Habib Bank Ltd v Central Bank of Sudan

JurisdictionEngland & Wales
JudgeMr. Justice Field,MR. JUSTICE FIELD
Judgment Date19 July 2006
Neutral Citation[2006] EWHC 1767 (Comm)
Docket Number2003 Folio No: 525
CourtQueen's Bench Division (Commercial Court)
Date19 July 2006
Between:
Habib Bank Limited
Claimant
and
Central Bank of Sudan
(Formerly Known as Bank of Sudan)
Defendant

[2006] EWHC 1767 (Comm)

Before:

Mr. Justice Field

2003 Folio No: 525

IN THE HIGH COURT OF JUSTICE

COMMERCIAL COURT

QUEEN'S BENCH DIVISION

Mr. James M Turner (instructed by Lane & Partners LLP) for the Claimant

The Defendant did not appear and was not represented

Hearing dates: 13 and 14 June 2006

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic

MR. JUSTICE FIELD Mr. Justice Field

Introduction

1

This is a claim against an issuing bank by a confirming bank for reimbursement in respect of payments made under two confirmed letters of credit.

2

The claimant ("HB") is a bank incorporated in Pakistan. At the material time it had branches in Karachi, London, Khartoum, New York and elsewhere. The branch in Karachi was the head office. I shall refer to the Karachi, London Khartoum and New York branches as "HOK", " HBL", "HBK" and "HBNY" respectively.

3

The defendant ("CBS") is the national bank of Sudan.

4

The letters of credit were issued and notified to the beneficiary and payment was made thereunder as long ago as 1982. The first letter of credit ("LC 218") was for US$7,474,549.80; the second ("LC 233") was payable on the same terms as LC 218 and was for US$7,700,000, of which US$ 6,645,450 was confirmed by HBL. The beneficiary of both credits was Tradinaft S.A. ("Tradinaft"). The total of the two payments made by the claimant under the credits was US$13,158,199.80, this sum reflecting deductions in respect of agreed confirmation commission and incidental charges. The gross total charged to CBS under an express undertaking "to honour your claim for principal amount and interest at maturity" was US$14,120,379.77 with interest at 2% over LIBOR down to 180 days from the dates of the bills of lading and thereafter at 3% over LIBOR.

5

At all material times CBS has accepted that it is liable for the principal sum with interest at the above rates compounded at 6 monthly intervals, less part payments made between June 1983 and February 1991 totalling US$2,679,958.99 However, they have continued to fail to pay the balance due.

6

On 6 th June 2003 HB issued a Claim Form and on 23 rd July 2003 Moore-Bick J gave permission for service out of the jurisdiction. The time for service was extended by David Steel J. and Cooke J. on 12 November 2003 and 25 August 2004 respectively; and on 14 February 2005 Cooke J. gave permission for amendment of the Claim Form, and service of the amended pleading out of the jurisdiction by an alternative method of service. He also extended the time for service to 5 September 2005.

7

On 9 March 2005 service of the Amended Claim Form was effected by the permitted alternative method of service and as a precautionary exercise the Amended Claim Form was delivered by the British Embassy in Khartoum to the Sudanese Ministry of Foreign Affairs on 18 April 2005. However, CBS failed to acknowledge service or to have anything to do with the proceedings.

8

It would have been open to HB in this situation to obtain default judgement pursuant to CPR Part 12 but the enforcement of such a judgement is notoriously difficult in international cases because such a judgement is not a determination on the merits. HB accordingly applied to Colman J on 3 February 2006 for directions with a view to there being a trial on the merits in the absence of CBS. The learned judge made the directions sought. He did so in accordance with his own decision in Berliner Bank v Karageorgis [1996] 1 Lloyd's Rep. 426 where he held that the court could order under its inherent jurisdiction that there be a trial on the merits where the defendant had failed to acknowledge service so that the plaintiff could seek to obtain a judgement that if given would be far more likely to be enforceable than a default judgement.

9

As I conclude below, HB has complied with the directions given by Colman J and the matter has come on for trial before me in the absence of CBS. Throughout the trial HB's counsel, Mr. Turner, has been commendably careful to draw to my attention any points, factual or legal, that might be to the benefit of CBS. In this he was considerably assisted by the very careful and thorough way in which this case has been prepared for trial by HB's solicitors and by Mr. Christopher Hayward, Head of Credit at Habib Allied International Bank plc, the entity which manages HB's delinquent debts accrued in the UK before December 2001. In particular, it is clear that thorough searches for relevant documents were made in London, Khartoum and Karachi and that HB has made full and proper disclosure.

