High Court · Decided 6 June 2014

Abani Trading Pte Ltd v BNP Paribas and another appeal

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[2014] SGHC 111Case no. District Court Appeal Nos 19 and 24 of 2013

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Laws this judgment relies on

Unfair Contract Terms Act 1977

Grounds of decision

Official text from eLitigation

George Wei JC:
Introduction
Background facts
[2] The plaintiff, Abani, is a trading company based in Singapore which carries on the business of general wholesale trade, including the importation and exportation of goods. The defendant, BNP, is a bank operating in Singapore.
[3] The letter of credit in question was obtained in connection with the underlying sale of a consignment of metal bars from Metal Market Dis Ticaret Ltd Sti (“Metal Market”) to Abani. In this respect, Abani had apparently bought the consignment of metal bars for the purpose of selling it to another party named Codiscomad. One of the terms of the agreement with Codiscomad required the goods in question to be shipped between November and December 2008.
[4] On 9 December 2008, Abani made the application to BNP for a letter of credit to be issued in favour of Metal Market as the named beneficiary. The letter of credit in the amount of US$80,665 was issued in favour of Metal Market the next day on 10 December 2008. The terms of the letter of credit provided, amongst others, that the applicable rules were the “UCP Latest Version” and that the latest date of shipment was 30 December 2008. The latter condition was probably included so as to ensure that Abani could fulfil its contractual obligations to Codiscomad. For the purposes of this appeal, the material clauses of the letter of credit are reproduced as follows:
[5] Given that the date of issuance was 9 December 2008, with reference to field 40E, the letter of credit was governed by the provisions of the Uniform Customs and Practice for Documentary Credits 2007 (International Chamber of Commerce Publication No 600) (“UCP 600”).
[6] Subsequently, a bill of lading dated 30 December 2008 was issued by Karetta Uluslararasi Tasimacilik Ve Dis Tic Ltd Sti (“Caretta”). The bill of lading and other relevant documents were negotiated through Fortis Bank, which then sought reimbursement from BNP. On 12 January 2009, BNP received the bill of lading and other relevant documents from Fortis Bank.
[7] After an exchange of emails and an alleged telephone call between BNP and Abani (both parties dispute what actually transpired during the telephone conversation), BNP eventually debited Abani’s account on 16 January 2009. It will be recalled that the agreement with Codiscomad required the goods to be shipped latest by December 2008. Whilst the bill of lading which had been negotiated was dated 30 December 2008, it appears that another bill of lading was issued later, which indicated that the shipping date was 2 January 2009. As a result, Codiscomad complained that Abani was in breach of its contractual obligations due to the late shipment. Given that the market price of the goods in question had fallen over the relevant time period, Abani asserted that it had no choice but to settle Codiscomad’s claim by deducting a sum of US$64,431.53 from the original sale price. Abani then brought the action against BNP to recover the sum of US$64,431.53, or alternatively, damages on the basis that BNP had breached its duty or the terms of the letter of credit and had failed to exercise due care in examining the relevant documentation before making payment.
The decision below
[8] After a two-day hearing that took place on 22 and 23 January 2013, the DJ dismissed Abani’s claim (see Abani Trading Pte Ltd v BNP Paribas [2013] SGDC 243). In arriving at his decision, the DJ made a few key findings, summarised as follows:
(a) Under Art 49(a) of the UCP 600, it is clear that the obligation of the issuing bank to pay pursuant to a letter of credit is detached from the underlying transaction on which it is based.
(b) The established exception concerning cases where the seller had made a fraudulent presentation of documents containing material misrepresentations was not pleaded by Abani and did not, in any event, apply to the facts of the present case.
(c) It was not part of BNP’s duties to act on the information supplied to it by Abani or any constructive knowledge which BNP may possibly have acquired in the course of previous transactions involving the same parties. In fact, BNP was prohibited from doing so pursuant to the rules set out in the UCP 600, given that there was no evidence of fraud on the part of the seller.
(d) The bill of lading presented for negotiation, and on which payment was made, was a conforming document given that it was not a “forwarder bill of lading”.
