Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Templeman,Lord Griffiths,Lord Goff of Chieveley,Lord Browne-Wilkinson,Lord Mustill
Judgment Date14 October 1993
Judgment citation (vLex)[1993] UKHL J1014-1
Date14 October 1993

[1993] UKHL J1014-1

House of Lords

Lord Templeman

Lord Griffiths

Lord Goff of Chieveley

Lord Browne-Wilkinson

Lord Mustill

Seaconsar Far East Limited
Bank Markazi Jomhouri Islami Iran (Body Corporate)
Lord Templeman

My Lords,


I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Goff of Chieveley, and for the reasons he gives I, too, would allow the appeal.

Lord Griffiths

My Lords,


For the reasons given in the speech to be delivered by my noble and learned friend. Lord Goff of Chieveley, which I have had the opportunity of reading in draft and with which I agree, I would allow this appeal.

Lord Goff of Chieveley

My Lords,


This appeal is concerned with an application for leave, under R.S.C. Order 11, to serve a writ out of the jurisdiction; and it raises in particular the question of the extent to which the plaintiff has to establish, in relation to such an application, a sufficiently strong case on the merits of his claim.


The appellant, Seaconsar Far East Ltd. ("Seaconsar"), is a Hong Kong company which deals in arms. The respondent. Bank Markazi Jomhouri Islami Iran ("Bank Markazi"), is an Iranian bank. Under a contract of sale dated 30 June 1986 Seaconsar agreed to sell a large quantity of artillery shells to the Iranian Ministry of Defence for a total price of U.S.$193 m. Payment was to be made by letter of credit. On 15 January 1987 Bank Markazi opened a letter of credit in favour of Seaconsar. covering shipment of "special equipments" (i.e. artillery shells), in a sum of U.S.$18,600.000. valid until 17 March 1988. The letter of credit was unconfirmed, and was available at sight in London at the counters of Bank Melli Iran. It permitted partial shipments, and was expressed to be subject to the Uniform Customs and Practice for Documentary Credits. 1983 Revision ("the UCP"). Bank Melli advised Seaconsar of the opening of the credit by letter dated 16 January 1987.


The credit (as amended) was payable at sight on presentation to Bank Melli in London of the original set of a number of specified documents, including

Process verbal of goods confirmed by orderer's authorized rep. who will be fully identified later on.


Under the heading "other conditions", there appeared (inter alia) the following provision:

Our LC no. and our principal's name should appear on all docs, and packages.


It is this latter provision which is the principal source of the controversy in the present case, a question having arisen from the fact that the details there specified were omitted from the "process verbal of goods", which was interpreted as meaning a list of the goods shipped.


Pursuant to the contract of sale, Seaconsar made two shipments of artillery shells from Setubal in Portugal to Bandar Abbas in Iran. The first shipment was made on 29 September 1987, and the second on 1 December 1987. Seaconsar made a presentation of documents to Bank Melli in London in respect of each shipment, the first presentation being made on Thursday 1 October 1987. and the second on Thursday 3 December 1987. Bank Markazi has failed or refused to make payment in respect of both presentations, on the ground that the documents presented were in certain respects not in conformity with the requirements of the letter of credit. So far as appears from the material before your Lordships, both consignments have been discharged in Iran but neither has been paid for, and the balance of the contract has been cancelled.


The present proceedings are concerned with a claim by Seaconsar against Bank Markazi for damages for breach of contract in respect of Bank Markazi's failure to pay against both presentations. Leave to serve the proceedings on Bank Markazi outside the jurisdiction was granted to Seaconsar ex parte by Hobhouse J. Bank Markazi then applied to set aside the order of Hobhouse J. in respect of both presentations. Saville J. dismissed Bank Markazi's application so far as it related to the first presentation, but he set aside the order of Hobhouse J. in relation to the second. Seaconsar then appealed to the Court of Appeal against the latter pan of Saville J.'s order, and Bank Markazi cross-appealed against the former. The Court of Appeal (Lloyd. Stuart-Smith and Beldam L.JJ.) dismissed both Seaconsar's appeal and Bank Markazi's cross-appeal. Stuart-Smith L.J. dissenting on the dismissal of Seaconsar's appeal. Seaconsar now appeals to your Lordships' House, with leave of the Court of Appeal, against the dismissal of its appeal. Bank Markazi no longer pursues its cross-appeal. It follows that your Lordships' House is directly concerned only with the second presentation.


