Standard Chartered Bank v Pakistan National Shipping Corporation (No. 2)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE EVANS,LORD JUSTICE ALDOUS,LORD JUSTICE WARD,LORD JUSTICE Aldous |
| Judgment Date | 27 July 2000 |
| Neutral Citation | [1999] EWCA Civ J1203-9 |
| Judgment citation (vLex) | [1999] EWCA Civ J1203-14 |
| Docket Number | Case No: QBCMF 98/0603 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2000 |
and
[1999] EWCA Civ J1203-14
Lord Justice Evans
Lord Justice Aldous
and
Lord Justice Ward
Case No: QBCMF 98/0603
QBCMF 98/0606
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 CRESSWELL)
Royal Courts of Justice
Strand, London, WC2A 2LL
MR TIMOTHY YOUNG QC/MR RICHARD KING (instructed by MESSRS AMHURST BROWN COLOMBOTTI, London, SW1Y 6BJ for the FIRST APPELLANT/FIRST DEFENDANT)
MR JOHN CHERRYMAN QC/MR LAWRENCE AKKA (instructed by MESSRS ASHOK PATEL & CO, London, SW17 7BD for the SECOND APPELLANT/FIFTH DEFENDANT
MR JEFFREY GRUDER QC/MS ZOE O'SULLIVAN (instructed by MESSRS LOVELL WHITE DURRANT, London, EC1A 2DY for the RESPONDENTS/CLAIMANTS)
Friday, 3rd December 1999
The judge began his judgment with the following paragraph, which I agree with and would entirely endorse —
"Antedated and false bills of lading are a cancer in international trade. A bill of lading is issued in international trade with the purpose that it should be relied upon by those into whose hands it properly comes—consignees, bankers and endorsees. A bank, which receives a bill of lading signed by or on behalf of a ship owner (as one of the documents presented under a letter of credit), relies upon the veracity and authenticity of the bill. Honest commerce requires that those who put bills of lading into circulation do so only where the bill of lading, as far as they know, represents the true facts."
This requirement of honest commerce is stringently enforced by the English Courts. If a false bill of lading is knowingly issued by the master or agent of the shipowner, and if the claimant was intended to rely on it as being accurate, did rely upon it and as a result of doing so has suffered loss, then the shipowner is liable in damages for the tort of deceit.
The rule in Derry v. Peek (1889) 14 App. Cas. 337 applies, and it is no defence to the charge of knowingly making a false statement that the master or agent believed that he was justified in doing so or that in the circumstances no harm would result : Brown Jenkinson v. Percy Dalton (London) Ltd. [1957] 2 Q.B. 621.
It follows from this that a bank which pays the seller the price of goods under a letter of credit against presentation of bill of lading which falsely records that the goods were shipped on the carrying vessel by the specified date, when they were not, has no difficulty in recovering damages from the shipowner sufficient to idemnify it against loss, whether or not it can obtain repayment from the seller.
For the first time, so far as reported cases are concerned, this appeal raises another issue : does the same rigorous standard as to the accuracy of statements made in the course of the letter of credit transaction apply to the bank, as it applies to the master and agents of the shipowner? If it does, and the bank is liable or potentialy liable for deceitful conduct, what is the effect, if any, on the bank's right to recover damages from the shipowner?
It should be made clear at the outset that the judge acquitted the bank, Standard Chartered Bank ("SCB."), and its servants of fraudulent or dishonest conduct, using these terms in the sense relevant to the criminal law. There is no appeal against that finding. But the appellants alleged that the evidence was clear that SCB knowingly deceived the Vietnamese bank by whom the letter of credit was issued, Incombank, as to the date when the documents were presented to it for payment. In fact, the presentation was late, outside the terms of the credit, and if Incombank had been told this, they would have been entitled to reject the documents on that ground. They did reject them, but on other grounds of discrepancy, with the result that, as will appear below, the problems of causation of SCB's loss become even more complex than they would have been in any event.
The appeal is from a judgment of Cresswell J. given on 1 April 1998 after an extended trial in the Commercial Court. SCB recovered damages from the shipowners, Pakistan National Shipping Corporation ("PNSC"), and from other defendants, including its customer Oakprime Ltd to whom the payment under the letter of credit was made, and Mr Arvind Mehra, a director of Oakprime. Oakprime is in liquidation and took no part in the trial or the appeal. PNSC and Mr Mehra both appeal against the judgment, raising the issues described generally above, and Mr Mehra further contends that the judge was wrong to hold him personally responsible for his activities as a director of Oakprime.
