terms comprised in Article 16 of the "Uniform Customs and Practice for Documentary Credits (1983 Revision)" to which the letter of credit was subject. Such terms read : -
"
(a)
If a bank so authorised effects payments ... or accepts, or negotiates against documents which appear on their face to be in accordance with the terms and conditions of a credit, the party giving such authority shall be bound to reimburse the bank which has effected payment ... or has accepted, or negotiated, and to take up the documents.
(b)
If, upon receipt of the documents, the issuing bank considers that they appear on their face not to be in accordance with the terms and conditions of the credit, it must determine, on the basis of the documents alone, whether to take up such documents, or to refuse them and claim that they appear not to be in accordance with the terms and conditions of the credit.
(c)
The issuing bank shall have a reasonable time in which to examine the documents and to determine as above whether to take up or to refuse the documents.
(d)
If the issuing bank decides to refuse the documents, it must give notice to that effect without delay by telecommunication or, if that is not possible, by other expeditious means, to the bank from which it received thedocuments (the remitting bank),...
(e)
If the issuing bank fails to act in accordance with the provisions of paragraphs (c) and (d) of this article and/or fails to hold the documents at the disposal of, or to return them to, the presentor, the issuing bank shall be precluded from claiming that the documents are not in accordance with the terms and conditions of the credit."
4. By way of background it may be, observed that the goods covered by the credit had been sold to the plaintiffs by Cheergoal Industries Ltd, that Cheergoal had bought such goods from Kanemtsu-Gosho (Hong Kong) Ltd and that Kanematsu had procured the issue by the defendants of a documentary credit in Cheergoal's favour. Kanematsu had requested the defendants not to honour the credit in favour of Cheergoal and they in turn had requested the defendants not to honour the credit in favour of the plaintiffs. This background is derived from an affidavit, which has beneficially to be construed to give it sense or effect, sworn in support of the application for discovery.
5. None of the matters just mentioned affect or are relevant to the defendants' legal' liability to the plaintiffs as beneficiaries named in the credit. The only issues arising on the pleadings as they stand are whether or not the alleged inadequacies and discrepancies in the documents presented indeed relieve the defendants of their prima facie obligation, strict compliance being required,and if they do, whether the defendants are entitled to rely upon them having regard to the provisions of Article 16 (d) as to notification.
6. Articles 3 and 4 of the "Uniform Customs. and. Practice for Documentary Credits" state : -
"Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract (s) even if any reference whatsoever to such contract (s) is included in the credit. In credit operations all parties concerned deal in documents and not in goods, services and/or other performances to which the documents may relate".
The effect is to render a credit subject thereto autonomous in character and to some extent analogous to a bill of exchange. As was said by Donaldson LJ in Intraco Ltd v Notis Shipping Corp [1981] 2 Lloyds Rep 256 at p 257 : -
"Irrevocable letters of credit and bank guarantees given in circumstances such that they are equivalent to an irrevocable letter of credit have been said to be the life blood of commerce. Thrombosis will occur if, unless fraud is involved, the courts intervene and thereby disturb the mercantile practice of treating rights thereunder as being equivalent to cash in hand."
7. The judgment of Mayo J reads in its entirety : -
"I am satisfied that sufficient relevance has been established to meet the criteria set out in RSC O24 r2. I order that the discovery sought is to be given or to be verified on affidavit."
8. I disagree. RSC Order 24 rule 8 applies and the documents specific discovery of which was ordered do not relate to any issue in the action. In any event the scope of discovery ordered is impossibly wide. No lacuna in the list already served by the defendants has been demonstrated.
9. In my view this appeal should be allowed and the Order of Mayo J, as and when properly drawn up and perfected, set aside.
Cons, V-P :
10. I agree with my Lord that the appeal should be allowed and the Order below set aside. I have nothing to add except to commend the wisdom of Mr Bunting expressly not adopting some of the comments I made in the course of argument. But as I see on respective positions, they are not too far apart. The difference is that Mr Bunting wishes to emphasise that matters, which I, as at present advised would think at all times irrelevant to the question of delay, are at any rate irrelevant as the pleadings stand at the moment.
Clough, JA :
11. I also agree. On the issues actually raised on the pleadings the Order made below is not sustainable.Mr Bunting has rightly conceded that should the bank hereafter plead matters relied upon to excuse delay, discovery may be required. Upon the pleadings as they now stand I concur with the judgments which have just been given.
(Sir Derek Cons)
(Michael Kempster)
(Philip Clough)
Vice-President
Justice of Appeal
Justice of Appeal
Representation:
Michael Bunting (M/s Stevenson Wong & Co) for Defendants/Appellants
Raymond Faulkner (M/s Crump & Co) for Plaintiffs/Respondents