Seaconsar applied for leave to serve proceedings out of the jurisdiction under either paragraph (d) or paragraph (e) of R.S.C. rule 1(1). The application under paragraph (d) was made either under subparagraph (i). on the basis that the contract was made within the jurisdiction, or under subparagraph (ii), on the basis that the contract was made by or through Bank Melli. as agent trading within the jurisdiction, for Bank Markazi, which was outside the jurisdiction. The application under paragraph (e) was on the basis of breach of contract within the jurisdiction, viz. refusal to pay at the counters of Bank Melli in London. Bank Markazi has never disputed that the case fell under either paragraph (d) or paragraph (e), its sole contention being that Seaconsar had not established a sufficiently strong case on the merits of its claim. On this point, the issues which have arisen in respect of both presentations are very similar. In substance, they are as follows:

  • (1) What is the test of a sufficiently strong case on the merits to justify the grant to a plaintiff of leave to serve proceedings out of the jurisdiction under Order 11.

  • (2) Whether Seaconsar has satisfied this test in relation to the merits of the following issues:

    • (a) Whether the documents were in conformity with the requirements of the letter of credit and/or did not give rise to a right of rejection by Bank Markazi;

    • (b) If not, whether Bank Melli had the authority of Bank Markazi to reject the documents;

    • (c) If so, whether Bank Melli did in fact reject the documents:

    • (d) If so, whether such rejection took place within a reasonable time as required by Article 16 of the UCP.


In addition, in relation to the second presentation there has arisen a third issue, viz.

(3) Whether the Court should take into account, in exercising its discretion in respect of the second presentation, the fact that Seaconsar's claim relating to the first presentation will be determined in England in any event.


So far as the first presentation was concerned, the crucial point which persuaded Saville J. to refuse to set aside the order of Hobhouse J. was that, in his opinion, Seaconsar had established a sufficient case on the merits that there was no rejection of the documents by Bank Melli at the material time. In the case of the second presentation, however, he held that Seaconsar had failed to establish a sufficient case on the merits on any of the four issues listed above as (2)(a)-(d), and so he allowed Bank Markazi's application.


In the Court of Appeal, however, it was held that Saville J. had erred in applying too strict a standard on the question whether Seaconsar had established a sufficient case on the merits, Saville J. having proceeded on the basis that Seaconsar must establish its case on the balance of probabilities. The Court of Appeal, which was united in the opinion that Saville J. had applied too strict a standard, was divided on the proper standard to apply. Lloyd and Beldam L.JJ. considered that Seaconsar had to establish a good arguable case on the merits, whereas Stuart-Smith L.J. was of the opinion that it was enough for Seaconsar to show that it had a case on the merits which was worthy of consideration. All were agreed, however, that in any event Bank Markazi's cross-appeal on the first presentation must fail. On Seaconsar's appeal, the majority held that Seaconsar had failed to establish a good arguable case on any of the four issues raised by it. Stuart-Smith L.J. however considered that Seaconsar had established a case worthy of consideration on all four issues. He also considered, in disagreement with the majority, that it was relevant to take into account the fact that proceedings in respect of the first presentation would in any event take place in England, and that this factor provided an additional and cogent reason why the court should exercise its discretion in favour of Seaconsar in relation to the second presentation.


In argument before the Appellate Committee, attention was concentrated upon the question of the strength of the case on the merits which a plaintiff has to establish in order to justify the grant of leave to serve proceedings out of the jurisdiction under Order 11. On this matter your Lordships had the benefit of a full citation of authority, and were much assisted by the admirable arguments presented to them, both by Mr. Kentridge for Seaconsar and by Mr. Chambers for Bank Markazi. It became apparent, however, in the course of argument that this point cannot be considered in isolation, but must be examined in its context, together with the other matters which fall for consideration by the court when it is called on to exercise its jurisdiction under Order 11. It is necessary therefore to look at the jurisdiction as a whole, before reaching a conclusion on the question directly at issue in the present case.


I start, as I must, with the relevant provisions of Order 11. Order 11. rule 1(1) provides that, subject to certain specified exceptions. "… service of a writ out of the jurisdiction is permissible with the leave of the court if in the action begun by the writ …". and there follows a list of...

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