Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,LORD JUSTICE STUART-SMITH,LORD JUSTICE BELDAM |
| Judgment Date | 28 October 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J1028-5 |
| Docket Number | 92/0982 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 October 1992 |
[1992] EWCA Civ J1028-5
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
(MR JUSTICE SAVILLE)
Royal Courts of Justice
Lord Justice Lloyd
Lord Justice Stuart-Smith
Lord Justice Beldam
92/0982
MR ANTHONY CLARKE Q.C. and MR SIMON RAINEY, instructed by Messrs Clyde & Co., appeared for the Appellants (Plaintiffs).
MR NICHOLAS CHAMBERS Q.C. and MR MARK HAPGOOD, instructed by Messrs Stephenson Harwood, appeared for the Respondents (Defendants).
In this case we have been concerned with the course of business under a commercial letter of credit. By a contract dated 30th June 1986 the plaintiffs agreed to sell a large quantity of artillery shells to the Iranian Ministry of Defence. The total price was $193M. Payment was to be made by letter of credit. On 15th January 1987 the defendants opened an unconfirmed letter of credit in favour of the plaintiffs. It provided for payment at the counter of Bank Melli Iran in London against presentation of documents. On 29th September 1987 the plaintiffs shipped the first instalment of goods from Setubal, Portugal. The invoice value was $3.1M, less 9 per cent retention. By letter dated 30th September 1987 the plaintiffs remitted a full set of documents. They arrived on 1st October. Bank Melli carried out the usual checks. They identified certain discrepancies. As a result there was a meeting on Monday 5th October at Bank Melli's offices between Mr Appiano of the plaintiffs and Mr Mansouri of Bank Melli. There is a dispute as to what was said at that meeting. One thing is clear. Bank Melli never paid against the documents. Nor did Bank Markazi.
On 1st December 1987 the plaintiffs shipped another consignment of goods. This time the invoice value was $4.526M, less 9 per cent retention. The documents were remitted the same day, and received by Bank Melli on 3rd December. Once again the documents were checked and found to contain discrepancies. On 8th December Bank Melli sent a telex to the plaintiffs, listing the discrepancies, and informing the plaintiffs that the documents were held at the plaintiffs' disposal. Although the telex was sent to the address indicated in the plaintiffs' covering letter, it appears that the plaintiffs had changed their telex number without informing Bank Melli. As a result the plaintiffs did not receive a copy of the telex until it was handed over at a meeting on 10th December, attended, as before, by Mr Appiano and Mr Mansouri. Thereafter Bank Melli telexed Bank Markazi requesting authority to pay against the documents, notwithstanding the discrepancies. They received no reply.
The two consignments have presumably arrived in Iran. But the plaintiffs have never been paid. The balance of the contract has been cancelled.
In those circumstances the plaintiffs commenced proceedings against Bank Markazi in respect of both presentations. They were granted leave ex parte to serve out of the jurisdiction by Hobhouse J. On the inter partes hearing Saville J. set aside leave in respect of the second presentation, but upheld leave in respect of the first presentation. On the second presentation he held that the plaintiffs' case was insufficiently strong on the merits. The plaintiffs now appeal against Saville J.'s decision in respect of the second presentation, and the defendants cross-appeal in respect of the first presentation.
The Appeal
It is common ground that the plaintiffs' claim falls within one or other of the heads of R.S.C. Order 11, rule 1. It is also common ground that England is an appropriate forum. The plaintiffs would say that it is clearly the most appropriate forum. The case thus turns on whether, as the evidence stands, the plaintiffs have established a sufficiently strong case on merits.
There were two matters for the judge to consider on the merits; first, whether the documents conformed to the credit, and secondly whether the telex of 8th December was a valid rejection. Regrettably the judge did not give a formal judgment. We only have a note of various issues which he decided as the argument proceeded, and other issues on which one side or the other was stopped. As to the second question he held that the telex was a valid rejection, and that the contrary was unarguable. As to the first question, he held that the plaintiffs had failed to establish on the balance of probabilities that the documents conformed with the contract. Mr Clarke, for the plaintiffs, argues that this was to impose too high a standard of proof at the interlocutory stage. Mr Chambers does not argue the contrary. The explanation for the judge's error must be that he misunderstood something said by the Court of Appeal in Attock Cement Co. Ltd. v. Romanian Bank for Foreign Trade [1989] 1W.L.R. 1147. In that case Staughton L.J. said at 1155:
"Save in the speech of Lord Tucker [in Vitkovice Horni a Hutni Tezirstvo v. Korner [1951] A.C. 869], which deals with a special problem, I cannot find in the decision any express consideration of the balance of probability. Nevertheless I conclude that, where there is a disputed question of fact which is essential to the application of R.S.C., Ord. 11, r.l, the judge must reach a provisional or tentative conclusion that the plaintiff is probably right upon it before he allows the service to stand. The nettle must be grasped, and that is what I take to be meant by a good arguable case".
