Swotbooks.com Ltd v Royal Bank of Scotland Plc
| Jurisdiction | England & Wales |
| Judge | MR S. PHILLIPS QC |
| Judgment Date | 29 July 2011 |
| Neutral Citation | [2011] EWHC 2025 (QB) |
| Court | Queen's Bench Division |
| Docket Number | 2010 Folio 131 |
| Date | 29 July 2011 |
[2011] EWHC 2025 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr S. Phillips QC
(Sitting as a Deputy Judge of the Queen's Bench Division)
2010 Folio 131
Mr Ian Wilson (instructed by Fladgate LLP) for the Claimant
Mr John Taylor (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing dates: 28, 29 March, 6 April 2011
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39 para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 28 May 2009 the Defendant, the Royal Bank of Scotland plc ("the Bank"), made a payment of £231,021.49 to Libri GmbH ("Libri"), purporting to do so pursuant to a Standby Letter of Credit which the Bank had issued to Libri on 31 July 2006 at the request of its customer, the Claimant, and notwithstanding protestations from solicitors acting for the Claimant that the documents which Libri had presented to the Bank earlier that month did not conform to the requirements of the Credit. The Bank proceeded to debit Swotbook's security account with the sum paid to Libri, together with a charge of £60.
The documents required by the Credit included (i) a "certified true and correct copy invoice evidencing the value of the goods delivered" and (ii) a "certified true and correct copy transport document". The Credit expressly incorporated the Uniform Customs and Practice for Documentary Credit (1993) Revision ICC Publication 500 ("UCP 500") and had an expiry date of 31 May 2009.
In these proceedings the Claimant, now in liquidation, maintains its contention that the Bank paid against discrepant documents (its case being that Libri presented neither a compliant invoice nor a compliant transport document), and accordingly claims that the Bank was not authorised to pay Libri and was therefore not entitled to debit the Claimant's account.
The Bank's defence is that the documents presented by Libri did comply with the terms of the credit so that the payment it made was fully authorised. But, if the documents were discrepant, the Bank contends that the Claimant subsequently ratified the Bank's payment to Libri by virtue of the way its debt to Libri was treated in accounting entries in the Statement of Affairs prepared by the Claimant's outgoing director on 24 July 2009 and submitted to Companies House by the Claimant's newly appointed liquidator on 27 July 2009. In the further alternative, the Bank contends that the Claimant should not be allowed to recover from the Bank as that would unjustly enrich the Claimant at the expense of the Bank.
The issue of the Credit
Until it went into creditors' voluntary liquidation on 27 July 2009, the Claimant was an internet book retailer, trading under the name ReadMore and selling books to customers in the UK and Ireland. The Claimant's customers placed orders online, providing credit card or other payment details. The Claimant would then place corresponding orders with a wholesaler of books, usually Libri, a wholesaler based in Hamburg, Germany. Libri would fulfil those orders by despatching books directly to the Claimant's customers by courier. Once an order had been despatched, the Claimant would take payment from its customer and Libri would invoice the Claimant.
The sale agreement between the Claimant and Libri required the Claimant to provide Libri with security for sums due to Libri in the form of a bank guarantee. On 28 July 2006 the Claimant applied to the Bank for a standby letter of credit to be issued in favour of Libri in the sum of £250,000, agreeing to indemnify the Bank in respect of its commitment to Libri.
The application form also contained the following provisions:
"10.2 Authority to pay
1 The [Claimant] irrevocably and unconditionally directs the Bank to make such payments and comply with such demands as may be claimed from or made on the bank in respect of or purporting to be in respect of the Bank's Commitment as the Bank thinks fit without any reference to the [Claimant] or any necessity to obtain the [Claimant's] confirmation or verification and notwithstanding that the [Claimant] may have disputed the Bank's liability to make such payments or to comply with such demands or that the Bank's Commitment may not be legally binding on the Bank.
2 The [Claimant] agrees that any such payment or compliance by the Bank shall as between the bank and the [Claimant] be conclusive evidence that the Bank was liable to make such payment or comply with such demand."
The Bank accepted the application and, on 31 July 2006, upon the Claimant paying £250,000 into a security account in respect of the indemnity, duly issued an irrevocable standby letter of credit to Libri in the following terms:
DEAR SIRS,
OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.: G111377
WE HEREBY ISSUE OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. G111377 IN YOUR FAVOUR FOR ACCOUNT OF SWOTBOOKS. COM LIMITED, OFFICE SUITE2, 4 BRIDGE STREET, MILLS, BRIDGE STREET, WHITNEY, OXFORD OX28,1FX FOR GBP250,000 (SAY GBP TWO HUNDERED FIFTY THOUSNAD) 00/100 VALID IN LEEDS UNTIL 31 MAY.
