First Commercial Bank v. Euroseas Finance (Asia) Ltd

HCA012470/1982

BETWEEN

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Coram: Hon. Liu J.

Date: 27th May, 1983.

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JUDGMENT

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1. The facts in both appeals are substantially the same, and I do not propose to analyse them separately.  Suffice it for me to say that in each case the plaintiff bank was the negotiating or accepting bank in a letter of credit transaction. The plaintiff and the defendant are the same entities in both appeals. The plaintiff is a bank incorporated in Taiwan. The defendant is a finance institution incorporated in Hong Kong. In both cases, the defendant issued an irrevocable documentary letter of credit in favour of a certain beneficiary. There was, in the appeal in High Court Action No. 12469 of 1982, a transfer of the letter of credit by the beneficiary to a corporation which eventually presented a draft under the letter of credit for negotiation by the plaintiff bank. Subsequent to the opening of the irrevocable documentary letter of credit, the beneficiary in one case and the ultimate beneficiary in another presented a draft together with the requisite documents for negotiation by the plaintiff. In both cases, the plaintiff duly paid the draft upon presentation.

2. The contention in both appeals is also substantially the same. At one time, there was an argument advanced in the appeal in High Court Action No. 12469 of 1982 in respect to the letter of credit transfer, but as a result of a subsequent document exhibited, that is no longer in issue.

3. In the course of today's arguments in both appeals, it was further submitted by counsel on behalf of the defendant that the Marine Insurance Policy was not endorsed in blank in conformity with one of the letter of credit requirements. An original was shown together with the back page, and upon perusal, counsel for the defendant fairly and squarely abandoned his argument advanced in that direction. Again, that is no longer an issue between the parties to the appeal in each of the High Court Actions.

4. The pinnacle of both appeals revolved around the Certificate of Inspection. There were peripheral matters raised by Mr. Mok who was persistent as counsel should be, but suffice it for me to say that those peripheral arguments did not stand the test of a closer examination and were instantly disposed of for the reasons indicated in the exchanges between counsel and the bench. Solutions to the matters so broached are obvious, and I do not propose to have them repeated.

5. I return to the central issue, that is to say, the Certificate of Inspection. In the letter of credit in each case, it was stipulated that negotiation of the draft drawn thereunder was to be accommpanied by, inter alia, an Inspection Certificate issued and duly signed by the accountee i.e. the drawee. In each case, a Certificate of Inspection was produced upon presentation of the draft for payment under the respective letter of credit. In each case, after acceptance of the documents together with the letter of credit and payment by the plaintiff as negotiating bank and upon dispatch of the same documents to the defendant for collection pursuant to its confirmatory undertaking under the same letter of credit, the defendant rejected the Certificate of Inspection and returned all the documents with a complaint that the Certificate of Inspection was a forgery.

6. Divers aspects of the case were gone into and dealt with on affidavits but the answer given by the plaintiff through successive counsel has been and still is that by virtue of Articles 8(b), 9 and 33 of the Uniform Customs and Practice for Documentary Credits, the negotiating bank was not called upon nor obligated by each of these letters of credit to verify the genuineness of documents. The Certificate of inspection in each case appears on its face to be in accordance with the terms and conditions of the credit and, moreover, by virtue of the aforesaid Articles of the Uniform Customs and Practice for Documentary Credits, the plaintiff as negotiating bank was in no way responsible for any deficiency, inaccuracy, forgery or falisfication.

7. The matter went before the learned Master on the 28th of April 1983 under an Order 14 summons, and arguments pitched at that level were disposed of in favour of the plaintiff resulting in judgment being given against the defendant with costs and interests as claimed.

8. The matter in each case was brought on to appeal, and both appeals come before this court today. Further affidavits have been filed by and on behalf of parties. As far as the defendant in each case is concerned, it is alleged that specimen signature of the accountee was procured by the defendant and thereafter supplied by the defendant to the plaintiff at the time of the issuance of the respective letter of credit. It is claimed on behalf of the defendant in each case that the specimen signature was given to the negotiating bank well in advance and that at the time when the draft under the respective letter of credit was presented for payment, there was absolutely no justification on the part of the plaintiff bank to honour the draft, though acting on the open request in the confirmed credit, in the awareness that the signature on the Certificate of Inspection was different from and, in fact, bore little resemblance to the specimen signature so allegedly supplied. The plaintiff denied the receipt of such specimen signature in each case. I have to go on the assumption that the defendant would be able to substantiate its allegation of dispatch of such specimen signature to the plaintiff at the trial. But even on that assumption, it would be incumbent upon this court to consider carefully at least two aspects: First, what is the true nature of the allegation and secondly, whether the materials now disclosed are sufficient to raise the contention sought to be upheld. What is the allegation? There can be numerous possibilities as to why specimen signature was or had to be allegedly supplied through or by the defendant to the plaintiff. The decision of the learned Master as challenged by the defendant was focussed on the Certificate of Inspection which remains the target of attempted criticisms though on a somewhat different front.

