DAI HAN COAL CORPORATION v. EUROPEAN ASIAN BANK, AKTIENGESELLSCHAFT

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JUDGMENT

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1. Some time in the year 1980, prior to the 6th of June, a sole proprietorship in Hong Kong, being that of Mrs CHAN LAW Fai Lee, who is the 2nd plaintiff in Action No. 323, was desirous of bidding for the supply of coal to a State-owned corporation in the Republic of South Korea - Dai Han Coal Corporation: (Dai Han being the Cantonese pronunciation of the name for Korea). The sole proprietorship is known as "Chan's Trading Company", and 1 shall refer to it as "CTC". I shall refer to the Coal Corporation as "Dai Han".

2. I have not seen any of the tender or bid documents, but it seems obvious from what is before me that a bid bond was required from those who wished to seek a contract with Dai Han. CTC, therefore, wrote to its Hong Kong, or to one of its Hong Kong, bankers, European Asian Bank, on 4th of June. The letter, which appears at page 14, was addressed to the Tsim Sha Tsui Branch of European Asian Bank, to which I shall refer as "EAB". It was signed by the husband of the proprietor, that is Mr CHAN Shiu-chung.

3. If Mr Chan had left that alone, then probably nothing would have ever come before me, but some young man in his employ, Mr Benson Hong, typed on, in a different type-face - "Contents as per attached", and he then signed that addendum. The contents appear at page 15. They are the terms that CTC required, and they were signed by Benson Hong.

4. It is quite clear from the evidence put before me that Mr Benson Hong was not an authorised signatory of CTC in so far as EAB was concerned. Whatever else he might have been able to do with CTC, vis-a-vis the banker he had no right to sign anything. And although page 14 is chopped by EAB "signature verified", it is accepted by Dai Han and Korea Exchange Bank, which I shall mention in a moment, that the bank was not satisfied with that document, and felt it would be improper in the circumstances to act upon it, and it so notified its client.

5. CTC, therefore, on the same day, issued another letter of instruction, that is page 13, and its reference number is A80/031. (A80 seems to be the reference number of this tracnsaction because all the relevant documents that I have are A80/ - something). The body of the letter incorporated basically the same terms that Mr. Benson Hong had put on page 15, but it reads as follows:-

"Please issue a bank guarantee on our behalf on today. The Beneficiary is Korea Exchange Bank, Seoul, Korea for account of Dai Han Coal Corp., Seoul, Korea of which the wordings are read as follows:

 

Thank you for your prompt attention in this matter."

and it is signed again by the same Mr. Chan who signed the previous, letter of instruction on page 14.

6. On the same day, EAB did issue, as requested, a guarantee. It is called a letter of Guarantee ''(For Bid Bond)'' and it is numbered 505354. I have taken the example on page 20. The bundles put before me contain many copies of the documents to which I will be referring in the course of this judgment, because there are copies for me of originals, there are the copies that were retained by the senders; so there are copies produced by BAB, there are the copies produced by CTC, there are copies produced by Korea Exchange Bank, to which I shall refer as "KEB" and there are copies produced by Dai Han.

7. The Letter of Guarantee which EAB issued was addressed to KEB Seoul. It did not contain any reference number, because the addressee was not CTC. The signatories were a Mr. Woydt and a Mr. Un. The wording, which followed the letter of instruction, which itself incorporated Mr. Hong's suggested wording, is of vital importance in this case and it is as follows:-

8. One of the major points at issue between the parties in the matters that I am now deciding, that is the whole of 7356 (which is an action by Dai Han against EAB) and the Dai Han/KEB/EAB dispute, which forms a part of 323, will turn on who was the beneficiary of this document entitled Letter of Guarantee and numbered 505354. There are other major issues but not as important as that.

9. It is quite clear from what I have read on page 14, the first letter, that EAB specified the beneficiary as Dai Han. It is equally clear from the letter of instruction on page 13 that the beneficiary is "KEB for account of Dai Han". As I said the question then arises as to who was the beneficiary. In order to determine that I have to look at the whole of the documentation, and not at any particular line on any particular page.

