Standard Chartered Bank v Pakistan National Shipping Corporation (No. 4) (Reduction of Damages)

JurisdictionEngland & Wales
JudgeSIR ANTHONY EVANS,Or
Judgment Date27 July 2000
Judgment citation (vLex)[2000] EWCA Civ J0727-3
Docket NumberCase No: 98/0603; 98/0606
CourtCourt of Appeal (Civil Division)
Date27 July 2000
(1) Standard Chartered Bank
(Plaintiff/Respondents)
(1) Pakistan National Shipping Corporation
(2) Seaways Maritime Limited
(3) Sgs United Kingdom Limited
(4) Oakprime International Limited
(5) Arvind Mehra
(Defendants/Appellants)

[2000] EWCA Civ J0727-3

Before:

Lord Justice Aldous

Lord Justice Ward and

Sir Anthony Evans

Case No: 98/0603; 98/0606

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

COMMERCIAL COURT

MR JUSTICE CRESSWELL

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand,

London, WC2A 2LL

Timothy Young QC and Richard King (instructed by Amhurst Brown Colombotti for the First Defendants/Appellants)

John Cherryman QC and Lawrence Akka (instructed by Ashok Patel & Co for the Fifth Defendants/Appellants)

Jeffrey Gruder QC and Zoe O'Sullivan (instructed by Lovells for the Plaintiffs/Respondents)

SIR ANTHONY EVANS

Background

1

Shipowners PNSC issued a bill of lading which to their knowledge gave a false shipment date. They knew also that the date stated in the bill of lading would or might be relied upon as the date of actual shipment by banks or other persons to whom the bill of lading might be presented under a letter of credit transaction, against payment for the goods.

2

That is what occurred. Mr Mehra on behalf of his company Oakprime presented the falsely antedated bill of lading to London bankers, SCB, under a Letter of Credit issued by Incombank of Vietnam and confirmed by SCB. SCB relied upon the bill of lading date as being accurate, and it follows that PNSC are liable to them in damages for the tort of deceit in respect of any loss they suffered in consequence of doing so: Brown Jenkinson v. Percy Dalton (London) Ltd. [1957] 2 Q.B. 621.

3

But that was not the whole story. The shipping documents included not only the bill of lading, but also Survey Certificates which were not presented to SCB until after the letter of credit expired. So they were not obliged to pay the amount of the credit to Oakprime, and it was outside the scope of their authority from the issuing bank, Incombank, to do so.

4

The usual course for the confirming bank to take in these circumstances is to inform the issuing bank of the late presentation and to request its instructions before making any payment to its customer, by whom the documents are presented. If it chooses to make the payment without obtaining the issuing bank's authority, then it does so as a volunteer, between itself and the customer, and the issuing bank is not obliged to indemnify it.

5

In the present case, SCB chose to make the payment and, as we have found ( see Standard Chartered Bank v Pakistan National Shipping Corporation (No. 2) [2000] 1 Ll. LR) 218, they claimed repayment from Incombank on the basis of a false statement that the documents were presented to them in time. Had Incombank paid them the indemnity which they claimed, then they would have been liable to Incombank to repay the amount as damages for deceit, when the true facts as to late presentation were discovered.

6

That situation never arose, because Incombank refused payment on the distinct ground that the documents presented did not conform with the terms of the credit, a fact which SCB, probably negligently, failed to notice.

7

So SCB are out of pocket, and they claim their loss as damages from PNSC, as having been caused by the false statement in the bill of lading (and elsewhere) as to the shipping date. But they would never have made the payment to Oakprime if they had not believed that they would be indemnified by Incombank, and it was in order to maintain that claim for an indemnity that they falsely concealed the fact of late presentation from them.

8

In these circumstances, as we have held, SCB's decision to claim an indemnity on this false basis was a cause of the loss which they suffered in consequence of making the payment to Oakprime and failing to recover the indemnity from Incombank.

9

Because Incombank rejected the documents on other grounds and made no payment to SCB, they never sought to hold SCB liable. Had they done so, relying on SCB's representation that the documents were presented timeously under the letter of credit, they would have been entitled to recover the amount as damages for the tort of deceit. This is not to say that Incombank did not rely upon the representation, because presumably their checkers accepted that the documents were presented in time. If they had not done so, they were entitled to reject the documents on that ground alone. If further enquiries had been made, the falsity of the shipment date would probably have been discovered.