9. It is not completely impossible to imagine as one of the many possible motives that the specimen signature was furnished for identifying the signature on the Inspection Certificate; hence the plaintiff's acceptance of the Certificate of Inspection in the alleged knowledge of the authorized signature would be censurable. That represents the true purport of the defendant's contention, which would, naturally, attract the usual criticisms, viz. not only has a defendant in an Order 14 application to condescend upon particulars but a defendant must first make out a reasonably clear-cut issue before he can hope to persuade the court that such issue as defined does raise a triable defence on the merits.

10. Counsel's argument is clear but unsupported by sufficient factual allegations. With a little charity, am prepared to assume the defendant as meaning to assert that specimen signature was supplied to the plaintiff on purpose, that not only had it been so supplied to the plaintiff but it was supplied specifically for that letter of credit transaction, and that not only had it been supplied for the particular letter of credit transaction but it was knowingly supplied for the plaintiffs guidance in the verification of the signatory to the Certificate of Inspection. On those assumptions, I pass next to consider if there are sufficient materials to support what he had meant to assert. Save for a bare allegation of dispatch, as I have stated, in the affidavit, the purpose for which the signature was allegedly given as a specimen signature has never been disclosed or specified. It has also not been suggested that the plaintiff was, at any time, informed of any possible connection between this alleged specimen signature and the letter of credit, let alone the Inspection Certificate.

11. Miss Yuen was at plains to illustrate that such allegation was not only far-fetched but incredible. It was common ground that the letter of credit imposed no limitation on the free selection of the negotiating bank for the presentation of the draft drawn thereunder. It would have been extraordinary, without any explanation, for the plaintiff bank to be singled out for the supply of the specimen signature if in fact that was the case. If not, we have never been told as to how many other banks had been so supplied with the specimen signature or whether all the possible negotiating banks had been so furnished with the like information. There is also no evidence that in fact the plaintiff bank had prior knowledge of these letters of credit or that the beneficiary would likely approach the plaintiff.

12. Miss Yuen drew the courts attention to various other pitfalls which make the belated allegation of the defendant in these appeals almost unbelievable. Be that as it may, it has to be acknowledged that this is neither the time nor the place for factual disputes to be resolved. But when the bare allegations on the affidavits are examined, it cannot be said that they have or have sufficiently provided facts to found the contention advanced on behalf of the defence.

13. The court has been asked to speculate on the true purport of a the allegation and the court has been requested to surmise the possible extent and scope of the very barebone of an alleged supply of a specimen signature. In full appreciation of the difficulties, Mr. Mok invited the court to grant leave to the defendant under the heading of "some other reasons for trial". Mr. Mok emphasised that "wherever there are circum-stances which ought to be investigated, there ought to be a trial and judgment should not be given under Order 14%.  There has been no clear-cut issue disclosed, the defendant has not condescended upon particulars and as Miss Yuen submitted, the factual allegations have not clearly and concisely stated what the defence is and what the facts are relied upon as supporting it. Miss Yuen, counsel for the plaintiff in both appeals, must, in my judgment, be right that the court must not indulge in speculation and must be confined to the particulars as given in the affidavit, from which the defence and the supporting facts, if any, are to be found.

14. In conclusion, it is my view that the defendant has neither set up any or any clear-cut issue for consideration; nor has it condescended upon sufficient particulars to enable the court to search for a bona fide triable defence on some conjectural topics. In the circumstances, the belated contention raised on behalf of the defendant by counsel must fail, and for the reasons commented on earlier in this judgment, the allegation of forgery can found no basis for a bona fide issue as against the plaintiff as a negotiating bank.

15. The learned master was, in my view, perfectly correct and his decisions on both these summonses can, in no way, be faulted.

16. The belated contention advanced on behalf of the defendant in both appeals has, in my view, no substance and do not warrant the granting of any leave to defend to the defendant for these matters to be re-ventilated. For all these reasons, I propose to have the appeal dismissed in each case. I order, in each case, the appeal be dismissed with costs.

Representation:

Miss M. Yuen instructed by Robert W.H. Wang for the Plaintiff.

Mr. Y.C. Mok instructed by John Ip & Co. for the Defendant.