10. Before I pursue that point, I should finish with the 4th of June, because it is quite clear that, although the Letter of Guarantee, and I shall call that "the LG", was addressed to Korea Exchange Bank, Seoul;, it was not sent to KEB Seoul, but was sent, or given or delivered to CTC, and CTC on that same date, 4th June, wrote to the manager of KEB in Kowloon and asked them to telex their head office in Seoul with the contents of EAB's letter - that appears from page 27. KEB Kowloon complied with that request on the next day, as appears from page 23, and in due course, as I shall point out in a moment, the contents of the letter from EAB were communicated to Dai Han in Korea.

11. Now, that is the 5th of June, and to the beholder it is not entirely clear who the beneficiary was, because the instruction was either Dai Han if EAB acted on page 14, or KEB for account of Dai Han if EAB acted on page 13. The letter at page 20, as I have said, was to KEB simpliciter. That being so, I an entitled to look beyond the face of the document and see what the various parties believed to be the situation.

12. Oh the 6th of June, Mr Woydt and Mr Marron reported to their Head Office by telex on whit they were doing, and they dealt with the various things that they were doing for CTC and for Mr and Mrs Chan; and one of the things that Mr Voydt and Mr Marron said was that they were issuing a bid bond to Korea Exchange Bank, Seoul for US$528,000. That is in accordance with the letter at page 20 and, on the face of it, would support the contention that the bank believed it was issuing the L.G. in favour of KGB. The telex is at page 36.

13. But, unfortunately, the telex does not end there. Under item (11), there is a reference to a bid bond. Now, "bid band" of course also appears in the heading at page 20, and I have to ask myself, among other things, what a judge should assume a banker believes it is doing, and I have to ask myself, among other things, "Could EAB, as a responsible banker, have ever believed that KEB would be bidding for a coal contract with Dai Han Coal Corp.?"

14. It is not as if EAB did not know what this was about, because the first paragraph of the letter of instruction, and the first paragraph of the L.G. make specific reference to a bid bond for the supply of the anthracite coal between Dai Han and CTC: So I look further into this telex, and I see these words and this is over the telex signature of Mr Woydt, who was one of the signatories of the LG itself:-

"Subject requested us to issue a bid bond in favour of Dai Han Coal Corp. Seoul, Korea in relation to a contract of supply 400,000MT anthracite coal from Mainland China to Korea. The stand-by L/C was issued to Bank of Tokyo as security for banking facilities ....." etc.

15. If, as a matter of strict construction, I come to a conclusion, or cannot come to a conclusion, as to the beneficiary of the document being Dai Han, then for various reasons of estoppel, I shall have to take into account what EAB thought and believed it was doing at the time, and page 36 is something that I shall have to bear in mind.

16. Now, on the 6th of June, the EAB prepared and issued a BR 657, which comes in five parts. There is a set of BR 657s exhibited, it is Exhibit 19, but those are the revised version produced in 1982: Basically, however, they are the same. The 5th part of a BR 657 is called the "Guarantee Control Card", and the Guarantee Control Card of the 6th of June prepared by EAB contains the following two lines:-

17. In view of certain arguments addressed to me on gratuitous guarantors, I should point out that, on page 33, a commission of $11,248.24 was charged for the issue of that guarantee.

18. On the next day, KEB Seoul, "without any responsibility" on its part, communicated to Dai Han the contents of the telex from KIM Kowloon, which contained the contents, but not the heading or addressee, of the LG with its number. That is a document with a Korean reference, which appears at the bottom left-hand corner of page 40, and, quite apart from the words I have already read, "without any responsibility", it contains these notes:-

"As this massage has been advised by cable, we reserve the right to make such corrections may be necessary upon receipt of the mail advice and we assume no responsibility for any errors and/or omissions in the transmission and/or translation of the cable.",

and then it is chopped "we transmit this unauthorised cable for information only without any responsibilities on our part", and also the status of the cable - "No test", "For information only."

19. The next day, that is the 7th of June, page 42, CTC asked EAB to amend the - what they called " the 2% bid bond" which I, for case of reference, call "the LG.", for the supply of 390,000 MT instead of 400,000 MT with the other term's and conditions remaining unchanged. Those were the instructions - "other terms and conditions are remain unchanged." The reference of that is A80/032.

