Heytex Bramsche GmbH v Unity Trade Capital Ltd
| Jurisdiction | England & Wales |
| Judge | Greenwood |
| Judgment Date | 10 October 2022 |
| Neutral Citation | [2022] EWHC 2488 (Ch) |
| Docket Number | Claim No. CR-2022-000181 |
| Court | Chancery Division |
| Year | 2022 |
[2022] EWHC 2488 (Ch)
Deputy Insolvency and Companies Court Judge Greenwood
Claim No. CR-2022-000181
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Mr William Day (instructed by Norton Rose Fulbright LLP) for the Petitioner
Mr Timothy Deal (instructed on a direct access basis) for the Respondent
Hearing date: 9 September 2022
Remote hand-down: This Judgment was handed down remotely at 10.30am on Monday 10 th October 2022 by circulation to the parties or their representatives by email and by release to The National Archives.
Deputy Insolvency & Companies Court Judge
Introduction & the Issues
This is the final hearing of a winding up petition (“the Petition”) presented by a German company, Heytex Bramsche GMBH (“Heytex”) which makes and sells textiles and fabrics, against an English company, Unity Trade Capital Limited (“UTC”) incorporated under the Companies Act 1985 with registered number 04784580 and a registered office at Ashley House, 235–239 High Road, Wood Green, London N22 8HF. Heytex was represented before me by Mr William Day of Counsel, and UTC by Mr Timothy Deal of Counsel. I am grateful to them both for their assistance.
According to its own evidence, UTC, incorporated in 2003, is a trade finance company specialising in the provision of capital and credit for international business, trade and other financial transactions, including by means of “ supporting credit facilities, issuing financial guarantees and letters of credit to back up payment commitments and obligations”. As such, on 26 August 2020, on the instructions of a company in the UAE called Jibran Technical Services LLC (“Jibran”) UTC is said by Heytex to have issued, by an MT700 SWIFT message, an expressly irrevocable letter of credit in the sum of €200,707.50 in favour of Heytex, as beneficiary, in order to facilitate the purchase of certain PVC coated fabrics by Jibran from Heytex pursuant to a contract of sale made on or about 5 June 2020. The sale contract itself had provided expressly for payment by “ letter of credit 90 days after date of B/L” (a reference to the anticipated bill of lading).
Whilst it was common ground that the letter of credit incorporated the standard terms contained in the “UCP 600”, being (since 1 July 2007) the current version of the “Uniform Customs and Practice for Documentary Credits” promulgated by the International Chamber of Commerce, there was, as I will explain, an issue regarding the extent to which those terms, which do not have force of law in the UK, were modified.
On 9 November 2020, by means of a SWIFT message sent by its own bank, Sparkasse Osnabruck (“Sparkasse”), acting as the “advising bank” in the context of the letter of credit, Heytex presented the various documents which it says were stipulated by the terms of the letter of credit and which it therefore says entitled it to immediate payment by UTC under Articles 7 and 15 of the UCP 600.
In the event however, on 12 November 2020, Sparkasse was told by UTC that it considered those documents, signed on behalf of Heytex and Jibran, to be discrepant, not having been signed by “ all sides of LC”, as expressly required by the letter of credit, and that the presentation was therefore non-compliant, meaning that no payment was due.
UTC has continued to deny its liability under the letter of credit notwithstanding that on the following day, 13 November 2020, it told Sparkasse by means of a further SWIFT message, that Jibran had since “ accepted all documents with discrepancies and advsied (sic) us to release all original shipping documents against his acceptance and confirmation of payments on maturity dates as detailed here under”, and that “ We therefore release documents to the applicant against his acceptance”.
Subsequently, Heytex agreed with Jibran two payment deferrals, both of which were communicated (the first on 9 January 2021, the second on 2 February 2021) by Sparkasse in SWIFT messages to which it received replies which said, amongst other things, that the deferrals were “ confirmed”, and in both instances that all other terms and conditions in respect of the new maturity date (original capitalised) “ shall remain the same as per our previous …acceptance message”. Under the second of these agreements, the first instalment (of €100,000) fell due for payment on 20 March 2021. In the event however, nothing has been paid to Heytex, whether by UTC or Jibran; it has been left without payment, or documents, or goods.