But that case was concerned with the standard of proof required to bring a case within one of the heads of Order XI, rule 1. It does not touch directly on the merits. In Overseas Union Insurance Ltd. v. Incorporated General Insurance Ltd. [1992] 1 Lloyd's Rep. 439 Gatehouse J. made the same mistake as Saville J. But his mistake was corrected by the Court of Appeal at page 442.
Since Saville J. applied the wrong standard of proof in relation to one of the matters which he had to consider in exercising his discretion, it is clear, as Mr Chambers concedes, that his decision cannot stand, and we must exercise our discretion afresh.
Did the documents conform?
I start with the letter of credit. It is contained in a telex dated 15th January 1987 from Bank Markazi in Iran to Bank Melli in London. So far as relevant it reads:
"This telex is to be considered as our credit instrument and is subject to Uniform Customs and Practice for Documentary Credits 1983 Revision I.C.C. Publication No. 400. At the request of Deputy Ministry of Defence for Logistics of IRI we open our irrevocable L/C No. 106808/4 in favour of M/S: Seaconsar Far East Ltd. 8th Floor Printing House Central Hong Kong for the sum of not exceeding U.S. Dollars 18,600,000.—(for value) valid until March 17–88 at the counter of Bank Melli Iran, LDN covering special equipments as per contract No. 11/284 DD.30–6–86 and its relevant addendum No. 1. Available by sight payment at the counter of Bank Melli Iran London against presentation of the original set of the following docs:
Signed commercial invoice in 4 copies…Full set of clean on board B/L marked freight collect issued or endorsed to our order…Certificate of origin in 4 copies issued by the local Chamber of Commerce confirming goods originated in France…Packing list in 4 copies
Inspection certificate of goods issued by [the beneficiary as] manufacturer who will be advised you later on and confirmed by orderer's rep.
Certificate of quality and perfect performance of goods issued by quality control department of manufacturing company.
Delivery schedule will be advised you later on.
.….
Process verbal of goods confirmed by orderer's authorized rep. who will be fully identified later on.
Kindly notify the beneficiary accordingly.
Other conditions:
.….
Only 91 per cent of the value of each cargo is payable against presentation of relevant required documents. The remaining 9 per cent is kept as good performance guarantee…
Please debit our account for payment. Our LC No. and our principal's name should appear on all documents and packages…"
The documents were, as I have said, received on 3rd December. They were checked on 3rd and 4th December. The Document Checking Record shows four discrepancies. We are only concerned with one. It relates to the Proces Verbal. It was a requirement of the credit that all the documents should bear the letter of credit number and the name of Bank Markazi's principal, that is to say, the Deputy Ministry of Defence for Logistic. The Proces Verbal reads:
"We certify, that:
7,300 pieces of 'SPECIAL EQUIPMENT'
Shipped [on] the M-V 'IRAN NAHAD' are on board and in accordance with [the] terms of contract no. 11/284 dated 30th June 1987."
It is signed by Mr Mohammad Eskandari, who, as appears from an amendment to the letter of credit, was the "orderer's representative". It is also signed by the plaintiffs. But it does not bear the letter of credit number and it does not bear the name "Deputy Ministry of Defence for Logistic", as do all the other documents, such as the Certificate of Inspection and the Certificate of Quality, in the top right-hand corner.
Curiously the checkers failed to notice a further discrepancy, that the Proces Verbal refers to a contract dated 30th June 1981 instead of 1986. But nothing now turns on that discrepancy.
There is no dispute between the parties as to the doctrine of strict compliance, and the reasons for it. They are to be found in the speech of Viscount Sumner in Equitable Trust Company of New York v. Dawson Partners, Ltd. (1926) 27 Lloyds List Reports 49, and the judgments of Parker J. and Sir John Donaldson M.R. in Bancfue de...
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