20. FAB on the same day acted on that application for amendment, but it did not effect the amendment in the way in which it appeared usually to have acted, as will be apparent from the latter part of this judgment. It re-wrote the LG. It was not asked to re-write it, it was not asked to re-issue it; it chose to do that - but I attribute to it the highest possible motive for having done so, because it appears to me, from the documents I have seen, that it realised that the 4th of June letter was incorrectly addressed, and it had not obeyed the instructions of its customers.

21. Page 44A is an example of the re-written LG of the 7th of June, and the addressee is "Korea Exchange Bank for account of Dai Han Coal Corporation"; the whole thing was re-written, substituting 390,000MT for 400,000MT. That was communicated to KEB Kowloon who, on the same day, the 7th of June, sent a telex to KEB Seoul: page 53. But a1l KEB did was to communicate the amendment, it did not communicate the change of addressee at the top of page 44A, and it is common case that page 44A was never seen by KEB Kowloon, KEB Seoul or Dai Han.

22. On the 11th of July, CTC asked for a further amendment of the LG, that is page 66A, and it involved three things:- an increase in the amount to US$672,500, a change in the percentage of the bid bond from 2% to 5%, and a drastic reduction in the tonnage from 390,000MT to 200,000MT. In other words, they were bidding very much more for very much less coal.

23. On that same day, the 11th of July, EAB issued letter of amendment. This is a letter of amendment, as appears on page 71. It is addressed to "KEB for account of Dai Han" and it says:-

And that letter was copied to CTC.

24. Now, counsel will appreciate that I have not read the whole of the letter. I have not done so deliberately because I am now going to come to certain other parts of it.  After "Dear Sirs," (that shews a singular lack of knowledge of a limited company), it reads as follows:-

"Re: Our Letter, of Guarantee No. 505354 date 7th June 1930 US$528,000 in favour of Dai Han Coal Corp.".

25. That is a reference back to page 44A: It is not a reference back to page 20. But the number is the same. It is not "505354A, for amendment", or"4505354/1 for re-issue", and it is not "505354A for replace-ment". It is the same number. The words which appear are "in favour of Dai Han Coal Corp,

26. It is urged upon me that that heading cannot in any way add to or detract from the substance of the letter. If I were to accept that argument, and there is some force in it, and I go to the letter itself, I see at the end of the last paragraph these words - Please advise beneficiary accordingly."    I am told by counsel for FAB that that is a mistake. However, it appears from Exhibit 2B that it has been added quite deliberately; "Please advise" are not on the same line as "All other terms and conditions remain unchanged"..The typeface seems to be slightly different, and it is angled, as is "beneficiary accordingly.".

27. As I say, this is copied to CTC, but it is addressed to "KEE for account of Dai Han". I have to ask myself what did EAB believe at that time. I say I have to ask myself; I have to ask myself if I come to a certain view on the construction of the documents. The beneficiary could not be the addressee, KEB. It can only be the person for whose account KEB was designated by CTC to be the recipient of any money paid under the LG.

28. As I say, counsel for EAB has said that is a mistake , but it is a mistake by Mr. Woydt and by Mr. Un, and Mr. Woydt is one of the gentlemen whose signature appears at the telex on page 36, (on the day before the 7th of June letter), telling his Head Office in Hamburg that Dai Han is the beneficiary.

29. On that very day, there came into existence a contract between Dai Han and CTC. There is no evidence before me as to when the document was in fact signed, but page 65 shews that it is dated the 11th of July. It is for 200,000MT and it must be apparent, therefore, that CTC had bid in an increased sum for 200,000MT a little time prior to asking EAB to amend the LG, as appears on page 66A.

30. In this part of the action,I am not concerned with what appears on page 60, but I am concerned with what appears on pages 63 and 64. On 63 there appears a force majeure clause which reads as follows:-

The important words are "... may be cancelled by the seller (that is CTC) provided that the seller notify the buyer (that is Dai Han) promptly by cable of the occurrence of the event which gives rise to force majeure ?" and it is common case, not only between the parties before me, but also between them and the party not before me today, that is CTC, (because their counsel mentioned it in another context in the middle of this hearing), that there never was such a cable, and nobody has ever invoked force majeure.

