First Bangkok City Finance Limited v. Thai Military Bank Limited
Read the full judgment text of HCA 7187/1988 on BabelCite. This High Court CFI judgment.
1. This is an application by the official Receiver as the liquidator of First Bangkok City Finance Limited (the plaintiff) for summary judgment order 14 of the Rules of the Supreme Court against the Thai Military Bank Limited (the defendant) for Swiss Francs 10,952,100.70 damages and interest.
|
HCA007187/1988 1988 No. A7187 IN THE SUPREME COURT OF HONG KONG HIGH COURT ---------------- BETWEEN
--------------------- Coram: Hon. J. in Chambers Date of hearing: 14th March 1989 Date of handing down judgment: 29th March 1989 ---------------------- J U D G M E N T ---------------------- 1. This is an application by the official Receiver as the liquidator of First Bangkok City Finance Limited (the plaintiff) for summary judgment order 14 of the Rules of the Supreme Court against the Thai Military Bank Limited (the defendant) for Swiss Francs 10,952,100.70 damages and interest. 2. On the 19th December 1985 the plaintiff, as lender, entered Into a loan agreement with People Plaza Co. Ltd. (People plaza), as borrower, a company registered in Thailand. In consideration of the loan agreement the defendant issued an irrevocable standby letter of credit (letter of credit) in favour of the plaintiff on the 24th December 1985. The letter of credit reads as follows :- "Gentlemen: 3. RE: IRREVOCABLE STANDBY LETTER OF CREDIT NO.282575 4. We, THE THAI MILITARY BANK, LIMITED of 34 Phayathai Road, Bangkok 10400 Thailand, hereby issue to FIRST BANGKOK CITY FINANCE LTD., HONG KONG ("the Beneficiary") for the account of The People Plaza Co., Ltd ("the Debtor") an irrevocable Standby Letter of Credit No. 282575 for a maximum aggregate amount of Swiss Franc 10,000,000.00 (CHF10,000,000.00) plus interest thereon at the rates per annum calculated in accordance with the provisions of a loan agreement ("the Loan Agreement") dated December 19, 1985 between the Debtor and the Beneficiary. Terms used but not otherwise defined herein have the meanings defined in the Loan Agreement. 5. Payment under this Letter of Credit will be made by us to the Beneficiary (which expression where applicable shall include its assignee or assignees their successors or assigns) forthwith on receipt of a tested telex from the beneficiary stating the amount claimed and certifying that:
6. The Beneficiary's tested telex demand shall constitute a sight draft drawn on and for account of the Debtor by the Beneficiary. 7. The amount payable by us under this Letter of Credit will be the amount stated in the telex plus interest thereon at the applicable rate of interest under the Loan Agreement until the date of receipt by the Beneficiary, and shall be paid to the credit of an account of the Beneficiary at the address of the Beneficiary set out above or such other address as the Beneficiary may from time to time advise.
8. All payments to be made by us hereunder shall be made without set-off or counterclaim and free and cleat of, and without deduction for or on account of, any taxes, levies imposts, deductions, charges, fees or withholdings of any nature imposed, levied, collected withheld or assessed by any country or any jurisdiction. 9. We hereby authorise the Beneficiary to apply any credit balance on our account or accounts with the Beneficiary or any of its branches in or towards satisfaction of any sum due from us hereunder. For this purpose the Beneficiary is authorised to purchase with the moneys standing to the credit of any such accounts such amount of Swiss Franc as may be necessary to effect such application. 10. This letter of Credit is to become effective on and from December 30, 1985, the date on which the Loan is drawdown under the Loan Agreement upon our receipt of authenticated telex advice from First Bangkok City Finance Ltd., Hong Kong that funds for CHF10,000,000.00 has been credited to the Thai Military Bank Ltd,'s account for credit of "the Debtor" and shall expire on January 11, 1991. 11. Except so far as otherwise expressly stated, this Letter of Credit is subject to the Uniform Customs Practice for Documentary Credit (1983 Revision) International Chamber of Commerce (Publication No. 400)
12. The loan agreement was later varied on the 27th December with the concurrence of the defendant. 13. On the 28th July 1986 the plaintiff was ordered to be wound up on the grounds of insolvency when the official Receiver was appointed to be the provisional liquidator. The official Receiver was later confirmed as the liquidiator. 14. During investigations carried out by the Official Receiver into the affairs of the plaintiff, it was discovered that the management of the plaintiff had absconded a few days before the winding-up order was made, having taken with them or having destroyed a large number of important documents. The official Receiver did not find any tested telex codes relating to the defendant amongst the plaintiff's documents. 15. Demands were made by the official Receiver in March 1988 against People Plaza and the defendant for payment, but these demands were rejected on the grounds that there was uncertainty as to the true creditor. 16. On the 3rd May 1988 the official Receiver sent to the defendant what was alleged to be a tested telex demanding payment which was the subject matter of Action No. A3462 of 1988 against the defendant. This action was, however, struck out by Godfrey J. on the 14th October 1988 for reasons which are unclear. However, on the 1st September 1988 the defendant received a second notice from the Bangkok branch of the Hongkong and Shanghai Banking Corporation that the Official Receiver contends is a tested telex that cured any defect there may have been in the first demand, which is in the following terms :-
17. No payment was made in respect of this demand with the result that the present action was instituted on the 4th November 1988. 18. In response to the plaintiff's summons under order 14, Mr. U. Sirasudhi, the Vice-Presidint and Assistant Manager of the International Banking Department of the Defendant, in an affirmation made on the 8th December 1988 avers that amongst financial institutions it is common that two financial institutions would agree on a particular code to be used in telex communications between themselves so that the telex communication bearing the code would be treated as authentic the code being known as the tested key. The particular code was a matter of top secrecy in the two financial institutions concerned. With regard to the document delivered by the hank to the defendant, the subject matter of the action, he states that on the face of it, the document only contains the word 'test' and does not purport to be a tested telex between two financial institutions of which the defendant is one. The blacked out portion deleted any reference to a test code and did not purport to emanate from the beneficiary so that he concludes that it does not amount to a tested telex for the purposes of honouring the letter of credit. 19. On the 2nd February 1989 a third telex demand was made by the Hongkong and Shanghai Banking Corporation on behalf of the Official Receiver which was without prejudice to the earlier demands. 20. For the purpose of the present application, Mr. Wong for the defendant relied solely upon the telex tested point, but also reserved his right to argue other issues if the matter goes further. 21. Mr Wong concedes that the plaintiff is the authorised beneficiary under the letter of credit but relies upon the provisions of Article 10 of the Uniform Customs and Practice for Documentary Credits (1983 Revision) which provides that the obligation of an issuing bank, the defendant, under a standby irrevocable letter of credit, only arises where the stipulated documents are presented and where the terms and conditions of the credit are complied with. Accordingly, as a result of the omission of the code number, he submitted that the defect is a matter of substance so that no liability accrues under the letter of credit. 22. It is clear that the official Receiver will never be in a position to ascertain the code number unless it is disclosed by the defendant. In every other respect the document of the 31st August 1988 complies with the requirements set out in the letter of credit. The defendant, in my judgment, knowing full well that the plaintiff is the authorised beneficiary under the letter of credit, has raised a specious and impossible requirement to resist the plaintiff's application for judgment. The argument presented does not amount to an arguable defence with the result that there will be judgment for the plaintiff with costs.
Representation: Mr Christopher Smith (official Receiver) for the Plaintiff. Mr R. Wong (Siao and Wen) for the Defendant. |