Standard Chartered Bank v Pakistan National Shipping Corporation (No. 3) (Assessment of Damages)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE POTTER,MR JUSTICE WALL,LORD JUSTICE HENRY |
| Judgment Date | 26 January 2001 |
| Neutral Citation | [2001] EWCA Civ 55 |
| Docket Number | Case No: A3/1999/0872 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 January 2001 |
[2001] EWCA Civ 55
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 Toulson)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Henry
Lord Justice Potter and
Mr Justice Wall
Case No: A3/1999/0872
A3/1999/0873
Jeffrey Gruder Esq QC & Miss Zoe O'Sullivan
(instructed by Messrs Lovell White Durrant for the Claimant)
Timothy Young Esq QC & Richard King Esq
(instructed by Messrs Amhurst Brown Colombotti for the First Defendant)
Lawrence Akka Esq
(instructed by Messrs Ashok Patel & Co for the Fifth Defendant)
INTRODUCTION
This is the latest in a series of decisions involving litigation between the parties arising out of proceedings brought by the claimant Standard Chartered Bank ("SCB") against Pakistan National Shipping Corporation ("PNSC"), the first defendants, and others, following the issue and presentation to SCB of a falsely dated bill of lading which induced SCB, as the confirming bank under a letter of credit established by a Vietnamese State bank ("Incombank"), to take up the documents and make payment to Oakprime Limited ("Oakprime"), the fourth defendants, who were the sellers of a cargo of Iranian bitumen to which the letter of credit related. On 1 April 1998 Cresswell J gave judgment for SCB against PNSC for damages to be assessed for deceit, conspiracy and negligent misrepresentation. He also gave judgment in similar terms against Mr Mehra, the fifth defendant, who was a director and the moving spirit of Oakprime. On 19 February 1999 Toulson J assessed SCB's damages in the sum of US$ 1,169,594.57 inclusive of interest. The judgment of Cresswell J against Mr Mehra was subsequently reversed by the Court of Appeal (see [2000] 1 Lloyds Rep 218) on the grounds that he was not personally liable for the misrepresentations made by Oakprime on the basis of SCB's pleaded case, which decision is currently the subject of a petition for leave to appeal to the House of Lords.
This is the appeal of PNSC, for whom Mr Timothy Young QC appears, against the findings of Toulson J on quantum. Mr Mehra, represented by Mr Akka, has also participated in the appeal against the event that the petition to the House of Lords may be successful. He has adopted the arguments of Mr Young and added an argument of causation relevant to Mr Mehra's position. Seaways Maritime Limited, the second defendants in the action take no part in this appeal. Proceedings against the former third defendants, SGS United Kingdom Limited, were discontinued prior to the hearing before Cresswell J. Oakprime were never made the subject of a judgment, being in insolvent liquidation. I shall deal first with the appeal of PNSC before turning to the point argued on behalf of Mr Mehra.
THE FACTUAL BACKGROUND
A full account of the facts appears from the judgments of Cresswell J on liability reported at [1998] 1 Lloyds Rep 684 and the judgment of Toulson J on quantum reported at [1999] 1 Lloyds Rep 747. A summary of the facts relevant to this appeal is as follows.
Oakprime agreed to sell 20,000 MT of Iranian bitumen to Vietranscimex (a state-owned company responsible for road maintenance in Vietnam) at a contract price of US$ 147 per MT. Payment for the bitumen was to be made by irrevocable letter of credit opened by Incombank and confirmed in London by SCB. Part of the cargo was to be shipped in the MV "Lalazar", a vessel owned by PNSC. Oakprime chartered the Lalazar from PNSC to carry 10,000 tons of bitumen from Bandar Abbas to Ho Chi Minh City. The last date for shipment under the letter of credit was 25 October 1993. When it became apparent that loading would not be completed by that date, PNSC agreed that false bills of lading would be issued showing that the goods had been so shipped. False bills dated 25 October 1993 were accordingly issued, and the bills and other documents called for were presented to SCB who, relying upon them, paid the sum of US$ 1,155,772.77 to Oakprime on 16 October 1993. SCB permitted late presentation of certain documents and failed to notice other discrepancies in the documents, which failure was described by Cresswell J as "most regrettable". However, having found that SCB's document checkers were negligent but honest, he accepted SCB's case that payment would not have been made to Oakprime but for the issue and presentation of the fraudulently dated bills.