31. On page 64, there is a requirement that CTC "establish a performance bond with the bank in favour of Dai Han Coal Corp. for not less than 5% of the contract value, valid for three months after the latest real shipping date or any extension thereof, available for payment against simple receipt of buyer at sight on the authorised foreign exchange bank in Seoul, accompanied by the statement of buyer stating that supplier and/or beneficiary have not complied with the terms and conditions of the contract and it should be released upon instructions of buyer after satisfactory completion of the contract or on its expiry date, whichever maybe sooner. In either case, performance bond can be released only by instruction of buyer." Those were the terms which CTC voluntarily went into that contract.

32. I need do no more than mention this date, because CTC is not before me in this judgment; but it is a matter that its banker might well wish to consider in some other context.

33. On 14th July, a commission was charged on that amendment (page 82), and it is charged on that amendment thus - "Our Letter of Guarantee No. 505354 for $672,500.": page 76. If the LG is solely page 44A, that cannot be correct, because 44A was $528,000. But what clearly FAB is doing is treating the whole of the series of documents as one thing.

34. Seven days later, that is 10 days after the date appearing on the contract, CTC asked EAB for a further amendment and the heading of it is of interest: Page 85A. It is signed by Mr Chan:-

35. What was being sought from FAB was a different creature. Whichever way you look at it, it was a different creature. It was a performance bond, and not a bond against a bid which might or might not be made, and which might or might not succeed.

36. EAB acted on that. There were some rude internal comments, justifiable in the circumstances, and they issued a letter on page 86; it is addressed to "KEB for account of Dai Han", and it is headed as follows: -

"Re: Our Letter of Guarantee   No. 505354 dated 7th June 1980 for US$528,000 and its amendment for US$672,500 dated 11th July 1980 in favour of Dai Han Coal Corp."

But it does not set out everything all over again. It is just dealt with it by way of amendments No. 1 is this - "The Letter of Guarantee No. 505354 is to be changed from Bid Bond to Performance Bond.", and then there is an increase, and this letter ends with the words, which, again, are angled - "Please advise beneficiary accordingly."

37. If I have to look into the mind of EAB, I look into it at the 23rd of July by looking at the first page of a BR 657, which was issued two days later, and the example I choose is 104A:-

38. On the same day CTC asked KEB Kowloon to communicate that amendment, and it is interesting to note that what KEB Kowloon was asked to communicate to Seoul was not just the page I read, page 36 of the 21st of July, but also the amendment of the 11th of July on page 71. That was done on the same day, as appears from page 107, and was received the same day in Seoul, and the following day was communicated to Dai Han as appears from 109.

39. For reasons that I need not go into, a further request was made by CTC for amendment to extend the expiry date of the guarantee - that appears on page 112, the letter is of 24th of July.

40. EAB obeyed that instruction on 25th July, on page 113 It issued a letter addressed to "KEB for account of Dai Han", and it was headed:-

"Re: Our Letter of Guarantee No. 505354 (for Performance Bond) for US$528,000 dated 7th June 1980...":

But that is wrong, because the Letter of Guarantee No. 505354 for $528,000 most certainly was not for a performance bond: It was for a bid bond.

And that was copied to CTC.

41. On that same day, Page 120, CTC asked KEB to send a telex with test to the Head Office in the terms of the letter I have just read. Also on that day, it is quite clear if one looks at page 121, that the page 113 letter never sent to KEB, although it is addressed to it, but then it is released to the bearer of page 121.

42. KEB Kowloon then sent a test telex to KEB Seoul on the same day, and that appears at page 123, and it is most carefully worded so that it would avoid any duplication - "We wish to test our previous messages sent you some time ago. Please avoid duplication.".

43. KEB Seoul communicated that to Dal Han the following day, as appears on page 124, and that has a chop,

"IF YOU RECEIVED THIS CABLE PLEASE AVOID DUPLICATION".

44. A clearer copy appears on page 125 and 126. 126 contains these words in print:

"N.B., If the above-mentioned amendment is not acceptable to you, please inform us by letter immediately.".

45. Somebody has written on this in Korean:

46. For that amendment, a further commission was charged of $6,463.96, page 130. A BR 657 was issued, which shews the beneficiary as Dai Han Coal Corporation, and there, for one moment, I will break my chronology.

