[2014] UKPC 10
Privy Council
Appeal No 0034 of 2013
JUDGMENT
Surinam Shipping
Ltd (Appellant) v Den Danske Bank A/S and others (Respondents)
From the Supreme
Court of Mauritius
before
Lord Mance
Lord Kerr
Lord Wilson
Lord Toulson
Sir Bernard Rix
JUDGMENT
DELIVERED BY
Lord Toulson
ON
16 April 2014
Heard on 29
January 2014
Appellant
(Surinam Shipping Ltd)
Shadmeenee Mootien Rogbeer
Respondents
(Den Danske Bank A/S)
Rishi Pursem SC
Nadeem Lallmamode
(Instructed by Fladgate LLP)
(Mauritius
Commercial Bank Ltd)
Patrice
Doger de Spéville SC
(Instructed by Blake Lapthorn)
LORD TOULSON:
1. The appellant is a Mauritian company. The respondent is a Danish bank. The dispute
concerns a letter of credit issued in relation to the sale of a vessel by the
appellant to a Danish company, Mecofish Ltd, which was acting as an
intermediary for a Spanish company. The
letter of credit involved three banks.
It was issued by a Spanish bank, Banco de Galicia, in favour of Mecofish
and was confirmed by the respondent. The
third bank involved was the Mauritius Commercial Bank Ltd (“MCB”). There is controversy about the role of MCB.
2. The letter of credit provided for successive payments of USD
140,000 and 75,000. The first tranche
was paid after some delay relating to the presentation of documents. The second was not paid and the appellant, as
transferee of the letter of credit, sued MCB in the Supreme Court of Mauritius
for USD$75,000 alleged to be due under it.
MCB pleaded in its defence that it had acted only as a “post office box”
under instructions from the respondent or, in other words, that its role was
limited to that of an advising bank. MCB
applied for the claim to be struck out but its application was dismissed and
the matter proceeded to a trial. For
reasons which are unclear, the appellant did not amend its claim to join the
respondent as a defendant, but the respondent was made a third party. In its amended defence the respondent
asserted that the appellant had failed to present documents compliant with the
conditions of the letter of credit prior to its expiry, and it denied the
paragraphs of the appellant’s pleading which alleged that MCB was liable to the
appellant.
3. The issues at the trial were whether MCB was merely an
advising bank (as MCB contended) or had undertaken responsibility to the
appellant for payment of the letter of credit (as the appellant contended), and
whether the appellant had fulfilled the conditions of the letter of credit. The trial judge decided both issues in favour
of the appellant. She gave judgment for
the appellant on the claim and ordered the respondent to indemnify MCB.
4. The respondent appealed.
MCB did not serve a notice of appeal, but it was represented on the
appeal by counsel who argued in support of the appeal of the respondent. The Court of Appeal (Matadeen Ag CJ and
Peeroo Ag SPJ) held that the role of MCB was purely that of an advising bank. It accordingly allowed the appeal and set
aside the judgment in favour of the appellant.
In view of its conclusion about the role of MCB, the court did not deal
with the question whether the appellant had complied with the conditions of the
letter of credit.
5. The appellant’s notice of appeal contains a number of
grounds but they raise essentially two issues: whether MCB ever accepted
personal responsibility to the appellant for making payments under the letter
of credit, and whether it was open to the respondent to dispute that issue
before the Court of Appeal. It is
convenient to consider the points in that order, although success for the
appellant on either would make the other superfluous. There was no argument before the Board on the
point left undecided by the Court of Appeal about whether the appellant had
made due presentation of the documents required under the letter of
credit. On the documents before the
Board the underlying facts appear to have been not entirely clear and there are
a number of gaps in the story, but it is unnecessary to explore those matters
for present purposes.
Role of MCB
6. On 5 September 1996 the respondent sent MCB a message in the
following terms:
“Please be informed Banco de
Galicia, Vigo, Spain has issued a irrevocable and partly transferrable
documentary credit, their ref no 8901/DCRE36596, in favour of Mecofish Ltd ...
the credit which is
confirmed by our bank.