(e) Abani failed to establish that it was unable to deliver the goods to Codiscomad as there was no evidence of any attempt being made to obtain delivery from the carrier on the strength of the bill of lading that had been presented for negotiation. On that basis, Abani failed to prove that it had suffered any loss as a result of BNP’s payment under the letter of credit.
(f) In the event that Abani was indeed placed in a position of having to negotiate with Codiscomad as a result of the breach of its contractual obligations, the settlement of US$64,431.53 was a reasonable sum.
The issues
[10] The core issues that are raised in DCA 19/2013 are as follows:
(a) whether BNP had breached its duty or the terms of the letter of credit, and failed to exercise due care in examining the relevant documentation that was presented to it;
(b) whether Abani had given express instructions to BNP to accept the bill of lading presented by the seller, and to debit Abani’s account accordingly; and
(c) what losses were suffered by Abani.
[11] The core issues that are raised in DCA 24/2013 are as follows:
(a) whether the DJ erred in holding that BNP was required to include in its pleading its claim for costs on an indemnity basis, specifically cl 11.4 of the STC;
(b) assuming that BNP was required to, whether the DJ erred in finding that Abani would suffer prejudice as a result of BNP’s failure to include its claim for indemnity costs in its pleadings; and
(c) assuming that BNP’s failure to include its claim in its pleadings was not fatal, whether cl 11.4 of the STC confers a contractual right to costs on an indemnity basis, and whether the contractual bargain between the parties should be upheld by the court.
The appeal in DCA 19/2013
Whether BNP had breached its duty or the terms of the letter of credit, and failed to exercise due care in examining the relevant documentation that was presented to it
[12] There is no dispute that the letter of credit in question is governed by the UCP 600. As noted above, the documents required for payment under the letter of credit included a full set of clean on board bill of lading issued by the carrier or its agent. In fact, field 46A of the letter of credit specifically states that a “forwarder [billing of lading]” would not be acceptable.
[13] Abani’s claim against BNP was based on two broad grounds. First, Abani alleged that the bill of lading presented for negotiation was a freight forwarder’s bill of lading and thus should have been rejected for non-compliance with field 46A of the letter of credit. Second, Abani claimed that the bill of lading presented for negotiation was not a “true” bill of lading. Abani argued that the “true” bill of lading only surfaced later, revealing that the goods were shipped on 2 January 2009. This is of significance as the letter of credit specified the latest date of shipment to be 30 December 2008.
[14] In determining whether the bill of lading presented was a conforming document, the DJ held that a relevant consideration was whether BNP was obliged to act on any information supplied by the applicant for the letter of credit (ie, Abani), or constructive knowledge that might possibly have been acquired in the course of previous transactions involving the same parties. This was relevant as Abani had advanced the argument that it was common knowledge that Caretta was a freight forwarding company. Furthermore, it was also claimed that BNP had entered into previous transactions with Abani, also involving letters of credit, where Delmas was the named carrier. In those transactions, the bills of lading presented for payment were signed by CMA CGM Shipping Agency JSC (“CMA CGM”) as agent of the carrier. Finally, Abani argued that it had informed BNP on 13 and 15 January 2009 that Caretta was only a freight forwarder, and was not an agent of the carrier, Delmas.
[15] In respect of the earlier transactions involving BNP, Abani and Delmas, reference was made to two bills of lading where CMA CGM had signed off as the agent of Delmas. The first was dated 5 October 2008, and was presented by Metal Market pursuant to an earlier letter of credit. The second, which was only tendered during the course of the trial, was dated 19 October 2008. In that bill of lading, Delmas was also identified as the carrier and CMA CGM was referred to as its agent. It bears noting that BNP has disputed the authenticity of the bill of lading dated 19 October 2008. In any event, as will be further discussed below, the relevance of these earlier bills of lading presented under separate transactions is doubtful at best.
[16] Given that the letter of credit in question was governed by the rules set out in the UCP 600, a close examination of the relevant articles in the UCP 600 would be necessary. In this regard, Art 4(a) of the UCP 600 states that:
This overriding principle of autonomy was further explained in the House of Lords decision of United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 (“United City Merchants”) at 183:
[17] Beyond that, the House of Lords also recognised that there was one established exception to this general overriding principle of autonomy. Widely known as the “fraud exception”, it applies to cases where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents which contain, either expressly or by implication, material misrepresentations of facts that to its knowledge are untrue.