47. Reading the two letters of the 4th of June together, I am in no doubt that the sender intended Dai Han to be the beneficiary.

48. Reading the two letters together, I am of opinion that any responsible banker would assume that Dai Han was the beneficiary.

49. Ignoring pages 14 and 15, I have reached the conclusion, as a matter of construction, on page 13, that what was intended was that Dai Han should be the beneficiary, and that KEB should be either the advising bank, or the recipient of the money, carrying with it the burden of paying Dai Han in such manner as Dai Han might direct.

50. Now, were the parties ad idem when the letter on page 20 was issued?

51. I believe that they were for a number of reasons.

52. First of all, if I read the first paragraph on page 20, it is quite clear that EAB knew that the LG was for a bid by CTC for a contract with Dai Han: But an L/G for bid bond must guarantee the bidder; it cannot guarantee the bidder's bank. Mistakes have been admittedly made throughout the documentation by all the parties concerned, and "KEB Seoul Korea" was undoubtedly a mistake; that did not conform with the instructions given by CTC, and I do not believe, it was ever so intended by EAB; and I am fortified in that belief by Mr. Woydt's own telex to Hamburg of the 6th of June, which I have read.

53. Taking page 20 alone as a matter of construction, I hold, and, as a matter of belief, I am firmly of opinion, that EAB intended the beneficiary to be the Coal Corporation (Dai Han) and not its banker, KEB.

54. An interesting argument on benefit by bankers was addressed to me by Mr. Mitchell, but the fact that a banker may benefit by holding its client's money for a time, or charging its client exorbitant interest for a time, does not make it the beneficiary of an LG.

55. I have reached the conclusion that Dai Han was the beneficiary in a number of ways, some of which I now recite are repetitions of what I have said already:

56. On the single document itself, if read as a whole, that is at page 20;

57. On the document at page 20 read with the letter of instruction at page 30;

58. On the document page 30 read with the two letters of instruction;

59. On the documents read with Mr. Woydt's explanation of what he himself intended to do;

60. On the whole string of 505354 read as a whole, as I have been invited by counsel for all these parties to do;

61. On what appears in the documents at the time of the conversion of the bid bond into a performance bond;

62. On the admitted knowIedge of EAB of what these documents were for, for whom they were intended and that they were to be acted on;

63. On the knowledge of EAB, at the time of the conversion into performance bond that they had been acted on by somebody other than KEB; because I apprehend that nobody in KEB expected the Directors and Shareholders of KEB to supply coal to the Dai Han Coal Corporation; and if I were wrong on any or all of those, I would say that EAB would be precluded from asserting to the contrary because of its knowledge that these documents were intended to be acted upon by Dai Han and because of its knowledge - express knowledge that it had been acted on in relation to the conversion from bid to performance, and implied knowledge from everything else - that it was intended to be and had been acted on by Dai Han.

64. That deals with the first point in this case.

65. Before I pass to the next section of this, I must remind those listening to what I say, that morality does not enter into the decisions of this Court, or even into judgments.

66. CTC on the 15th of November, without informing KEB Kowloon, without informing KEB Seoul, without informing Dai Han went to its banker EAB, and asked EAB to cancel the LG. EAB, believing that it was lawful, proper banking practice acted on its clients' instructions, and a Mr. LEE put "REDEEMED" chops all over the original letter which was handed to him by CTC. He did not put on the "CANCELLED" chops that appear at page 164, and he appears not to know who put them on or when: See Exhibit (?) CTC did not see fit to tell anybody that EAB had obeyed those, its, instructions.

67. Mr. Mitchell in a singularly persuasive argument which - nothing to do with him - fell on slightly deaf ears, sought to persuade me that the L.G. was revocable without notice to the beneficiary, without notice to the advising bank. He invoked the U.C.P. and certain authorities which, he said, supported his contentions:-

68. I am of opinion that he is mistaken and. that EAB, although acting honestly and, as it thought, properly, was acting mistakenly in cancelling the document.

69. In my judgment, a performance bond guarantee issued by a banker is not revocable until either the completion of performance, the expiry date or non-performance resulting in the underlying contract coming to an end; that it is in the same category as in irrevocable Letter of Credit.

