Alternative Power Solution Ltd v Central Electricity Board and another

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Clarke
Judgment Date09 September 2014
Neutral Citation[2014] UKPC 31
Date09 September 2014
Docket NumberAppeal No 0035 of 2013

[2014] UKPC 31

Privy Council

From the Supreme Court of Mauritius

before

Lord Mance

Lord Clarke

Lord Sumption

Lord Hodge

Lord Toulson

Appeal No 0035 of 2013

Alternative Power Solution Limited
(Appellant)
and
Central Electricity Board and another
(Respondents)

Appellant

Aidan Casey (Instructed by Sheridans Solicitors)

Respondent

Desire Basset SC (Instructed by Blake Morgan Solicitors)

Respondent

Rishi Pursem SC Nadeem Lallmamode (Instructed by Carrington and Associates)

Heard on 2nd April 2014

Lord Clarke
Introduction
1

This appeal centres on the fraud exception to the obligation of a bank to make a payment under a letter of credit. It arises out of an injunction granted by P Lam Shang Leen J ("the judge"), sitting in the Commercial Division of the Supreme Court of Mauritius, by which he restrained the second respondent ("Standard Bank") from making a payment to the appellant ("APS") under a letter of credit which had been issued in favour of APS. The letter of credit was issued as the means of payment under a contract of sale between APS and the first respondent ("the CEB"). The appeal arises out of an order made by the judge on 18 February 2011 in which he continued and, as it was put, made interlocutory an interim injunction which he had first granted against Standard Bank ex parte on 21 December 2010. APS appealed to the Court of Appeal in the Supreme Court, which is part of the Supreme Court in Mauritius. The appeal was heard by YKJ Yeung Sik Yuen CJ and Matadeen SPJ but the appeal was dismissed on 14 August 2012. APS now appeals to the Board pursuant to leave granted by the Court of Appeal.

2

The reasoning of the judge and the Court of Appeal were not the same but they both held that the CEB was entitled to an injunction restraining Standard Bank from paying APS under the letter of credit because there was sufficient evidence of fraud on the part of APS to the knowledge of Standard Bank to engage the fraud exception. As appears below, the Court of Appeal went further than the judge in this regard. It was submitted on behalf of APS and Standard Bank that both the judge and the Court of Appeal were wrong to conclude that there was sufficient evidence of fraud to engage the exception.

The contract
3

Not all the documents which might be relevant to the contract between APS and the CEB were before the courts below or before the Board. However, a sufficient number were put in evidence so that a clear picture emerges. During the course of 2010 there was a tender process during which APS bid for the supply of 660,000 compact fluorescent lamps ("CFLs") or bulbs to the CEB. The process led to a "Contract Agreement" dated 3 September 2010, which recorded that the CEB had accepted APS' bid for the supply of the CFLs for the total price of Rs23,370.000, which was equivalent to US$763,725.50. The price was expressed to be DDU, which the Board understands to mean delivery duty unpaid.

4

The contract provided, so far as relevant:

" 2. The following documents shall constitute the Contract between the Purchaser and the Supplier and shall be read and construed as an integral part of the Contract:

(a) this Contract Agreement;

(b) Purchaser's Letter of Acceptance ref: CMO/CA3051/LOA/APSL dated 26 August 2010;

(c) The General Conditions of Contract (GCC) for Procurement of Goods and the Special Conditions of Contract (SCC) and the bidding document CA/3051 dated 23 December 2010 [sic];

(d) Supplier's Technical and Financial Proposals dated 19 January 2010 and replies to all Purchaser's clarifications; …

3. This Contract shall prevail over all other Contract documents. In the event of any discrepancy or inconsistency within the Contract documents, then the documents shall prevail in the order listed above."

5

The Letter of Acceptance referred to at 2(b) provided, so far as relevant:

"You are hereby requested to: … (d) sign and return the attached Contract Document; … (f) manufacture and supply the above CFLs as per Technical Specifications contained in Part 2 of our bidding document OAB No.CA/3051 and as per your offer dated 19 January 2010…".

6

As to 2(c) the only section of the GCC in evidence was section 4, "Inspections and Tests", which provided, so far as relevant:

(a) The CEB… shall have the right to inspect and/or to test the equipment to confirm their conformity to the Contract specifications. The CEB shall notify the Supplier in writing, in a timely manner, of the identity of any representatives retained for these purposes.