[18] The principle of autonomy as explained in United City Merchants has also been applied locally. In the Court of Appeal decision of Brody, White and Co Inc v Chemet Handel Trading (S) Pte Ltd [1992] 3 SLR(R) 146, Lai Kew Chai J, in delivering the judgment of the court, held at [19] that:
The Court of Appeal went on to endorse the comment made by Donaldson LJ in The Bhoja Trader; Intraco v Notis Shipping Corp of Liberia [1981] 2 Lloyd’s Rep 256 that “[t]hrombosis will occur if, unless fraud is involved, the courts intervene and thereby disturb the mercantile practice of treating rights thereunder as being the equivalent of cash in hand” [emphasis added].
[19] As noted by the DJ, the fraud exception is inapplicable to the present case in so far as Abani has not raised any arguments in relation to fraud on the part of the seller. In fact, no evidence appears to have been led with regard to the issue of fraud and the fraud exception was not, in any event, raised during the course of this appeal. Accordingly, I see no reason to depart from the DJ’s finding that the fraud exception was inapplicable on the case as pleaded by Abani.
[20] The central question, therefore, is whether the bill of lading presented for negotiation was a conforming document. Abani argued that the bill of lading ought to have been rejected for non-compliance on the basis that it was a “forwarder bill of lading”. As discussed above, Abani claimed that BNP should have been aware of the fact that Caretta was a freight forwarding company by virtue of Caretta’s international repute. Abani further argued that, in any event, BNP should have been privy to the fact that the agent of the carrier, Delmas, was CMA CGM. This was because BNP had been involved in previous transactions (also in relation to letters of credit) concerning Delmas and Abani. Finally, Abani also highlighted the fact that they had brought the above-mentioned points to BNP’s attention by way of a chain of email communications between 13 and 15 January 2013.
[21] The general principles governing a bank’s duty to examine documents presented pursuant to a letter of credit governed by the UCP 600 are well-known. The principle of autonomy has already been briefly referred to above. I agree with BNP’s submissions that the principle of autonomy further gives rise to two key implications. First, in determining whether there has been compliance with the conditions set out in the letter of credit, banks are confined to dealing with the documents that have been presented to them. Second, in examining the documents that have been presented, banks do not take into account matters or circumstances that are extraneous to the documents. It follows that banks are generally not obliged to carry on any further investigations into the allegations made by the applicant for the letter of credit.
[22] This view is consistent with and indeed mandated by the provisions of the UCP 600, which governs the letter of credit in question. Article 14(a) of the UCP 600 states unequivocally that:
In fact, it was observed by the Privy Council in Westpac Banking Corporation v South Carolina National Bank [1986] 1 Lloyd’s Rep 311 at 315 (“Westpac Banking Corp”), an appeal from the Court of Appeal of New South Wales, that “[i]t forms no part of the bank’s function, when considering whether to pay against documents presented to it, to speculate about the underlying facts” [emphasis added].
[23] The position set out in Westpac Banking Corp is also supported by the learned authors in Peter Ellinger & Dora Neo, The Law and Practice of Documentary Letters of Credit (Hart Publishing, 2010) at p 118, where it was observed that the principle of determining compliance with reference to the documents alone “highlights the principle of autonomy, whereby the examining bank is not supposed to take into account extraneous matters, such as the beneficiary’s behaviour in relation to the underlying contract”. This is also in line with Art 34 of the UCP 600, which states that a “bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document”.