On 17 November 2021, a statutory demand was served by Heytex at UTC's previous registered office, claiming payment under the letter of credit, and on 25 January 2022 the Petition was presented on the basis that UTC, not having paid the sum demanded, is insolvent, unable to pay its debts within the meaning of sections 122(1)(f) and 123 of the Insolvency Act 1986. Pursuant to rule 7.10 of the Insolvency (England Wales) Rules 2016, notice of the Petition was given in the Gazette on 25 February 2022. Before me, there were no formally supporting or opposing creditors, although there was evidence of an unsatisfied Judgment given summarily against UTC in the London Circuit Commercial Court in favour of H. Stoll AG and Co. KG on 6 December 2021, in the sum of £540,000 plus interest and costs. On instructions, Mr Deal told me that as he understood it, UTC was or would be seeking to appeal or otherwise have that judgment set aside; that in any event, it was by some means to be challenged.
In substance, UTC's evidence was contained in the First and Second Witness Statements of its director, Dr Sukhendu Bhowmik made on 1 and 23 March 2022; UTC's website describes Dr Bhowmik as having “ earned his reputation in sourcing and facilitating Financial Instruments over 20 years of his experience in international trade finance”. Heytex's evidence was contained in the First and Second Witness Statements of Henning Wolfgang Fischer, an accountant employee, made on 6 April 2022 and 25 August 2022.
At the hearing, Heytex sought permission to rely on Herr Fischer's Second Statement, which was served out of time (not in accordance with the directions given by ICCJ Barber on 9 March 2022 at the first hearing of the Petition) and which exhibited copies of Heytex's standard terms of business and of the allegedly discrepant documents presented on 9 November 2020. That evidence was plainly relevant and material, and there was no objection to its admission, which I allowed, and which caused no unfairness to UTC.
In summary, at the hearing, UTC disputed its alleged liability under the letter of credit, and thereby opposed the Petition, on the following bases.
i) First, it argued that it was not the issuer of the letter of credit, which had in fact been issued by an apparently closely connected company called Unity Trade Bank Limited (“UTB”), a company registered in Gambia with a registered office, according to its own website, at “ Enterprise House, 1 Enterprise Way, Banjul, Gambia”, and a “ representative office” at the same address as UTC's registered office at Wood Green. UTB's website describes UTC as its “ UK based subsidiary”. This was not an argument that had been raised either by Dr Bhowmik in either of his Statements (or previous correspondence) or in Mr Deal's Skeleton Argument.
ii) Second, that the presented documents were discrepant because they were not signed by “ all sides of LC”, a provision that required the signature of not only Jibran and Heytex, but also of Sparkasse and of the issuer itself (whether UTC or UTB). Again, this was not an argument raised as such in Mr Deal's Skeleton Argument, which described the alleged discrepancy as comprising the fact that “ the documents were not signed by Jibran and the Petitioner”. If correct, its effect would be to render an expressly “irrevocable” letter of credit, revocable at the instance of the issuer. Mr Deal explained to me that having only very recently been instructed, he had not seen Herr Fischer's Second Statement exhibiting the signed documents before he lodged his Argument.
iii) Third, that the “ waiver” referred to in the message of 13 November 2020, was given by Jibran alone, and merely communicated by UTC and/or UTB on behalf of Jibran. It was argued that in those circumstances, and in consequence of the incorporation of UTC and/or UTB's “ Credit Norms” into the terms of the letter of credit (modifying and prevailing over the UCP 600, and in particular, Article 16 of the UCP 600) UTC and/or UTB were entitled to release the presented documents to Jibran without themselves incurring or accepting any liability to Heytex whether under the letter of credit, which was thereby rendered “ void”, or at all (for example, in conversion): Heytex must, it was said, look to Jibran for payment.
iv) Finally, again by virtue of the allegedly incorporated Credit Norms, and in particular, Clause 2.6 of those Norms, it was argued that the letter of credit was rendered “ void” by virtue of the variations to the payment schedule negotiated and agreed between Heytex and Jibran, and referred to above. Again, it was said that as a result, Heytex must look to Jibran alone for payment.
Ultimately therefore, in respect of the alleged liability under the letter of credit, the following issues arise.
i) Who was the issuer, UTC or UTB?
ii) What was required of Heytex by the express stipulation that the documents to be presented should be signed by “ all sides of LC”? In light of that, were the presented documents, signed by Heytex and Jibran, in fact discrepant, or was the presentation compliant?
iii) Were the provisions of the Credit Norms incorporated into the...
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High Court Considers Contractual Construction Of Irrevocable Letter Of Credit Incorporating UCP 600
...that a winding up petition presented by the beneficiary succeeded against the issuer: Heytex Bramsche GmbH v Unity Trade Capital Ltd [2022] EWHC 2488 (Ch). One of the key issues considered in this case was whether or not the documents presented as part of the demand were compliant with the ......