At the request of Mecofish
Ltd we hereby transfer the above credit . . . in favour of Surinam Shipping Ltd
. . .
as follows:
Amount:
USD$140,000 as under B)
USD$75,000 as under D)
Date and place of expiry:
30.11.1996 in Denmark for presentation of documents, 15.10.1996 for shipment. This credit is available at the counters of
Den Danske Bank, Copenhagen as follows:
B) USD$140,000 against the
following documents:
Signed commercial invoice in
triplicate evidencing the full credit amount, and the amount payable now:
USD$140,000 and also stipulating the particulars of the vessel M4/V Sabena Star
. . .
Protocol of delivery and
acceptance signed by representatives of Campopesca and Mecofish Ltd.
Port clearance from the port
trust in Bombay or other authority to the effect that the vessel has left
Bombay bound for Vigo, Spain, legalised by the Panamanian Consulate, or other
authority. . . .
Declaration from the
Panamanian Register confirming that there are no mortgages registered and that
all taxes, etc have been paid and application to delete the vessel or change
the ownership has been filed with the Register, and that they will issue the
official certificate before 30 November 1996. D) USD$75,000 against the
following documents:
Signed commercial invoice in
triplicate evidencing the full credit amount, and the amount payable now:
USD$75,000 and also stipulating the particulars of the vessel MV Sabena
Star . . .
The certificate of deletion
or change of ownership to Campopesca, SA, from the Panamanian Register
confirming that the vessel is free from any registered encumbrances or
mortgages whatsoever.
Special conditions:
documents other than the commercial invoices to be issued – to whom it may
concern – and appearing only to have been signed by the parties stipulated.
Details of goods: M/V Sabena
Star . . .
Invoice to evidence shipment
from Bombay, India to Vigo, Spain.
Invoice also to evidence date of shipment. . . .
The documents to be
presented within validity date mentioned above.
Art 43 does not apply to this credit. . . .
Documents to be forwarded to
us in one lot by courier.
Reimbursement: upon receipt
of documents at our counters in order we shall remit proceeds as per
instructions received. . . .
Please advise this credit to
2 beneficiary [the appellant] without adding your confirmation. This credit is subject to UCP500 1993 rev
ICC.”
On 6 September 1996 MCB
forwarded the document to the appellant under cover of a letter headed
“Documentary Credit No 89014/DCRE 36596 for USD 215,000 by order of Mecofish
Ltd”. The letter stated:
“We annex herewith the above
documentary credit established in your favour by Banco de Galicia, Vigo and
advised by Den Danske Bank A/S Copenhagen.
This credit is irrevocable
on the part of the issuing bank but it must be understood that neither this
letter nor the attached advice conveys any engagement on our part.
We remind you that the
documents should be strictly in accordance with the terms of the credit and
must be consistent with each other.
Should you be unable to comply with any term please urgently communicate
with the applicant requesting the necessary amendment. The description of the relative goods have to
correspond exactly to the description in the credit.
Will you please pay special
attention to the terms and conditions underlined by ourselves and do not
hesitate to
contact us for guidance, if
need be.”
7. UCP 500 (or to use its full title “The Uniform Customs and
Practice for Documentary Credits (1993 Revision) ICC Publication No 500”)
included the following provisions:
“Article 1 – application of
UCP
The Uniform Customs and
Practice for Documentary Credits, 1993 Revision, ICC Publication No 500, shall
apply to all Documentary Credits . . . where they are incorporated into the
text of the Credit. They are binding on
all parties thereto, unless otherwise expressly stipulated in the Credit.
Article 7 – advising bank’s
liability
a. A Credit may be advised to a Beneficiary through another
bank (the ‘Advising Bank’) without engagement on the part of the Advising Bank
but that bank, if it elects to advise the Credit, shall take reasonable care to
check the apparent authenticity of the Credit which it advises. If the bank elects not to advise the Credit,
it must so inform the Issuing Bank without delay.
b. If the Advising Bank cannot establish such apparent
authenticity it must inform, without delay, the bank from which the
instructions appear to have been received that it has been unable to establish
the authenticity of the Credit and if it elects nonetheless to advise the Credit
it must inform the Beneficiary that it has not been able to establish the
authenticity of the Credit.
