Экзамен зачет учебный год 2023 / The-independence-principle-of-letters-of-credit-and-demand-guarantees-150-373

II. Claims by the Paying B ank

various grounds including that of money paid under mistake. Tuckey J. said that this was a personal common law claim directed at HSBC Jersey, who, it was said, had and received Tejarat’s money. He stated that, if they did, Tejarat could recover since the claim did not depend upon proofol impropriety or want of probity. However, relying on Agip (Africa) Ltd v.Jackson,42 he rejected the claim on the ground that it was not possible to identify the money received by HSBC in Jersey as the money which came from Tejarat’s account with BV in Munich and Tejarat could not trace their money to the moneys received by HSBC in Jersey, the reason for this being that Tejarat’s money had become mixed with other moneys in the process of bank transfers. Tuckey J. explained that:

[t]he undisputed evidence as to what would have happened is that BV’s account with Dresdner Bank, its correspondent in Frankfurt, would have been debited with the payment. If there was enough money in this account to cover the payment, it would not have been necessary to transfer funds from Munich. Dresdner’s payment to [HSBC] Frankfurt would have been made via the local deutschmark clearing system with the Landesbank in Frankfurt, whereby their account would have been debited and [HSBC’s] account would have been credited with the amount of the payment. Probably in BVs account with Dresdner Bank and certainly in Dresdner and [HSBC’s] account with the Landesbank, Tejarats money would have been mixed with other money.234

raise the defence of ministerial receipt. The defence is that the bank received the money as agent for its customer and transferred the money in an irrevocable fashion to the customer in good faith without notice of the payer’s claim.45 In the context of payments relating to letters of credit and performance bonds, a collecting bank receiving money as an agent on behalf of its customer is not liable to the payer (issuing or confirming bank) who paid it under mistake if, before learning of the payer’s claim for refund, the bank has paid the money to or on the instructions of its customer in good faith.46 The main question is whether the bank had notice that the money was being claimed by the payer before it transferred it to or on the instructions of its customer. Where the bank had notice that the payer had a claim to reimbursement before the money was irrevocably transferred to the customer it cannot rely on the defence of ministerial receipt.47 The defence of ministerial receipt complements the wider defence of change of position.

42[1990] 1 C h 2 6 5 .

43[1995] 1 L loyds Rep. 23 9 at 245 .

44[1990] 1 C h 265.

45e.g. Bullerv. Harrison (1777) 2 C ow p . 565, 98 E R 1243; Bavins &Sims v. London dr South Western Bank

Ltd[ 1900] 1 Q B 2 7 0 .C A ; Gowers v. IJoyds & National ProvincialForeign Bank 7 * /[ 1 9 3 8 | 1 All E R 7 66, CA .

46Bank Tejarat v. HSBC [ 1995] 1 L loyd’s Rep. 239.

47Jones v. Abbey National Pic [2009] E W H C 7 2 2 (Q B ), m o n ey erroneously sent by C H A P S transfer in to

the b an k acco u n t o f a cu sto m er o f the d efen d an t bank.

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Claims Against the Beneficiaryfo r a W rongful D em and

11.23In this context the defence of change of position applies where after receiving a payment made by mistake the bank acting in good faith alters its position so that it would be unjust to require it to repay the money. As with the defence of ministerial receipt, good faith is an important feature of the defence of change of position. As Lord Goff made it clear in Lipkin Gorman v. Karpnale Ltd,Ai the defence of change of position does not apply to a defendant who changed his position in bad faith. But what is bad faith in this context? On the one hand it certainly includes dishonesty. On the other hand, it has been said that negligence or unrea­ sonable behaviour is not enough.498 Does it include conduct falling short of outright dishon­ esty but going beyond negligence?