AVAILABLE FOR PAYMENT AT SIGHT AT THE COUNTERS OF ROYAL BANK OF SCOTLAND PLC, BONDS & GUARANTEES CENTRE LEED, 1 VICTORIA PLACE, HOLBECK, LEEES LS11 5AR U.K ON PRESENTATION OF THE FOLLOWING DOCUMENTS:—
A) YOUR SIGNED STATEMENT (SIGNATURES APPEARING THEREON TO BE AUTHENTICATED BY YOUR BANKERS) THAT SWOTBOOKS. COM LIMITED HAS FAILED TO MAKE PAYMENT TO YOU WITHIN 14 DAYS FROM SETTLEMENT DATE
B) CERTIFIED TRUE AND CORRECT COPY INVOICE EVIDENCING THE VALUE OF THE GOODS DELIVERED.
C) CERTIFIED TRUE AND CORRECT COPY TRANSPORT DOCUMENT.
D) YOUR SIGNED AND DATED STATEMENT CONFIRMING THAT THERE IS NO DISPUTE PENDING BETWEEN YOU AND SWOTBOOKS. COM LIMITED REGARDING CONFORMITY OF THE GOODS TO THE SPECIFICATION AGREED BETWEEN YOU AND SWOTBOOKS. COM LIMITED.
COVERING PROVISION OF BOOKS
PARTIAL DRAWINGS ALLOWED
ALL BANK CHARGES OTHER THAN THOSE OF THE ISSUING BANK ARE FOR YOUR ACCOUNT
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED AND EXCEPT ARTICLE 43 THIS IRREVOCABLE STANDY LETTER OF CREDIT IS SUBJECT TO UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993) REVISION INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO.500.
YOURS FAITHFULLY
AUTHRORISED SIGNATORY
In its Defence the Bank relied upon the "authority to pay" provisions set out in paragraph 7 above to plead that it was entitled to be indemnified by the Claimant against its payment to Libri even if the documents presented by Libri did not comply with the requirements of the Credit. Reliance on those provisions was abandoned shortly before trial, although in my judgment they continue to have some relevance to the Bank's defence based on "unjust enrichment" as explained below.
The 2008 presentations
It is common ground that between about December 2007 and February 2008 Libri supplied thousands of books to customers of the Claimant (for which the Claimant was paid by those customers), and that the Claimant was indebted to Libri in a sum at least equivalent to that eventually paid to Libri by the Bank. Mr Wilson, Counsel for the Claimant, referred to the fact that the Claimant may have some cross-claims against Libri, but confirmed in his opening submissions that they were not relied upon in these proceedings.
Libri made unsuccessful presentations under the Credit on 5 May 2008 (revised or supplemented on 30 May 2008) and on 22 September 2008 (again revised or supplemented on 12 November 2008), in each case the invoice total amounting to €395,622.21, a sum in excess of the limit of the Credit. Among the reasons given by the Bank for rejecting the documents presented were (a) that the copy invoices did not specify that they related to the provision of books and in some instances included other items such as calendars or CDs and (b) that a "declaration in lieu of oath" by Libri dated 21 April 2008, declaring that it had handed over the orders from the Claimant to Deutsche Bundespost (and attaching a list of items described as "German Post Transfer Document") did not sufficiently evidence delivery to the Claimant. However, by letter dated 20 November 2008 the Bank informed Libri's UK solicitors that it considered that confirmation from DHL (a subsidiary of Deutsche Bundespost), if attached to the declaration and listing provided by Libri, would satisfy the requirement of a copy transport document.
On 9 April 2008 Libri asked the Bank to return all documents previously presented, which the Bank duly did. It is common ground between the parties that Libri was entitled to make fresh presentations thereafter and that the Bank was both obliged and entitled to consider those new presentations on their face, uninfluenced by any knowledge of what may have been previously presented.
The May 2009 presentations
On 6 May 2009, Libri made a fresh claim for a partial drawing under the Credit for €261,454.83 and presented:
(1) Document (A): a signed statement dated 5 May 2009 that the Claimant had failed to make payment within 14 days.
(2) Document (B): by way of an invoice, a document dated 15 April 2009 addressed to the Claimant, comprising:
(i) a covering page headed "INVOICE FOR BOOKS", asking that previous "initial" invoices be ignored and explaining that "Compared to these initial invoices this Invoice is a partial summary invoice. It is partial because it omits other items than books. It is summary because it summarizes all sales of books between 2 December 2007 and 21 February 2008";
(ii) a spreadsheet setting out a total of 10,927 items, in relation to each item stating that its trade description was "Book", setting out the "Initial Invoice" number, a "Transport...
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