70. I reach that conclusion as a matter of law on the following authorities:

71. I reach it as a matter of prudent practice, and, in this particular instance, I reach it on the facts of this case, which include the concessions and admissions made by EAB through its counsel. Quite apart from anything else that I have said, this was a document issued by a Hong Kong banker with the intention that it should be communicated to parties in a distant land and acted on by them.

72. In my judgment, it must have been obvious to EAB, if it had stopped and thought about that aspect of it, that it should either have ascertained from its customer, CTC, that the beneficiary and/or the advising bank, had been informed or should have said,

"Unless and until you or I inform them, I am not going to cancel this",

or words to that effect.

73. I also hold that it was not open to EAB unilaterally to issue the letter of the 7th of June as a replacement or re-issue, to take the place of the 4th of June, without any request therefor by its client, and I hold that its doing so in nowise detracted from the nature of the letter of the 4th of June which continued to subsist as against EAB. That is my finding (in addition to the other ones).

74. On the 17th of March Dai Han presented, through its banker, KEB Seoul, a claim on EAB. That document appears at page 204, and I must add this that the document is what might be called a "collection letter", and for the purpose of this judgment, between these parties, I consider it to be a claim. That does not mean to say that I would necessarily consider it a claim as between CTC and EAB, because that is something to be litigated shortly after this judgment is concluded. There is no doubt that it relates to 505354. It refers to the 4th of June, 1980, but gives the amount of $706,125, which means the claim is being made on the series 505354, that is, 4th of June as re-issued, plus all the amendments: and it includes a statement, a receipt and two drafts: pages 207, 206 and (?) (?) respectively.

75. Now, this document was accompanied by two bills of exchange in favour of KEB and endorsed, and they were addressed to EAB: Pages (?) and (?). It included a receipt from Dai Han Coal Corporation itself - that, of course, is the buyer mentioned at page 64 - and it also has a statement by Dai Han addressed to "TO WHOM IT MAY' CONCERN" saying that CTC had failed to complete the underlying contract. EAB received those documents on 24th March.

76. EAB replied immediately by telex, which is to be found at page 187, and dated the 26th of March, in these terms:

77. Back came a telex from KEB Seoul, at page 190, expressing surprise by the beneficiary of the L/G, that is what it says, saying they never agreed to the cancellation referred to at page 187, or to returning the original for discharge, and asking EAB to honour its guarantee in accordance with Article 8B of the U.C.P.. That was received at 1842 hours on the 31st of March,'that is, just under six hours before the expiry date of the LG. Those documents were in due course returned to KEB under cover of letter of the 7th of May, at page 203.

78. A number of points is made on that claim.

79. The first is this: It is not a claim under the L/G, because it refers to the 4th of June. I do not believe that I have to go further into that, because I have already said that I regard everything from that 4th of June to the 25th of July as one document. But, even if that were equivocal, the sum "$706,125" would make it quite clear to EAB what was referred to, because it is 505354 (and they themselves have chosen to put no "A" on it or no stroke and another number, and to retain it right through). The construction of these documents, and the compliance with the requirements contained in the original L/G are for the protection of EAB, so that it should know under what the claim is being lodged; and, in my judgment, the"4th of June"is not such a matter as would enable EAB to disregard the claim and not to honour the L/G. However, that does not stand alone.

80. The second paragraph of the L/G reads:

"Payment under this guarantee is available against your receipt accompanied by a statement certifying that the accountee has failed. to complete the relative contract.":

And what Mr. Mitchell says to me is "Your receipt' means 'your receipt', and "your receipt" in the 4th of June letter was addressed to KEB and KEB only, it could not be Dai Han's receipt, (which is page 206)": But EAB took it upon itself to re-issue the 4th of June letter on the 7th, and the 7th is "KEB for account of Dai Han Coal Corporation ".

81. And reading all of those together, and following my previous findings, in my judgment, the receipt supplied at page 206 was ample fulfilment of the requirement either on page 20 in paragraph 2, or on page 44A in paragraph 2.