[24] There is a commercial rationale for such a strict view of the bank’s duty to examine the documents presented for payment. It is driven by the consideration that any obligation placed on the issuing bank to investigate the underlying facts of the transaction would effectively alter the commercial character of the letter of credit, from one of payment on demand, to one of payment only after being convinced or compelled to pay. In any event, it must be recognised that the bank examining the documents often does not possess the requisite expertise or tools to investigate, inspect or inquire into the truth of the representations which appear on the face of the documents. In fact, it was observed in James E Byrne et al, UCP600: An Analytical Commentary (Institute of International Banking Law & Practice, 2010) at p 1254 that:
[25] In its submissions, Abani drew the court’s attention to a bill of lading that it received from Delmas on or about 23 January 2009, which was issued by CMA CGM as agent for Delmas. This bill of lading was issued on 2 January 2009 and has been referred to by Abani as the “true” bill of lading. To this end, Abani pointed out that the date of issuance for this “true” bill of lading is after the latest date of shipment as indicated in field 44C of the letter of credit (ie, 30 December 2008). In the course of this appeal, Abani also referred to an email from Delmas dated 20 February 2013, where it was stated that Caretta was not an agent for Delmas at the relevant time.
[26] However, it bears noting at this juncture that even if it is established that the agent for Delmas was CMA CGM, and not Caretta, that does not necessarily mean that BNP had failed in its duty to properly examine the relevant documents before making payment. On the face of the bill of lading itself, it is undisputed that Caretta had signed off as agent for the carrier. In these circumstances, the fact that Caretta was not an agent of Delmas (which is disputed) is an underlying fact which BNP may not have been required to investigate, taking into account the various authorities cited above.
[27] Furthermore, it will be recalled that BNP had debited the amount due under the letter of credit from Abani’s account on 16 January 2009. This occurred well before the point in time when Abani received what has been referred to as the “true” bill of lading from Delmas ([25] above). At the time of deduction, the only bill of lading that had been presented to BNP under the letter of credit (and on the basis of which Fortis Bank had negotiated the bill of lading) was the bill of lading stating the shipment date as 30 December 2008. Under such circumstances, I am of the view that the subsequent communications between the relevant parties and the surfacing of the “true” bill of lading is of limited relevance to the core issue of whether BNP failed to properly examine the bill of lading that had been presented for payment. In arriving at this view, I note that Art 7(c) of the UCP 600 clearly states that an “issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank”. Further, Art 15(a) of the UCP 600 provides in no less uncertain terms that “[w]hen an issuing bank determines that a presentation is complying, it must honour” [emphasis added].
[28] Moving on, Abani, in its submissions, sought to distinguish the House of Lords decision of United City Merchant on the basis that the present case does not involve any dispute or breach of the underlying sale transaction. It was further argued that the fact that Caretta carried on the business of freight forwarding was general knowledge and that BNP must have realised through its previous transactions involving the same parties that a different company had signed as agent for Delmas. Abani was of the view that these facts are directly relevant to the question of whether the bill of lading presented was a compliant document. Abani further submitted that in examining the documents for compliance with the terms of the letter of credit, the bank was under a duty to exercise its judgment, banking experience and general knowledge. In making this submission, Abani relied on the observations made by the learned authors in Ali Malek & David Quest, Jack: Documentary Credits (Tottel Publishing, 4th Ed, 2009) (“Jack: Documentary Credits”) at para 8.21. On this basis, it was argued that BNP ought to have relied on its banking experience to realise that the bill of lading was not compliant as it was signed by Caretta, which was not the named agent in previous transactions involving Abani, BNP and the same carrier, Delmas. It was also submitted that in exercising its judgment, experience and general knowledge, BNP should have applied the knowledge that it had acquired from the emails sent by Abani, stating that Caretta was only a freight forwarder and that the bill of lading was a “forwarder bill of lading”.
[29] I am unable to agree with Abani’s submissions for the following reasons. At the outset, it must be recognised that Abani’s reliance on the specific extract from Jack: Documentary Credits is doubtful at best. To understand the context in which that statement was made, it will be necessary to set out at length para 8.21 in Jack: Documentary Credits that was referred to by Abani:
In this regard, it was clearly recognised by the learned authors that there may be cases that are less clear-cut and there remains some doubt as to where the line ought to be drawn. On one end of the spectrum, there are facts which a bank can be expected to know. As highlighted in the extract above, the fact that Singapore is not in Europe would clearly fall within the scope of general knowledge that a bank must be expected to take into account of when examining the relevant documents for compliance. But the example raised in the extract above is far removed from the facts and circumstances of the present case. To that end, it appears to be a stretch to argue that the fact that Caretta was not an agent of Delmas falls within the scope of facts that “a bank can be expected to know”.