SCB sought reimbursement from Incombank as the issuing bank under the letter of credit. Incombank rejected the documents on the grounds of discrepancies rather than late presentation. SCB's conduct in claiming indemnity against Incombank was described by the Court of Appeal as deceitful: see [2000] 1 Lloyd's Rep 218 at 223–However, it was held that the conduct criticised did not break the chain of causation between the fraud of PNSC and payment by SCB to Oakprime as beneficiaries.
On 5 January 1994 the Lalazar arrived at Ho Chi Minh City and gave notice of readiness. Mr Brinsden, the chief executive of SCB in Vietnam, quickly learned that Vietranscimex had instructed Vietnam Overseas Shipping Agency ("VOSA") who were agents for PNSC not to let the vessel dock until they had concluded a new agreement with Oakprime. On 6 January, Mr Brinsden wrote to Incombank correctly pointing out that Vietranscimex were only the notify party and not the consignee (which was Incombank), and thus had no right or title to the goods, nor any right to give instructions concerning the ship in which the goods were carried and that, as they had rejected the documents, the ownership of the goods remained in SCB for whom Incombank were in a trustee relationship in respect of the documents of title. Thus it was with SCB that Vietranscimex would have to negotiate any new agreement.
On 7 January 1994, Mr Brinsden had a meeting with representatives of Vietranscimex and Incombank during which his staff overheard discussion about Vietranscimex using the position to obtain a reduction in the price. As a result SCB decided to do all it could to ensure that the vessel did not discharge immediately and to order an SGS inspection to establish that the quality was that called for under the letter of credit. On 8 January, Mr Brinsden wrote again to Incombank to make the position clear to Vietranscimex that they would have to negotiate any future sale as a new and separate deal with SCB, who reserved the right to negotiate the sale of the goods at a fair market price which, given a recent increase in the world price of bitumen, might mean a higher price. He added:
"In principle, of course, we would be more than happy to settle for the original price but, if Vietranscimex are not able to reach a satisfactory agreement with us, we are free to find other buyers elsewhere, including outside Vietnam."
On 10 January 1994 the Lalazar docked and was visited by Mr Brinsden, representatives of Incombank and Vietranscimex, and surveyors from SGS. On questioning the master Mr Brinsden had his suspicions confirmed that the bills of lading had been falsely dated and reported back to Mr Bishop and Mr Griffiths the servants of SCB in London who were in day-to-day charge of the transaction:
"My impression …. is that the cargo is onboard and that the final solution will depend on the negotiations between ourselves and Vietranscimex as to price. We have some advantage as long as Lalazar does not unload (Vietranscimex and the owners are both trying to get this expedited) and, furthermore, the Vietranscimex officials are somewhat under fear of disciplinary action over this deal."
As a result of the SGS inspection it became apparent that there were difficulties with the cargo. Vietranscimex's contract with Oakprime not only contained a detailed specification in relation to the quality of the bitumen, but also required that it be packed in new 24 gauge steel drums as per ISO standards. The documents presented by Oakprime to SCB included certificates as to quality and the other requirements of the letter of credit. However SGS made it clear that while, from visual examination of sample drums taken from the top, the quality of the bitumen was probably as specified, the drums appeared to be clearly second-hand and generally poor and rusted. In depth examination of the cargo, particularly the lower level of the drums was recommended, but this was impossible before the vessel was unloaded. On 18 January, an SGS report based on two samples randomly drawn from the top layer of four holds found compliance with the contractual specification of the bitumen, although some figures were marginal (the reported figure for penetration was 60 as against a contractual requirement of 60–70).
On 21 January, Mr Brinsden wrote to Mr Long, the Director-General of Vietranscimex, offering to sell the cargo at the original contract price of US$ 147 per tonne, stating that this was a reasonable figure since the world price for the product had now risen to US$ 152 per tonne. On 26 January Vietranscimex countered with an offer to pay the price asked for contract quality cargo in new drums and US$ 130 per tonne for contract quality cargo in used drums of 24 gauge, stating that bitumen not meeting the contractual specification or in used drums which were not of 24 gauge would be rejected. Payment was to be 180 days after receipt. Mr Brinsden rejected that offer and pressed...
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