11.24 In Niru Battery Manufacturing Co v. Milestone Trading L td 50 a fraudster gave his bank a bill of lading which was not genuine as part of documents to be presented to the issuing bank under a letter of credit. Not knowing that the bill of lading was not genuine, the beneficiary’s bank presented it to the issuing bank. There were certain unusual features of the transaction, including the fact that the contract goods had been sold elsewhere in the period between tender of the documents and payment under the credit, which were known to the benefi­ ciary’s bank and which should have caused it to make inquiries of the issuing bank. But it did not make any inquiries. In an action by the issuing bank and the applicant to recover the mistaken payment from the beneficiary’s bank, the defendant bank raised the defence of change of position. Moore-BickJ. held that the defence was unavailable to the bank because it acted in bad faith. The learned judge took the view that bad faith included not just dishon­ esty but was capable of embracing a failure to act in a commercially acceptable way and sharp practice of a kind that fell short of outright dishonesty. The bank had not consciously acted in disregard of the standards expected of an ordinary honest banker but it had taken a risk that in releasing the money it might infringe the issuing bank’s rights. An appeal against this decision was dismissed by the Court ofAppeal.51

11.25The Court of Appeal held that the emphasis was not on whether the defendant had been dis­ honest but rather on whether it would be inequitable or unconscionable, and thus unjust, to allow the recipient of money paid under a mistake of fact to deny restitution to the payer.52

B. Where there is no fraud

11.26Where a bank pays the beneficiary on receiving documents that are not compliant or are forged in circumstances where the beneficiary is not guilty of fraud, is the bank entitled to recover the payment on the ground that it was made under a mistake? There appears to be no reported English decision on this point. It is submitted that in the absence of fraud by the beneficiary the bank is not entitled to a claim in restitution on the ground of mistake. This approach was adopted by the High Court of Singapore in Mess Pierson N Vv. Bay Pacific (S)

Pte L td 53 where the paying bank’s claim in restitution was rejected because the beneficiary was not guilty of fraud in presenting the documents. The view that the bank is not entitled

Credit and Commerce International (Overseas) Ltd v, Akindele [2001] C h 43 7 ). It was also said th at there was su p p o rt for the app ro ach in the m ajo rity decision o f the H o u se o f L ords in Kleinwort Benson lad v. Lincoln City

СоияяУ [1999] 2 A C 349 .

53 [2000] 4 SLR 3 93 .

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II. Claims by the Paying B ank

to restitution on the ground of mistake is also consistent with the position adopted in both UCP 600 and URDG 758. In the case of letters of credit under UCP 600, under Article 16, an issuing or confirming bank must give a notice of rejection which states each discrepancy in respect of which the bank refuses to pay. An issuing or confirming bank that fails to act in accordance with Article 16 is precluded from claiming that the documents do not constitute a complying presentation.54 Therefore, a bank that fails to spot a discrepancy and conse­ quently makes payment would not be able to recover the payment on the basis that it was made under mistake.

The position is similar in the case ofa payment under a demand guarantee. Under Article 20.a 11.27 of URDG 758 a bank has five business days within which to examine a demand and decide whether it is complying or not. And under Article 20.b, if the bank determines that the demand is complying it shall pay. If the bank determines that the demand is not complying,

it is required to give a single notice identifying each discrepancy for which it rejects the demand and the notice must be sent within five business days following the day of presenta­ tion.55 A bank that fails to comply with these requirements is precluded from claiming that the demand and any related documents do not constitute a complying demand.56 In other words, if the bank pays, it is precluded from claiming that the demand was non-compliant. If the bank cannot complain that the demand was not compliant, it cannot maintain an action based on mistake in accepting and paying a non-compliant demand.

3. Damages for Negligent Misrepresentation?

In the ordinary case, the beneficiary is not liable to the bank or to the account party for negli­ 11.28 gence in presenting to the bank a document which appears to conform with the letter of credit

but which is false. The reason for this is that the beneficiary of a credit does not owe a duty of care to the paying bank, the issuing bank, or the account party.57 The beneficiary’s agreement to the terms of a letter of credit does not impose a duty of care on him in relation to the docu­ ments required to be presented to the bank in order to obtain payment under the credit.58 There is no implied assumption of responsibility on the part of the beneficiary arising by reason of the beneficiary’s agreement to the terms of the credit.59 In MontrodLtd v. Grundkotter Fleischvertriebs GmbH60 an attempt to advance a claim against the beneficiary of a letter of credit based on negligence in the preparation or presentation of a document was firmly rejected. Potter L.J., with whosejudgment Sir Martin Nourse and Thorpe L.J. agreed, observed that in a case of this kind the letter ofcredit is procured by the buyer pursuant to its obligation to pay under the sale contract. The beneficiary, the seller, agreed to the terms of the letter of credit as part of the buyer’s performance of his payment obligation. He then explained that:

[i]n seeking to ensure that documents presented to the issuing bank comply with the terms of the letter of credit, a beneficiary is pursuing his own commercial interests. He seeks to present

54A rt. I6.fi

55A rt. 2 4 .d an d e.

56A rt. 2 4 .f.

2 6 7

Claims Against the Beneficiaryfo r a W rongful D em and

compliant documents in order himself to be paid in the context of a transaction in which the commercial interests of the issuing bank and other parties involved in connection with the letter of credit are dealt with in the manner provided for under UCP 500 (now 600], subject to the provisions ofwhich they are aware that the transactions will be conducted and the com­ mercial risks distributed.61

established.62 But the mere fact that a beneficiary agrees to the terms of a letter of credit was insufficient material from which to imply any such assumption of responsibility.63

III.CLAIMS BY TH E ACCO UN T PARTY

11 .3 0 In certain circumstances it is the account party who will be interested in bringing a claim against the beneficiary in respect ofa wrongful demand. This will be the case where, although the bank may be entitled to claim, it has no interest in doing so because it has already been reimbursed by the account party. The account party will also be the party interested where the bank has no locus standi to maintain the claim, as where the beneficiary’s demand is wrongful because it is in breach of the underlying contract to which the bank is not a party.

1.Damages for Deceit or Restitution for Money Paid Under Mistake

11 .3 1 Where the bank has paid the beneficiary in response to a demand which is wrongful because of fraud on the part of the beneficiary and the account party has reimbursed the bank, the bank will not be interested in bringing a claim against the beneficiary as discussed above. In such a case, the account party would want to maintain a claim against the beneficiary in dam­ ages for deceit. But the account party may face difficulties with such a claim because a requirement for a cause of action in deceit is that the representation must have been made with the intent that it will be acted on by the claimant.64 For the account party to succeed in a claim in deceit he must be able to show that the beneficiary’s intention in making the false representation was to deceive him, the account party. The problem is that the false represen­ tation by the beneficiary is made to the paying bank rather than the account party and is intended to deceive the bank rather than the account party. The beneficiary’s interest is to induce the bank to make payment under the letter of credit or demand guarantee. The account party might seek to argue that the false statement, although not made to him directly, is reasonably intended to deceive him because the beneficiary must know that the false rep­ resentation will be passed on by the bank to him, the account party, who will have to reim­

burse the bank. It is true that this requirement may be satisfied if a representation is made to a third party (in this context the bank) with intent that it be passed on to the claimant

A ndrew A n g J . expressed the view th a t a paying b an k has no cause o f action in dam ages for negligent m isrepre­ sen tatio n against the beneficiary.

64 Peek v. Gurney (1873) L R 6 H I, 3 7 7 , 4 1 1 - 4 1 4 , per L ord C airns.

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2. Damages for Breach of Contract

Where the beneficiary has made a demand for payment which he is entitled to make under 1 1 .3 4 the letter of credit or performance bond and the issuer has paid, as he is obliged to do, but

the demand was made in breach of an express term of the underlying contract, the account party is entitled to maintain an action against the beneficiary for damages for breach of contract. In Sepoong Engineering Construction Co Ltd v. Formula One Administration Ltd6S the account party sought to recover money received by the beneficiary under a letter of credit on the ground that the beneficiary had demanded (and received) the payment in breach of a term of the underlying agreement. However, the claim failed because Langley J. held that the agreement, on its true construction, gave the beneficiary the right to demand payment as it did. The result would therefore have been different if the beneficiary had demanded pay­ ment in breach of the terms of the underlying agreement. In such an action, if the account party has already reimbursed the bank, it will claim the amount paid as its loss. If the benefi­ ciary has claims of his own against the account party arising from the underlying contract, that may be set-off against the account party’s claim in damages for breach of the same contract.69

Rep. 216.