[30] In the present case, the bill of lading that was presented to BNP referred to Delmas as the carrier. Furthermore, in the box towards the bottom of the bill of lading, Caretta’s name and stamp appear below the words “AS AGENT ON BEHALF OF THE CARRIER”. In this regard, the point that the bank must use its banking experience, knowledge and judgment means nothing more and nothing less than the fact that the bank must exercise a certain degree of commercial common sense when examining the presented documents for conformity. It does not mean that a bank is thereby subjected to the duty to investigate the veracity of the representations appearing on the face of the document. As a corollary to that, it follows that a bank should not be subjected to the duty to check the documents presented in the current transaction against similar documents presented in previous transactions. Adopting such a position will only serve to place a considerable burden on the shoulders of the bank, which is inconsistent with the practice and established principles pertaining to documentary credits.
[31] Furthermore, the fact that the bill of lading issued by Delmas was signed by CMA CGM in previous transactions involving Abani and BNP is largely immaterial. To this end, it is well established that each letter of credit transaction is a separate and autonomous transaction: see Rafsanjan Pistacho Producers Co-operative v Bank Leumi [1992] 1 Lloyd’s Rep 513. The fact that CMA CGM had signed as agent for Delmas in previous transactions does not mean that BNP was therefore obligated in the present transaction to reject any bill of lading which did not reflect CMA CGM as agent for Delmas. In any event, there is no evidence to suggest that Delmas only used one agent and no other. Whether Caretta was, in fact, an agent of the carrier, Delmas, would more likely fall on the other end of the spectrum, in the category of facts that the bank would not be required to investigate beyond the face of the documents.
[32] In relation to the issue of whether the bill of lading was compliant with the conditions set out in the letter of credit, Abani argued that the bill of lading presented for payment was not compliant because it was issued by Caretta in its capacity as a freight forwarder. As explained above, this was expressly prohibited by field 46A of the letter of credit in question. To support its claim, Abani has referred to Art 20(a) of the UCP 600, which states that:
The complaint by Abani was that Caretta merely signed as “agent of the carrier”, as opposed to signing as “agent of the named carrier”, which was Delmas. In other words, Abani was of the view that in order for the document to be compliant, the entity signing as an agent must specifically state that it was signing as the agent of Delmas. Furthermore, Abani also pointed out that the bill of lading did not carry the Delmas logo and that it was not printed on Delmas’ letterhead. It bears noting, however, that Delmas was clearly named as the carrier in the middle of the first page of the bill of lading.
[33] I am unable to agree with the position adopted by Abani. The terms of the letter of credit and the UCP 600 do not dictate the precise form, arrangement or sequence in which the required information and details are to be set out in the bill of lading. In fact, Art 20(a) of the UCP 600 demonstrates the overriding concern for substance over form with the opening words: “A bill of lading, however named, must appear to ...”. I accept BNP’s submissions that there is no express requirement in the UCP 600 which governs the specific position of the carrier’s name on the face of the bill of lading. The fact that the bill of lading was not printed with the carrier’s letterhead does not in any way render it non-compliant with either the terms of the letter of credit or the provisions of the UCP 600.
[34] Counsel for BNP also referred to a position paper issued by the International Chamber of Commerce, Commission on Banking Technique and Practice, Position Papers No 1, 2, 3, 4 on UCP 500 (1 September 1994) at p 4 (“the ICC Position Paper”). The ICC Position Paper stated that in so far as the word “carrier” has been used on the front of the document to identify the party acting as carrier, there is no need for the name of the carrier to be placed where the agent is signing on the carrier’s behalf. On the facts of the present case, there is no dispute that Delmas has been identified as the carrier on the front of the bill of lading. Therefore, the fact that the words “AS AGENT ON BEHALF OF THE CARRIER” appeared directly above the signature and Caretta’s name and stamp would suffice. Contrary to what Abani has argued, there is no requirement for the carrier to be named specifically at the location where the agent signs off the bill of lading, in so far as the carrier is already named elsewhere on the front of the bill of lading. Whilst it is recognised that the ICC Position Paper was issued in relation to the UCP 500, it appears that the relevant provisions in the UCP 500 are the same as those found in the UCP 600. That being so, I see no reason to depart from the DJ’s finding that the bill of lading was, on its face, compliant, given that it was signed by Caretta as agent of the carrier and that Delmas was clearly identified as the carrier on the front of the bill of lading.