(b) The inspections and tests shall be conducted on the premises of the Supplier…"

The SCC were in evidence. They were expressed to supplement or amend the GCC and, where there was a conflict, to prevail over the GCC. They provided inter alia for ICC arbitration in respect of all disputes arising in connection with the contract (GCC 10.2); for specific details of the "Shipping and other Documents to be furnished by the Supplier" (GCC 13.1); if goods were to be supplied from abroad, for payment by cash against goods or by letter of credit "at Supplier's option" (GCC 16.1); and for the provision of a "performance security" (GCC 18.1). The SCC further provided:

"The inspections and tests shall be: The Manufacturer shall carry out all routine tests prior to shipment in the presence of the Purchaser's Representative/designated independent inspector as may be prescribed by the latter to the successful bidder, after Acceptance of offer" (GCC 26.1); and "The inspections and tests shall be conducted at: the Factory" (GCC 26.2).

7

As to 2(d), the "Technical and Financial Proposals dated 19 January 2010" were not in evidence in their entirety. However it was apparent that in its bid APS had identified the proposed manufacturer as Ningo Blunt International Trade Co Ltd. There was in evidence one request for clarification issued by the CEB, namely Clarification No 2, together with APS' reply to the request. The request referred to APS' bid document and included these requests:

"a. Please provide the manufacturer's name, models and types of all Lamps proposed as per the manufacturer's/supplier's catalog;

b. Please provide the ELI/EST certificate for each of the above proposed models/types.

c. Please submit the Manufacturer's Authorisation Form duly signed by the Manufacturer…"

8

APS' replied to the request for Clarification No 2 under cover of an email of 8 February 2010, which referred to Philips but made it clear that Philips was not the contract manufacturer. Thus it stated:

"(a)…Philips (China) Investment Company Limited is the brand owner… In the present tendering process, we would be supplying OEM/ODM product for CEB Mauritius out of a plant manufacturing for Philips and satisfying technical and performance requirements with minor deviations as per specifications laid down in the technical documents. However if you require specifically Philips brand on a co-branding exercise with the CEB, we will be happy to assess supply…

(b)… You would notice that the contract manufacturer is not listed as an ELI certified supplier, however the products they produce are certified and Philips has independently tested the product under their application. If you require more details you can contact by e-mail Ms …

(c) We deal with Philips…We also deal with the contract manufacturer directly…

An ODM (original design manufacturer) is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce (either as a supplement or solely) without having to engage in the organization or running of a factory. A primary attribute of this business model is that the ODM owns and designs in-house the products that are branded by the buying firm. This is in contrast to a contract manufacturer or CM.

The letter of credit
9

The letter of credit was issued by Standard Bank and notified to APS on 27 September 2010. It was not suggested that it was not in conformity with the contract. It was described as Irrevocable Transferable and the Applicable Rules were described as UCP Latest Version. The date and place of expiry were stated to be "101230 Port Louis Mauritius". The date of expiry was thus 30 December 2010. The amount was US$763,725. Partial shipments and transhipment were allowed. The place of taking in charge or receipt was given as South Africa and/or Asia and the place of final destination or delivery was Port Louis, Mauritius. The latest date of shipment was 30 November 2010. The documents required were set out in detail and the period of presentation was said to be within 15 days after shipment date but within the validity of the credit. There was no requirement for any certificate of inspection or similar document to be presented to the bank. The credit was advised through and negotiated at Mauritius Commercial Bank Ltd ("MCB") who were in fact APS's bankers.

Relevant events before and at the application on 15 November 2010
10

The goods were manufactured by Sichuan CB Light Co Ltd ("Sichuan Light"). On 23 September 2010 the MCB provided the CEB with a performance guarantee for APS. In early October there were email exchanges between APS and the CEB about delivery in which Mr Dookhee of APS gave an indication of delivery dates and the CEB asked if the delivery could be "sped up" so that the first container reached them by the end of October. On 18 October MCB notified Standard Bank that the letter of credit had been partially transferred to CB Light to the extent of US$ 613,800. On that day Mr Dookhee said by email that, subject to space, the first container should be leaving within 12 to 14 days and that the CEB's agent should be able to check the finished goods "in the southern city of foshan in guangdong province either in xiaolan or guzhen". He added that the agent would need to meet him in either Guangzhou or...

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