Article 9 – liability of
Issuing and Confirming banks
a. An irrevocable Credit constitutes a definite undertaking of
the Issuing Bank, provided that the stipulated documents are presented to the
Nominated Bank or to the Issuing Bank and that the terms and conditions of the
Credit are complied with:
i) if the Credit provides for sight payment – to pay at sight;
b. A confirmation of an irrevocable Credit by another bank (the
“Confirming Bank”) upon the authorisation or request of the Issuing Bank,
constitutes a definite undertaking of the Confirming Bank, in addition to that
of the Issuing Bank, provided that the stipulated documents are presented to
the Confirming Bank or to any other Nominated Bank and that the terms and
conditions of the Credit are complied with:
i) if the Credit provides for sight payment – to pay at sight…”
Under UCP 500 the duties of
an advising bank are thus clearly defined and do not include responsibility to
the beneficiary for payment of sums due under the documentary credit from the
issuing or confirming bank. In the
present case the letter of credit and the letter from MCB to the appellants
dated 6 September 1996 made it clear that MCB’s role was that of an advising
bank.
8. The trial judge said:
“In the present case the MCB
took a more proactive role in the transaction.
According to the letter of credit the DDB requested the MCB to advise
the Credit to Beneficiary No 2 ie Surinam Shipping ‘without adding your
confirmation’, and the MCB in turn informed Plaintiff of the letter of credit
by way of letter and does mention therein that neither the credit nor the
attached advice ‘conveys any engagement on our part’. However it did not limit itself to checking
the authenticity of the credit. It gave
advice to the effect ‘the description of the relative goods has to correspond
exactly to the description in the credit’ and urged Plaintiff to ‘pay special
attention to the terms and conditions’ which it underlined. It further invited Plaintiff not to have any
hesitation ‘in contacting us for guidance, if need be’. When the DDB highlighted discrepancies in the
documents, the Defendant, on 30 October 1996, wrote to Plaintiff informing it
of same and stating ‘we hold documents at your disposal, at your request we
shall be quite prepared to contact the first beneficiary’. Subsequently the MCB was actively involved in
the long exchange of correspondence between the parties communicating the DDB’s
demands and reservations to Plaintiff, holding the Plaintiff’s documents in its
possession, seeking instructions from Plaintiff and acting in accordance. Further the representative of Plaintiff testified
to the effect that when the matter dragged on, the Defendant advised Plaintiff
to submit all the documents under both B and D to ensure that payment would be
effected.
As such it cannot be said
that the MCB’s participation was restricted to checking the authenticity of the
credit as advising bank. Its involvement
went beyond that of an advising bank as per the UCP DC500.”
9. The Court of Appeal rejected the judge’s reasoning. It examined the correspondence between the
parties and concluded:
“There is no evidence to
indicate that the MCB had in any way added its confirmation to the documentary
credit that it was asked by DD Bank to advise to SS Ltd. Nowhere in the long exchange of
correspondence that ensued between the parties is there any indication that the
MCB was conveying any engagement on its part.
On the contrary that correspondence shows beyond any doubt that the MCB
was no more than an advising bank and DD Bank was the bank that had confirmed
the Credit. In the circumstances any
claim in relation to the documentary credit should have been directed against
DD Bank. As no claim could in law lie
against the MCB, the action of SS Ltd against MCB should have been set
aside. And as no action could lie against
the MCB, the question of DD Bank . . . taking up the defence of MCB and indemnifying
it could not arise.
It is also relevant to state
that the action of SS Ltd against the MCB is based solely on the letter of
credit. It is neither an action for
damages for negligence against the MCB nor the equivalent of an action for damages
for breach of warranty of authority…”
10. Ms Mootien-Rogbeer endeavoured to persuade the Board that the
trial judge’s analysis was right and the Court of Appeal were wrong, but it was
an impossible task.
The suggestion that by its
letter to the appellant dated 6 September 1996, enclosing the letter of credit,
MCB undertook a role beyond that of an advising bank, and accepted
responsibility for the payment of sums due under the credit, is contrary to the
entire language and tenor of the letter.
Throughout the correspondence which followed between the parties,
regarding both tranches of the credit, MCB acted as a channel of communication
between the appellant and the respondent, but the trial judge did not identify
and Ms Mootien-Rogbeer was not able to identify any letter which showed a
change in MCB’s role from that of advising bank to that effectively of a
confirming bank. The Board has examined
the correspondence and can see no basis for finding that MCB accepted direct
liability for payment of the credit.