[35] Apart from that, there was also significant dispute over the interpretation of the phrase “forwarder bill of lading” or “freight forwarder’s bill of lading”. In this respect, whilst it was accepted that these terms were not defined specifically in the UCP 600, Abani submitted that they were generally understood to mean a bill of lading issued by a freight forwarder in its capacity as a freight forwarder, and not as an agent for the carrier.
[36] To this end, it must not be overlooked that where a freight forwarder is engaged in the process of arranging for carriage of goods by sea, it may perform a variety of roles. In many circumstances, the freight forwarder may be acting as an agent of the cargo owner or the shipper of the goods. The freight forwarder will often not be the actual carrier of the goods. In certain cases, whilst the freight forwarder is not the actual carrier, it may have entered into a contract of carriage as the contractual carrier. Alternatively, there may also be occasions where the freight forwarder, whilst not the carrier or the contracting carrier, signs the bill of lading in its capacity as an agent for and on behalf of the carrier. In other words, there is no reason in principle as to why a freight forwarder is unable to act as an agent of the carrier in signing the bill of lading. Whether the freight forwarder had signed as an agent of the carrier very much depends on the precise arrangement between the relevant parties. In cases where the freight forwarder signs as an agent of the carrier, the bill of lading will, in form and in substance, be considered a “normal” bill of lading evidencing a contract of carriage between the shipper and the carrier. It will not be considered a “freight forwarder’s bill of lading”.
[37] In this regard, the nature and function of a “normal” bill of lading is well-known. It serves as evidence of the contract of carriage, as a receipt for the goods and as a document of title: see generally Tan Lee Meng, The Law in Singapore on Carriage of Goods by Sea (Butterworths Asia, 2nd Ed, 1994) at chapter 6. As the learned author in Stephen Girvin, Carriage of Goods by Sea (Oxford University Press, 2nd Ed, 2011) (“Carriage of Goods by Sea”) explains at para 3.21, a bill of lading that is signed by a freight forwarder in its capacity as a freight forwarder is not strictly considered a bill of lading. Such bills of lading are often referred to as “house bills of lading” or “freight forwarder bills of lading”. In such cases, the freight forwarder will likely be acting in the capacity of an agent for the shipper to enter into a contract of carriage. Whilst “house bills of lading” and “freight forwarder bills of lading” serve as evidence of receipt of the goods, they are not considered documents of title to the goods and thus are not transferable by indorsement. Where a bill of lading is required to serve the three functions of a “normal” bill of lading as elaborated above, it follows that it would be important to ensure that the bill of lading is not merely a “freight forwarder bill of lading”.
[38] Accordingly, whether an entity which carries on the general business of a freight forwarder signs the bill of lading in its capacity as a freight forwarder or as an agent for the carrier depends entirely on the facts and circumstances of each case. As discussed in the paragraph above, a freight forwarder can engage in a variety of roles in the carriage of goods. In fact, as pointed out in Carriage of Goods by Sea at para 3.23, a freight forwarder may sign and act as the principal. In such cases, the freight forwarder, by virtue of custom or express terms, will usually have the right to employ subcontractors to perform the carriage.
[39] In the final analysis, there is thus no legal impediment or reason why a freight forwarder is unable to sign the bill of lading as an agent of the carrier, as opposed to an agent for the shipper. In arriving at this conclusion, I have also considered the opinion released by the International Chamber of Commerce Banking Commission (“ICCBC”), set out in Gary Collyer & Ron Katz, ICC Banking Commission Opinions 2009–2011: New Opinions on UCP 600 and 500, ISBP, URC and URDG (International Chamber of Commerce, 2011) at pp 39–40. In that opinion, the ICCBC was asked to address the issue of whether several variations on the phrase “forwarders bill of lading not acceptable” had any meaning in terms of the UCP 600. At the outset, the ICCBC acknowledged that in the context of the UCP 600 and letters of credit, the term “freight forwarder bills of lading” has no meaning, whether in respect of them being allowed or not allowed. In this regard, where freight forwarder transport documents are expressly stated to be not acceptable, as in the present case, the term remains “ambiguous and does not clearly define the type of document that would be acceptable”. More pertinently, the ICCBC further noted that:
It bears noting that with reference to the bill of lading in the present case, Caretta had signed as a named agent for the carrier, Delmas.
