Montrod Ltd v Grundkotter Fleischvertriebs-GmbH
| Jurisdiction | England & Wales |
| Judge | Lord Justice Potter,Sir Martin Nourse,Lord Justice Thorpe |
| Judgment Date | 20 December 2001 |
| Neutral Citation | [2001] EWCA Civ 1954 |
| Docket Number | Case No: A3/2000/3783/PTA; A3/2000/3789/QBCMA |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 2001 |
[2001] EWCA Civ 1954
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
(His Honour Judge Raymond Jack QC)
Lord Justice Thorpe
Lord Justice Potter and
Sir Martin Nourse
Case No: A3/2000/3783/PTA; A3/2000/3789/QBCMA
A3/2001/0125 PTA; A3/2001/0126 QBCMI
Nigel Jones QC and Ms Sara Benbow (instructed by Simmons Stein & Co, London, for the appellant)
Alain Choo-Choy Esq (instructed by Sherrards, Herts, for the first respondent)
Ali Malek QC and Michael Kay Esq (instructed by Lawrence Jones, London, for the second respondent)
INTRODUCTION
The various appeals and applications for permission to appeal before us arise from orders made by HHJ Raymond Jack QC (sitting as a Judge of the Commercial Court) on 28 November 2000 following his judgment in relation to the liability of the various parties arising from payment made by Standard Chartered Bank ("SCB") in London pursuant to a documentary credit issued by SCB in favour of Grundkotter Fleischvertriebs GmbH ("GK"), a German company named as beneficiary, through the advice of its German bank, Commerzbank. That credit had been issued at the request of Fibi Bank (UK) PLC ("Fibi") acting on the instructions of Montrod Limited ("Montrod"), the claimants in the action, who were named as applicants in the credit. The underlying contract was a contract of sale made between GK as sellers and Ballaris, a Russian entity of uncertain status, as buyers of a consignment of 400 mt of frozen pork sides sold cif Moscow. The credit called inter alia for the presentation of certificates of inspection signed by Montrod.
There were before the court applications whereby (a) GK sought summary judgment under CPR Part 24 against Montrod on Montrod's claim against GK for a declaration that no valid certificates of inspection had been issued by Montrod capable of satisfying the requirements of the letter of credit; (b) SCB sought summary judgment under CPR Part 24 against Fibi in respect of its claim for reimbursement of monies paid to GK pursuant to the letter of credit; (c) Fibi similarly applied for summary judgment against Montrod in the event of it being found liable to SCB and (d) Montrod sought reconstitution of the action with SCB claiming against Fibi, Fibi claiming under CPR Part 20 against Montrod, and Montrod claiming against GK in the form of a new Part 20 claim against GK for reimbursement in the event of being found liable to Fibi. So far as the issues between SCB, Fibi and Montrod were concerned, it was agreed between the parties that the judge should not decide simply whether or not the defences put forward by Fibi and Montrod had any real prospect of success, but should give final judgment on the basis of the statements and documentary evidence before the court. So far as Montrod's application to add a CPR Part 20 claim against GK was concerned, it was resisted by GK on the basis that Montrod's claim as formulated in a draft statement of case before the court had no realistic prospect of success. However there was no agreement limiting the court in relation to its consideration of that issue to the evidence then available to the court.
Montrod, a company carrying on a finance and investment business in England, was engaged through an intermediary to provide the necessary documentary credit which GK required if the matter was to proceed. The credit was payable by SCB '45 days sight' on presentation by GK of various specified documents which included:
"Certificate of Inspection issued and signed by the credit applicant at his discretion on the goods quality and quantity in good order before shipment."
The credit was expressed to be subject to the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publications 500 ("UCP 500"). In circumstances to which I will turn in more detail below, GK presented to SCB documents, including an inspection certificate apparently signed by Montrod, which on their face complied with the terms of the credit. SCB paid the credit in the face of an assertion by Montrod that the inspection certificate which GK presented had not been signed or authorised by Montrod and that the document was fraudulently created. The judge found that the inspection certificate had indeed been signed without the authority of Montrod but that GK was not fraudulent and was entitled to payment by SCB which was entitled to payment from Fibi, which was in turn entitled to reimbursement by Montrod. In the course of his judgment the judge rejected Montrod's alternative argument that SCB was entitled to refuse payment on the grounds that, even if GK was not fraudulent, SCB and GK had prior to payment been made aware that the inspection certificate had not been signed or authorised by Montrod and as such was a 'nullity' and/or a non-conforming document.
