Bank Negara Indonesia 1946 v Lariza (Singapore) Pte. Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 December 1987 |
| Date | 14 December 1987 |
| Court | Privy Council |
Banking - Letter of credit - Transferable credit - Singapore - Beneficiary instructing issuing bank to transfer credit - Whether bank under obligation to effect transfer -
Article 46 of the Uniform Customs and Practice for Documentary Credits (1974 Revision) provides:
“(a) A transferable credit is a credit under which the beneficiary has the right to give instructions to the bank called upon to effect payment or acceptance or to any bank entitled to effect negotiation to make the credit available in whole or in part to one or more third parties (second beneficiaries). (b) The bank requested to effect the transfer, whether it has confirmed the credit or not, shall be under no obligation to effect such transfer except to the extent and in the manner expressly consented to by such bank, and until such bank's charges in respect of transfer are paid.”
The defendant bank opened an irrevocable transferable letter of credit in favour of the plaintiffs by order of the buyer under contracts of sale. The credit was expressed to be subject to the Uniform Customs and Practice for Documentary Credits (1974 Revision). The plaintiffs instructed the bank to transfer part of the letter of credit to their supplier but the bank refused. The plaintiffs failed to perform their contracts with their supplier and so the supplier obtained judgment against the plaintiffs. The plaintiffs commenced proceedings in the High Court of Singapore against the bank claiming, inter alia, damages for breach of contract arising from the issuing and opening of the letter of credit. The judge dismissed the plaintiffs' claim holding that the plaintiffs had no cause of action against the bank as issuing bankers of the letter of credit. On appeal by the plaintiffs the Court of Appeal of Singapore allowing the appeal held that under article 46(a) and (b) the bank was obliged to effect the transfer.
On the bank's appeal and the plaintiffs' cross-appeal to the Judicial Committee: —
Held, allowing the appeal and dismissing the cross-appeal, that on the assumption that under article 46(a) a beneficiary had the right to instruct the bank which issued a transferable letter of credit to make the credit available to one or more third parties, by article 46(b) no bank asked to transfer the credit was obliged to do so except to the extent and in the manner to which the bank expressly agreed; that designation of a letter of credit by the issuing bank as transferable was insufficient to constitute consent to a subsequent transfer request; and that, therefore, since after the plaintiffs' request for part of the credit to be transferred to the plaintiffs' supplier the bank had given no express consent, the bank was under no obligation to effect the transfer, and so the judge had properly dismissed the plaintiffs' action (post, pp. 379C–F, 380B, 380E–H, 381B).
No cases are referred to in the judgment of their Lordships or were cited in argument.
APPEAL (No. 27 of 1986) with leave of the Court of Appeal of Singapore by the defendant bank, Bank Negara Indonesia 1946, against the judgment of the Court of Appeal of Singapore (Wee Chong Jin C.J., Chua and Thean JJ.) given on 6 November 1985 allowing an appeal by the plaintiffs, Lariza (Singapore) Pte. Ltd., from the judgment of Lai Kew Chai J. in the High Court on 16 May 1984 dismissing the plaintiffs' action.
By leave of the Court of Appeal of Singapore, the plaintiffs cross-appealed against the rate of interest awarded by the judgment of the Court of Appeal on 6 November 1985.
The facts are stated in the judgment of their Lordships.
Anthony Boswood Q.C. and Elizabeth Choo (of the Singapore Bar) for the bank.
Richard Field Q.C. and Philip Sales for the plaintiffs.
14 December. The judgment of their Lordships was delivered by LORD BRANDON OF OAKBROOK.
This is an appeal from an order of the Court of Appeal of Singapore (Wee Chong Jin C.J., Chua and Thean JJ.) dated 6 November 1985 allowing with costs an appeal from an order of the High Court of Singapore (Lai Kew Chai J.) dated 16 May 1984.
The material facts, as set out in the judgment of the Court of Appeal, are these. The plaintiffs are dealers in commodities, including palm oil. By two agreements dated 30 January and 15 February 1980 they agreed to sell to Bakrie Brothers (Singapore) Pte. Ltd. (“Bakrie”) 3000 metric tonnes and 2000 metric tonnes of crude palm oil in bulk unbLeached at the prices of U.S.$627 and U.S.$670 per metric tonne respectively. It was a term of both agreements that payment for the palm oil was to be made by means of a transferable irrevocable sight letter of credit to be opened in favour of the plaintiffs, the opening of which was to be advised through the Bank of Canton Ltd. In order to fulfil and perform the two agreements made by them with Bakrie, the plaintiffs entered into two agreements with Ban Lee Oil Mill Co. (Singapore) Pte. Ltd. (“Ban Lee”) for the purchase from Ban Lee of two corresponding quantities of crude palm oil in bulk of the same quality at the lower prices of U.S.$601 and U.S.$645 per metric tonne respectively. Similarly under these two agreements payment was to be made by an irrevocable sight letter of credit to be opened in favour of Ban Lee.
On 20 February 1980 the plaintiffs were advised by Bank of Canton that a transferable irrevocable sight letter of credit No. SIN/042/80...
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