■ B

12

CLAIMS AGAINST THE BENEFICIARY

FOR OVERPAYMENTS

I. INTRODUCTION

Chapter 11 considered the circumstances where a beneficiary who has received payment under 12.01 a letter of credit or demand guarantee pursuant to a demand which is wrongful may be liable

to the paying bank or the account party. This chapter examines the circumstances when a claim can be maintained against a beneficiary who has received payment pursuant to a demand which is not wrongful but where it turns out that the amount received by the beneficiary exceeds the amount of his actual loss so that he is left with a surplus or overpayment. An over­ payment of this kind is likely to occur in the case of a demand guarantee or standby letter of credit rather than a letter of credit issued to pay the contract price in a sale of goods contract. The discussion that follows is therefore focused on cases concerning demand guarantees and standby letters of credit. An overpayment under a demand guarantee is made possible by the principle of independence which requires that a bank that receives a complying demand must paywithout proofor conditions.1The bank is bound to pay even though the beneficiary does not claim that he has suffered loss as a result of the account party’s breach of contract.2 Where there is an overpayment the question arises whether the beneficiary is liable to repay it and,

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II. W H ERE TH ERE IS EXPRESS PROVISION

IN TH E CONTRACT

1 2 .0 4 In determining the beneficiary’s liability to repay any surplus the starting point must be the terms of the underlying contract,6 since the performance bond under which the beneficiary

3 e.g. UxinterimpexJSC v. StandardBank Pic [2008] EWCACiv819; Spiersbridge Property Developments Ltd v. Muir Construction Ltd [2008 ] CSOH 44; Tradigrain vState Trading Corporation o fIndia [2006] 1 Lloyd’sRep. 216.

4See, e.g. Papamichael v. National WestminsterBank Pic [2003] EWHC 164; ChaseManhattan Bank NA v. Israel-British Bank (London) Ltd [1981] Ch 105, as explained in Westdeutsche Landesbank Gironzentrale v. Islington Borough Council [1996] AC 669. See also Barclays Bank Ltdv. WJSimms Son and Cooke (Southern) Ltd 11980] QB 677; Lloyds Bank Pic v. Independent Insurance Co Ltd [19991 2W L R 986,1002; Kleinvort Benson Ltd v. Lincoln City Council [1999] 2 AC 349.

5Some of the discussion in this chapter has been published as an article, see N. Enonchong, ‘Recovery of Overpayments made under Performance Bonds’ [2010] Restitution Law Review 14.

6Australasian Conference Association Ltd v. Mainline Constructions Proprietary Ltd (in liq) (1978) 141 CLR 335; CargillInternationalSA v. Bangladesh Sugar & Food Industries Corp [1996] 2 Lloyd’s Rep. 524, esp at 530; Емка InsaatVe SanayiAS v. Banco Popolaire DellAlto Adige SPA [2009] ElWHC24l0at [40] and [41].

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II. Where There is Express Provision in the Contract

has received the payment was issued to him pursuant to the terms of that contract. Where the contract contains express provisions specifying who is to receive any surplus there should be little difficulty. However, it is necessary to draw a distinction between a case where the con­ tract specifies that the account party is to receive the overpayment and one where the contract stipulates that the beneficiary is to retain it. The reason is because in the latter case there has been

a question as to whether the relevant term is a penalty.

1. Contract Allows Account Party to Recover

days after the final certificate, but only if nothing was owed to the proprietor, or if anything was due, after the proprietor had received payment. That clause did not apply in the circum­ stances because no final certificate had been given. Clause 30(h) also contemplated release to the builder of the security. It was held that since the security was to be released to the builder rather than the bank, under the contract it was the builder who was entitled to any surplus. Gibbs A .C.J.,8 with whose judgment Jacobs and Murphy JJ. agreed, said that:

it seems to me that effect must be given to the indication provided by (clause 30(h) and clause 31(j)], that the security is to be released to [the builder]. In my opinion under the contract it is [the builder] that is entitled to any surplus remaining of the money provided under the security once the obligations of [the builder] have been discharged.