[40] More importantly, it must also be recognised that in cases where a bill of lading is signed by a freight forwarder, the issue of whether the freight forwarded had signed the bill of lading in its capacity as a freight forwarder or as agent for the carrier would very much depend on the precise arrangement between the relevant parties to the transaction. The parties may include the freight forwarder, the shipper or the carrier. In this regard, the bank examining the transport documents presented for payment will be ill-equipped to determine the precise legal status of the signing party (ie, the capacity it is acting under). This glaring problem was also alluded to in the opinion of the ICCBC referred to in the previous paragraph. The ICCBC recognised that terms which exclude freight forwarder transport documents do not clearly define the type of document that would be acceptable. More pertinently, it was recognised that a “document examiner will not be in a position to determine the status of the party signing when it signs as carrier”. The same principle would apply to cases where the party signs as a named agent for or on behalf of the carrier, such as in the present case. In these circumstances, it will be impractical to impose such an onerous duty on the bank to investigate the legal status of the signing party when it is not privy to the arrangements entered into by the parties to the shipping transaction.
[41] In referring to the opinions and papers released by the ICCBC, I am reminded that whilst these documents are not strictly legally binding, they are often regarded as representative of the views of experts in this particular area of law, and are also regularly accepted by the courts. In the English decision of Fortis Bank SA/NV v Indian Overseas Bank [2010] 2 Lloyd’s Rep 641, Hamblen J observed at [46] that:
In this regard, I am of the view that whilst the papers and opinions issued by the ICCBC are not legally binding, they ought to be given persuasive weight in so far as they reflect international practice in this specialist area of law.
[42] At this juncture, it will be useful to address the related issue of the decision released under the framework of the International Chamber of Commerce’s Documentary Credit Dispute Resolution Expertise (“DOCDEX”) in the present case. In this regard, following the commencement of the suit by Abani, BNP submitted a request for a DOCDEX decision to the International Chamber of Commerce’s International Centre for Expertise. In the present case, Abani declined to participate in the DOCDEX process and it must be noted that Abani was not bound to participate in any event. Pursuant to the DOCDEX framework, decisions will only be binding if both parties have so agreed.
[43] Nonetheless, BNP proceeded with the DOCDEX process and the panel of experts eventually released a unanimous decision on 16 August 2011. Two major findings were made by the panel in the DOCDEX decision. First, the panel found the bill of lading presented to BNP for payment to be compliant with the requirements of the letter of credit in question. Second, the panel was of the view that BNP was not obliged to investigate Abani’s claims pertaining to the signature of the bill of lading by Caretta.
[44] At the outset, it must be recognised that I am not in any way bound by the DOCDEX decision that has been placed before me. Nonetheless, similar to the opinions and papers released by the ICCBC, I am of the view that the DOCDEX decision is of persuasive value. In the English Court of Appeal decision of Fortis Bank SA/NV v Indian Overseas Bank [2011] 2 Lloyd’s Rep 33 (“Fortis Bank (CA)”), Thomas LJ, in delivering the judgment of the court, observed at [29]–[30] that:
[45] In considering the commercial practice of international bankers and traders, the English Court of Appeal referred to, amongst others, DOCDEX Decision 242. It was further acknowledged at [34] that:
In this regard, although it was accepted that DOCDEX decisions were not legally binding, it is of significance that the English Court of Appeal was prepared to treat the DOCDEX decisions as evidence of international commercial practice.