82. If I were wrong on either or both of those, I would hold that the bills of exchange, both the first and the second of the tenor, addressed to EAB and endorsed by KEB, would amount to a receipt by KEB for the purposes of either page 20 or page 44A, if "your" were to mean KEB and not the beneficiary.

83. Now, there follows these words,

".... accompanied by a statement certifying that the accountee has failed to complete the relative contract.":

It does not say,

".... your receipt accompanied by your statement .....",

It does not say,

"..... a receipt accompanied by a statement ?":

It says,

"....  your receipt accompanied by a statement ...."

and where "your" appears, and "a" follows, in my judgment, it means that any statement will do, provided it is someone with the knowledge of the contents of the document; and who better than Dai Han, whose statement it was at page 207? Indeed, disgressing for a moment, it might well be that EAB would have taken exception to a statement by KEB that there had been a failure to complete the relative contract, because it would say, "How on earth do you know? That is not a proper statement to put forward when claiming under an L/G.".

84. In my judgment, page 207 is a sufficient statement for a claim to be made.

85. The next objection is that the claim was not accompanied by the original L/G.

86. Mr. Mitchell addressed me at some length on the wisdom and prudence of having the original L/G in the hands of the beneficiary with everything that he put forward, I am in entire agreement: But it has nothing to do with this particular Action. It could be of considerable importance if what had been communicated to Dai Han by EAB Seoul, differed from what had been issued by BAB; but that is not this case. It could easily have been provided for in the L/G by saying,

"Payment under this guarantee is available against your receipt etc. accompanied by the original of this document",

or

"accompanied by this L/G."

87. It chose not to put in some such wording. It could have said to its client, "We're sorry; we are not going to risk this when we are dealing with a far away Republic, the commercial practices of which we may not have complete knowledge; we want the original L/G": I am sure CTC would have said, "Yes"; but such words are not there, and, in my judgment, the absence of the original does not defeat the claim.

88. But, I will repeat I am entirely in agreement with the submission of Mr. Mitchell that, as a matter of prudence and common sense, an original ought to be kept in the possession of the beneficiary.

89. Another point that was raised was that there was general unreasonableness in Dai Han, or, alternatively, KEB Seoul, in relying upon untested telexes not emanating from the bank, in fact relying on those telexes at all.

90. Again, I would say I am in agreement in principle with what Mr. Mitchell has urged upon me, but I hold that it is not relevant in this case. If there had been a difference between what was communicated to Dai Han and what was issued, it would have been unreasonable for Dai Han to invoke what they had heard, because they ought to have taken the simple prudent precaution of saying to KIM Seoul, "You tell KEB Kowloon to get the original from EAB or from CTC, because we are not going to act on your telexes.". Here, there is no such difference; they are identical, so what does it matter? In my judgment, it does not.

91. And, lastly, there is this plea relating to force majeure.

92. What is urged upon me by Mr. Mitchell is that payment cannot be made unless there is a certificate of non-claim of force majeure. It is an interesting argument, but in my judgment it has no force. Force majeure would be a defence by CTC to a claim on it or its bankers made by Dai Han. If Dai Han claims or its bankers, and claims successfully, EAB claims on CTC: equally, if Dai Han claims against CTC: It could be a defence in both of those. It is common case that it has never been raised, never been pleaded, from that day to this.

93. If a certificate of non-claim of force majeure had been required by EAB, it would have been a very simple matter, in fact, to put in the required words, under the second paragraph, such as,

"Accompanied by a statement that no claim of force majeure has been or is intended to be raised.".

EAB chose not to put any such wording. In my judgment, the absence of such a document is not fatal to the claim.

94. I have, and unhappily for Mr. Mitchell, found against his client on everyone of the defences that it sought to put forward. It is to be noticed that I have in nowise criticised it for putting them forward. It has found itself in a very difficult position, through no fault of its own, and on behalf of its Directors and Shareholders, and indirectly on behalf of its client, it has put forward all that it could properly put forward; and put it forward in the best possible manner, not stressing those points that are weak, and relying on those points that are strong.

95. There will therefore be judgment against EAB on this part of 323, and in 7356.

96. Annexed to this judgment is a document containing the statement of agreed facts made to me by Counsel on 24th January 1985 (A-B) in the forenoon and (C) in the afternoon.