Proceedings were also brought against shipping brokers who acted for PNSC, Seaways Maritime Ltd. ("Seaways"), and the judge entered judgment against them. Seaways have played no part in the appeal.
The appeal has been attractively and persuasively argued by Mr Timothy Young Q.C. for the shipowners and Mr John Cherryman Q.C. for Mr Mehra and also by Mr Jeffrey Gruder Q.C. for the bank. Each was ably assisted by junior counsel and we are grateful to them.
Facts
The facts are fully set out in the judgment of Cresswell J. reported at [1998] 1 Lloyd's Rep. 684 at 687–695. The letter of credit was opened by Vietnamese buyers from Oakprime of 20,000 tonnes of bitumen to be delivered in two shipments c.i.f. named Vietnamese ports. Under the credit as finally amended, the latest date for shipment was 25 October 1993 and the last date for negotiation for documents was 10 November. The letter of credit was issued by Incombank and was duly confirmed by SCB.
Oakprime chartered two vessels from PNSC. The first, m.v. Lalazar, was chartered on 2 September and eventually berthed for loading at Bandar Abbas on 18 October. Loading proceeded slowly and with interruptions and in the result was not completed until 5 December. By 25 October, the latest date for shipment under the credit, only 1644 mt.tons were loaded. The second vessel m.v. Hunza also loaded at Bandar Abbas. Documents relating to that shipment were also presented to SCB. How they were handled by SCB is relevant as evidence of the bank's practices, but not otherwise.
The judgment at pages 688–694 spells out in devastating detail the steps which Mr Mehra on behalf of Oakprime then took in order to obtain a bill of lading and other documents which falsely stated that a full cargo answering to the contract description was loaded by 25 October. To satisfy the requirements of the letter of credit, Oakprime had to present to SCB not only a bill of lading but also surveyor's certificates and the like. The brokers, Seaways, and surveyors (S.G.S.) became involved. There was a blatant attempt to produce false, and in some cases forged documents so that an appearance of conforming documents could be achieved by the latest date for presentation, 10 November. The judge was left in no doubt but that the falsity was deliberate and that Mr Mehra's evidence denying it, which he rejected, was manifestly false (p.700). Two of his findings should also be quoted :—
"It is clear that PNSC, Seaways and Mr Mehra appreciated that what they were doing amounted to deliberate deception of SCB and any other bank to whom the bills of lading, might be presented in order to obtain payment" (690").
"PNSC for their part were willing to participate in what their brokers admitted to be "maritime fraud" provided they received a payment on account of freight and demurrage"(690).
There was some suggestion by the brokers that occasionally bills might be backdated, if other parties agreed, but their managing director accepted that this transaction showed a complete breach of the principle of the Baltic Exchange that there should be honest and truthful dealing between members (691).
The parties to this unlawful agreement recognised that the falsity was not limited to the bill of lading alone. In the result, "the certificate of origin, invoice and packing list contained false information to the knowledge of Mr Mehra" (694). PNSC was not involved in falsifying those other documents, but without the antedated bill of lading they would have been of no avail.
So it came about that on 9 November documents purporting to record shipment by 25 October in compliance with the credit were presented to SCB under cover of a letter from Oakprime, signed by Mr Mehra as managing director on its behalf. The letter reads in part :—
"We enclose herewith all the documents required under the above Letter of Credit No. 0801C931C1025 with the exception of the S.G.S. Certificate which will be delivered to you within in [sic] the next few days.
……….
We will deliver the S.G.S. Certificate as soon as issued at which time, we would request you to discount the draft, value of USD 1,215,660.00 and pay the discounted proceeds to our account with National Westminster Bank….."
The letter was date-stamped as received by the bank on the same date, 9 November. The bill of lading was dated 25 October and stated that 55132 steel drums of bitumen with gross/net weights 8683.290 mt/8269.800 mt were shipped by that date on board m.v. Lalazar. A further letter, dated 10 November but not received until 11 November, states that the SGS Certificates were enclosed with it, but it also suggests that the certificates were not then available :—
"Please note that due to the time differences between Iran and the U.K., and the fact that SGS (Iran) is closed over the next two days, being the Iranian (Islamic) weekend. SGS (Iran) will communicate the reports to SGS (London) via SGS (London) via SGS...
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