7 (1978) 141 C LR 335 .

8 Ibid., at 352.

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Claims Against the Beneficiaryfo r Overpayments

12.07The position would therefore be a fortiori where there is an express term in the contract stipulating that any surplus should be repaid to the account party. Such a term is not a penalty because the overpayment is due to the account party as a debt.9

2.Contract Allows Beneficiary to Retain Overpayment

12.08However, a similar clear term in the underlying contract which expressly allows the benefi­ ciary to retain any surplus may give rise to the question whether it is unenforceable as a penalty.101In Cargill International SA v. Bangladesh Sugar & Food Industries Corp,n where there was no such express term, Morison J. said obiter that if he had been persuaded that there was an express term of the underlying contract which permitted the beneficiary to call on the bond when he had suffered no damage and to retain the moneys, he would have held the provision to have been penal. That view is, with respect, questionable.

12.09First, the law of penalties is not applicable where the obligation is to pay upon the occurrence of a specified event other than a breach of contract.12 In order for a contractual provision for payment to be penal, it must provide for payment upon a breach of contract.13 In the case of a performance bond, although it is issued to secure performance of the underlying contract, nevertheless the obligation is to pay upon an event (the making of a complying demand) rather than upon a breach of contract. The position is the same even in the case of a perfor­ mance bond which requires that the beneficiary’s demand should include a statement that there has been a breach of contract as, in such a case, payment is due not upon a breach of contract but upon the making of a complying demand; that is to say, one including a statement that there has been a breach ofcontract (without any proofat all). In other words, the obligation

is to pay upon the occurrence of an event other than a breach ofcontract. It makes no difference that the event (the making of a complying demand) took place against the background of or accompanied by a contractual breach or that the event would not have occurred but for the breach of contract.14 The position is that for an obligation to pay to be penal, ‘it must require

9 Tradigrain v. State Trading Corporation o fIndia [2005] EWHC 2206 (Comm) at [34].

10In Edward Owen Engineering Ltd v. Barclays Bank International Ltd [1978] 1 QB 159, I70E, Lord Denning observed obiter that a performance bond was in the nature of penalty, since a beneficiary who makes a complying demand is entitled to be paid even though the amount paid may exceed the amount of his actual loss.

11[1996] 2 Lloyd’s Rep. 524, 531.

12CampbellDiscount CoLadv. Bridge\1961] 1 QB445, [1962] AC 600; Export Credits GuaranteeDepartmentv. Universal Oil Products Co [1983] I WLR 399. In certain cases there may be a dispute as to whether the event (upon the happening ofwhich payment is required) is a breach ofcontract: cf. Euro London Appointments Ltd v. Classens InternationalLtd [2006] F.WCA Civ 385; [2006] Lloyd’s Rep. 436 (where it was held that the relevant event was not a breach ofcontract and therefore the rule ofpenalties did not apply) and M & JPolymers Ltd vIrnerys

MineralsLtd[2008] EWHC 344 (Comm); [2008] 1 Lloyds Rep. 541 (where itwas held that the relevant eventwas a breach of contract so that the rule as to penalties was applicable).

13MapleLeafMacroVolatility MasterFund v.Jacques Ilouvroy [2009] EWHC 257 (Comm); [2009] 1 Lloyd’s Rep. 475 at [260].

14The position is different where a contract requires payment upon the happening of any one of a number of events, including a breach of contract by the payer. In such a case the sum is capable of being a penalty when the circumstances giving rise to payment are the breach of contract, but not when the circumstances giving rise to payment are otherwise: Maple Leaf Macro Volatility Master Fund v. Jacques Rouvroy [2009] EWHC 257 (Comm); [2009] 1 Lloyd’s Rep. 475 at [262].

274