Montrod and Fibi appeal with the permission of the judge. Their appeals raise identical issues and Fibi has not appeared to present any separate argument. The finding of the judge that GK was innocent of any fraud has not been challenged and the success of the appeal depends upon the correctness of the 'nullity' argument, as to which there is no clear previous authority
In relation to Montrod's application for permission to add a CPR Part 20 Claim against GK, Montrod's draft case raised various causes of action which were the subject of applications by GK for summary relief and/or to strike out. The judge's decision on those matters, in respect of which he refused leave to appeal, has given rise to applications to this court for leave to appeal, to which I shall turn in due course.
THE BACKGROUND FACTS
GK had prior experience of export business but this was its first letter of credit transaction. It opened a new account with Commerzbank which it used as its advisor in connection with the credit. In the course of its communications with Ballaris when negotiating the contract of sale and the putting in place of the letter of credit, GK (who never had direct contact with Montrod) dealt with Ballaris in good faith on the basis that Ballaris could speak as to Montrod's intentions so far as signature of the inspection certificate was concerned. GK were led to understand that Mr Wieler, an employee of GK, should sign the inspection certificates on behalf of Montrod and GK agreed that he would do so, receiving through the post a Montrod company stamp as proof of Montrod's authorisation of GK. GK acted accordingly. The full circumstances in which that unusual situation came about, and the judge's reasons for accepting that GK, who at all times acted on the advice of Commerzbank, were entirely innocent of fraud, appear in the report of the judge's decision at [2001] 1 All ER (Comm) 368 at 377b-378f and 379b-d. As already indicated there is no appeal against those findings.
Unknown to GK, Ballaris were not entitled to speak for Montrod as to the contents of the credit. The negotiations between Montrod and Ballaris were conducted entirely between Mr Hoory on behalf of Montrod and a Mr Bernard Choo of Frankfort Trade Credit Agencies of Singapore who (as apparent agent/intermediary for Ballaris) had approached Mr Hoory to provide the credit. Mr Hoory had no direct contact with either Ballaris or GK. The precise relationship and the contact of any communications between Mr Choo and Ballaris or GK remain to be determined. However, it was in fact the case (and it is not in dispute) that Montrod did not wish or intend to inspect the goods. So far as Mr Hoory was concerned, the requirement for presentation of a signed certificate was no more than a device, or 'locking' clause, intended to ensure that, by withholding its signature, Montrod could ensure that the credit would not be operable until it had been put in funds by Ballaris. That purpose was never disclosed to GK who were unaware of it and would never have agreed to the inclusion of such a term had it been so aware. GK duly despatched the goods by means of twenty lorry shipments to Moscow where they were delivered to Ballaris without any subsequent complaint. GK did so on the understanding that it was entitled to sign the inspection certificates for each truck load on behalf of Montrod and believing that, in any event, the goods were also to be inspected by an agency on arrival in Moscow. Having signed the certificates in those circumstances, GK duly presented twenty sets of documents under the credit to SCB in London, which accepted them as conforming with the credit.
THE RELEVANT CHRONOLOGY
In February 2000, Montrod requested Fibi to obtain a letter of credit to be issued by the London branch of SCB in respect of the price of the goods agreed to be sold by GK which was to be named as the beneficiary. On 17 February 2000 Fibi wrote to SCB forwarding Montrod's request and stating that:
"[Fibi] shall reimburse you two working days after receipt of your tested Telex/Swift claim confirming that documents have been presented to yourselves strictly in accordance with the LC terms and are being forwarded to us"
In fact, since the letter of credit was '45 days sight', the notice period for reimbursement was considerably longer. However nothing turns upon that.
Upon 21 February 2000 SCB issued the letter of credit in accordance with Fibi's instructions, stating that Montrod was the applicant. SCB then requested Commerzbank to advise the letter of credit to GK, Commerzbank...
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