10

Instead, there was correspondence between Incombank and SCB regarding other discrepancies, which led to the ultimate rejection of the documents. So it is arguable that Incombank did rely upon SCB's representation and did suffer some small expenses in consequence of doing so. But it is sufficient for present purposes, in my opinion, that SCB's conduct towards Incombank was unlawful and was a contributory cause of their own losses, which they now seek to recover in full from PNSC.

The Issue

11

The issue therefore is whether the claim, which is admitted by PNSC, should be reduced to take account of SCB's partial responsibility for its own loss. Apportionment was never viewed favourably by the common law, one reason being that the substantive right to recover damages was constrained by the straitjacket of pleading and other procedural rules that continued until the Judicature Acts 1873–5. Even after those Acts were passed, there remained two rules which are directly relevant for present purposes. First, the claimant could not recover damages for loss which was even partly caused by his own fault, even if the loss was otherwise caused by the defendant's breach of duty towards him. This rule was abrogated by the Law Reform (Contributory Negligence) Act 1945, but not before artificial rules of causation were devised in order to ameliorate the injustice which the rule could cause for claimants. The best-known example of this strained approach was the "last opportunity" rule ascribed to Davies v. Mann (1842) 10 M & W 546. By providing for the apportionment of loss in such circumstances, the 1945 Act made such artificial rules unnecessary, and the Courts were enabled to adopt a more common-sense approach towards issues of causation generally.

12

The second rule which is directly relevant in the present case is now exemplified by the House of Lords' decision in Tinsley v. Milligan [1994] 1 A.C. 340. PNSC relied upon this rule in its defence, arguing that SCB were disqualified from recovering damages by reason of their own unlawful conduct which had caused or contributed towards their loss. As we have held, the defence fails, because its scope is limited to cases where the claimant has to assert and rely upon his own unlawful conduct in order to establish his claim against the defendant (the so-called "reliance principle"). This limitation of the rule presents possible injustice where an injured claimant might be disqualified from recovering damages by reason of some illegal conduct of his own which was not causative of his loss. The modern rule however is still of the all-or-nothing kind. The claimant either recovers damages in full or is disqualified by reason of his own misconduct and recovers nothing.

13

It should be noted at this point that the origins of the Tinsley v. Milligan line of authorities lie in considerations of public policy which are distinct from the question of the desirability or otherwise of the Court being able to apportion loss to which the claimant as well as the defendant has contributed. The Court should not be seen to recognise or approve illegal behaviour, and there is no injustice in refusing to exercise the Court's powers in favour of such a claimant, even against a defendant who would otherwise be held liable towards him.

14

The present case exposes, in unusual circumstances, a different situation. On our findings, the claimant's (SCB's) unlawful conduct does not disqualify him under the rule in Tinsley v. Milligan, but it was a contributory cause of the loss which he seeks to recover from the defendants, PNSC. If both parties were negligent and no more, the 1945 Act would permit and require an apportionment of damages. Does it apply in the present case?

15

In deference to the detailed submissions we have received from both parties, I shall attempt a brief historical survey of the Court's power to reduce damages which is found in the Law Reform (Contributory Negligence) Act 1945.

Before 1945 – common law and admiralty

16

Reported cases show the Courts grappling with problems of causation when accidents occurred, both on land and at sea. It was recognised in both jurisdictions, common law and admiralty, that the law was concerned with direct or immediate, rather than remote, causes, and that there could be cases where there was not one cause, but two. Both the injured claimant and the defendant from whom he sought to recover damages could be regarded as having caused or contributed towards his loss. In such cases, the Admiralty Court apportioned liability between the parties, but the common law rule was that the claim failed. It was sufficient to disentitle the claimant that he was the part-author of his own misfortune. This rule was commonly ascribed to the judgment of the Court of King's Bench in Butterfield v. Forrester (1809) 11 East 60. It led to the supposed rule of "last opportunity" attributed to Davies v. Mann (above) which was devised in order to prevent the common law rule from producing an unjust result. It was, in fact, no more than a...

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