10

The absence of CBS has meant that the court has had to be particularly alert not only to any matters potentially in CBS's favour on the merits but also to matters going to the court's jurisdiction and to whether CBS has been given due and proper notice of all relevant matters.

11

None of the individuals involved in the issuance and confirmation of the two credits or the payments made thereunder was called to give evidence. This was not surprising given the length of time (24 years) that has elapsed since the credits were issued, confirmed and paid. HB instead relied on the contemporaneous documents. In some cases the originals were not available but it was quite clear that all the copies put before the court were authentic.

The issuance, advisement and confirmation of the two credits

LC 218

12

CBS approached HOK in January 1982 about the opening of confirmed letters of credit to finance the purchase of crude oil by General Petroleum Corporation of Khartoum from Tradinaft. Drafts of the proposed terms of the credits and the terms on which CBS would reimburse HB were exchanged between CBS and HB. One of the matters raised was a proposal that HB should be permitted to appropriate export proceeds held for CBS towards CBS's reimbursement liability. On 25 March 1982 CBS sent a telex to HBL setting out the terms of LC 218 in favour of Tradinaft. The credit was stated to be valid in the UK until 30 April 1982 for US$9,350,000 and the documents to be presented were listed. Under the heading "Special Instructions" the telex stated:

1. Please advise this credit to beneficiaries adding your confirmation thereto.

2. The amount of this credit is payable 180 days from the date of B/Lading at interest of 2 per cent over LIBOR.

3. After negotiation please send us all the documents by first and second registered airmail.

Provided that all terms and conditions have been complied with and confirmed by you as such we are prepared to present the relative 180 days draft to drawees and arrange for acceptance duly signed by them.

We hereby undertake to honour your claim for principal amount plus interest on maturity.

As regards all your banking charges except confirmation charges we undertake to meet your claim to the credit of your account with bank whom you nominate.

This credit is subject to Uniform Customs and Practice for Documentary Credit (Revision 1974) International Chamber of Commerce Publication No. 290.

Above text is full details which is to be considered operative and withstanding receipt of airmail details.

13

The terms of LC 218 were amended by two telexes received by HBL on 28 and 29 May 1982. Under the first the amount of the credit was changed to US$7,474,549.80, the details of the beneficiary were clarified and numerous changes were made to the description of the documents that had to be presented. Under the second, the first three sentences of paragraph 3 of the Special Instructions were replaced by:

After negotiation please send all documents by first and second registered airmail. Provided that all terms and conditions have been complied with and confirmed by you, we hereby undertake to honour your claim for principal amount and interest on maturity.

14

No CBS answerback appears on the copy of the 25 March 1982 telex produced to the court but there is no doubt that the telex was sent by CBS to HBL because later telexes, for example that dated 29 March 1982, which do show the CBS answerback, are only explicable on the basis that CBS sent and HBL received the 25 March 1982 telex.

15

HBL a dvised LC 218 to Tradinaft by letter dated 30 March 1982 but did not in this letter add their confirmation. This was done in a separate letter dated 1 April 1982, the relevant part of which reads:

We hereby advise you further that the above mentioned Letter of Credit bears our confirmation and we undertake to honour the drafts drawn strictly in terms of the Credit and presented to us at our counter before expiry date.

LC 233

16

The terms of LC 233 were sent by CBS to HBL by a telex on 28 March 1982 which showed CBS's answerback. The terms were very similar to LC 218, although the amount was for US$8,085,000. In particular the "Special Instructions" were identical to those set out in the 25 March 1982 telex. The terms of the credit were amended by telexes from CBS to HBL on 29 March 1982 and 1 April 1982. As a result, the amount was changed to US$7,700,000, the description of the documents to be presented was altered and paragraph 3 of the "Special Instructions" was amended in the same way as the equivalent paragraph in LC 218 was amended. The first of these amending telexes was a tested telex. The copy adduced of the second telex does not show CBS's answerback but it is clear from other telexes that it was sent by CBS.

17

HBL a dvised Tradinaft of LC 233 by letter dated 30 March 1982 but held back from confirming the credit until CBS formally agreed to allow export proceeds held by HB to go towards satisfying CBS's reimbursement...

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