Procedure before the Court
of Appeal
11. The trial judge delivered her judgment on 20 May 2009. The (present) respondent’s notice of appeal,
dated 8 June 2009, did not challenge the judge’s conclusion about the role of
MCB. The grounds of appeal related to
her finding that the appellants had presented all the necessary documents
within the period of validity of the letter of credit (which the judge found to
have been extended). MCB did not appeal
against the judgment but on the contrary it gave notice, dated 11 June 2009,
that it intended to resist the respondent’s appeal.
12. The respondent served a skeleton argument on 1 November 2010,
which was confined to the grounds set out in its notice of appeal.
13. The appeal was heard on 18 November 2010. The transcript of the hearing shows that
counsel for the respondent began his submissions by taking the point that MCB
was merely an advising bank and that it was therefore not under any liability
to the appellant so as to give rise to a right of indemnity against the
respondent. He developed his argument by
reference to the language of the letter of credit, the correspondence and the
provisions of UCP 500, without interruption by Ms Mootien-Rogbeer. His submissions took him some time and
continued into the afternoon.
14. When Ms Mootien-Rogbeer came to address the court, she began by
observing that there was no appeal by MCB and she submitted that the court
should disregard any submission made on behalf of the (now) respondent that MCB
was not liable to the appellant.
However, she made no reference to the fact that this point had not been
raised in the respondent’s notice of appeal, nor did she suggest that she was
not in a position to argue the point.
15. The court heard next from counsel for MCB. He submitted that the respondent was right in
its argument that there was no liability on the part of MCB. At this point
Ms Mootien-Rogbeer
intervened to remind the court that MCB had not appealed against the
judgment. The court indicated that it
was fully aware of this and invited counsel for MCB to continue, as he
did. It was therefore apparent that the
court was allowing the point to be argued.
The position taken by Ms Mootien-Rogbeer in the Court of Appeal was that
the court ought not to entertain it, because the respondent was not entitled,
in her words, to “step into the shoes of the defendant” (MCB), which had not
itself appealed against the trial judge’s finding of liability.
16. Before the Board, Ms Mootien-Rogbeer submitted that the respondent
was precluded from challenging MCB’s liability to the appellant before the
Court of Appeal by its failure to raise the point in its grounds of
appeal. She also repeated her submission
before the Court of Appeal that the respondent was not entitled to put itself
in the place of MCB so as to dispute the liability of MCB.
17. As to the first point, it would have been open to Ms
Mootien-Rogbeer to have objected in the Court of Appeal to the respondent
raising a point which was not in its grounds of appeal without obtaining leave
to amend, and to have opposed any grant of leave or to have submitted that any
grant of leave to amend should have been on terms, for example, that the
hearing was adjourned. She did not take
that course. The Board has some sympathy
with Ms Mootien- Rogbeer’s submission that she was caught by surprise, but even
so she had time (for example over the mid-day adjournment) to consider her
response. The Court of Appeal had a
discretion whether to allow the respondent to argue a point which it had not
originally raised in its notice of appeal, and the Board would not interfere
with its decision on a procedural matter of that kind unless it considered that
there had been a real miscarriage of justice.
This is not such a case, and in any event Ms Mootien-Rogbeer had a full
opportunity to present her argument on the role of the MCB to the Board (as she
had done to the trial judge).
18. The argument which Ms Mootien-Rogbeer made to the Court of
Appeal, and repeated before the Board, that it was not open to the respondent
to challenge the trial judge’s finding of liability on the part of MCB, which
had not itself appealed against the decision of the trial judge, is
unsound. A defendant which is entitled
to indemnity from a third party may have no interest in disputing its own
liability. Indeed, in the present case
MCB adopted the position in its skeleton argument before the Court of Appeal
that it was indifferent as to the outcome of the appeal, because if the present
respondent’s appeal was successful, both the claim against itself and the
respondent would fall, but if it was unsuccessful, MCB would be entitled to
indemnity. One of the purposes of a
defendant who claims an indemnity from a third party being able to join the
third party in the action is precisely in order that the third party should be
bound by any findings made by the court between the claimant and the defendant. The corollary is that a third party who is
joined in an action, and will therefore be bound by findings made between the
claimant and the defendant, is entitled to advance any defence which may be
available to the defendant.
19. For those reasons the Board dismisses the appeal.
