First Commercial Bank v Euroseas Finance (Asia) Ltd

Judgment Date27 May 1983
CourtHigh Court (Hong Kong)
Judgement NumberHCA12470/1982
Subject MatterCivil Action



Action No. 12469-70 of 1982







Coram: Hon. Liu J.

Date: 27th May, 1983.




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...

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