[46] Given the underlying rationale of the need for uniformity and consistency in the interpretation of the UCP 600, I am of the view that the decisions, papers and opinions of the ICCBC are of persuasive value. The remarks made by the learned authors in Jack: Documentary Credits on this point are particularly apposite:
[47] Whilst it may be argued that the comments of Thomas LJ in Fortis Bank (CA) were directed towards the issue of relevance of international commercial practice when an issuing bank rejects the presented documents, I am of the view that the same principles apply in cases where the issuing bank has accepted the presented documents as being compliant and this decision is subsequently contested by the applicant for the letter of credit. Furthermore, I also acknowledge the fact that in considering the DOCDEX decision, it must not be overlooked that Abani had elected not to participate or to respond to the reference. The panel of experts would therefore not have had the benefit of arguments from Abani. Nonetheless, I am of the view that the DOCDEX decision is still of some persuasive value. Further, there have been no allegations that BNP had presented its case to the panel in an unfair or underhand manner. In fact, it must be recognised that a large part of the decision-making process depended upon the close examination of the relevant documents, such as the letter of credit and the bill of lading. Apart from that, BNP had also submitted the email exchange between itself and Abani for the expert panel’s consideration. In the circumstances, I am of the view that Abani’s lack of participation does not render the entire DOCDEX decision useless.
[48] In any event, I also note that this is not the first time that a DOCDEX decision has been referred to in subsequent litigation, where one party had elected not to participate in the DOCDEX process. In the case of Mizuho Corporate Bank Ltd v Woori Bank [2004] SGHC 219, the defendant had declined to participate in the DOCDEX process that was initiated by the plaintiff. At the hearing before AR Vincent Leow, the defendant argued that no weight should be placed on the DOCDEX decision on the basis that it had not participated in the DOCDEX process. Nevertheless, AR Leow was of the view that after taking into account the fact that the DOCDEX decision was reached on essentially an ex parte basis, the decision would still have some persuasive value and it was treated as such. On this basis, it was noted that the DOCDEX decision echoed the view which the learned Assistant Registrar arrived at with regard to the interpretation of a clause in the letter of credit.
[49] Similarly, in the present case, it is noted that the DOCDEX decision is consistent with the decision that I have arrived at after a careful consideration of all the surrounding facts and circumstances. For the avoidance of doubt, the decision to dismiss Abani’s appeal is not based solely on the DOCDEX decision. In fact, as mentioned above, it must be emphasised that the DOCDEX decision is not legally binding.
[50] By way of summary, I am of the view that BNP has not breached its duty or the terms of the letter of credit, and that it has not failed to exercise due care in examining the relevant documentation that was presented to it.
Whether Abani had given express instructions to BNP to accept the bill of lading presented by the seller, and to debit Abani’s account accordingly
[51] Having decided in favour of BNP on the first issue, there is strictly no need to consider the second issue on whether Abani had ratified or confirmed BNP’s decision to accept the bill of lading. Furthermore, this issue was not dealt with by the DJ as he had arrived at the decision that the bill of lading was, in any event, a conforming document. Nevertheless, given that both parties have made submissions on the issue of ratification, I will make some passing observations on this particular issue.
[52] In brief, BNP submitted that after receiving the relevant documents from the negotiating bank, Fortis Bank, its officers proceeded to check the relevant documents for compliance with the terms of the letter of credit. The documents presented were assessed to be compliant and this decision was communicated to Abani on 12 January 2009. To this end, BNP submitted that it had also faxed copies of the relevant documents to Abani. Thereafter, a series of exchanges took place between BNP and Abani, where there appeared to be a divergence of opinion as to whether the relevant documents were compliant. In spite of that, BNP proceeded to debit Abani’s account for the value of the letter of credit on 16 January 2009.
[53] According to Abani, it had received an email from BNP on 16 January 2009 at 3.05pm, stating that its account would be debited that very day. This was followed by a telephone conversation between the representatives of each party. In this respect, both parties are at variance as to what actually transpired during the telephone conversation. According to Abani, its representative was informed that BNP had already debited Abani’s account pursuant to BNP’s earlier email that was sent at 3.05pm. Therefore, Abani had “no choice but to accept the situation” and it was alleged by Abani that its representative had made it clear to BNP’s representative that Abani would be reserving its rights in full against BNP. Meanwhile, BNP’s position was that Abani’s argument that it had made it clear that it would be reserving its rights was “little more than an afterthought which ought to be rejected”. In support, BNP referred to an email sent by Abani to BNP on 16 January 2009 at 6.18pm, reproduced as follows:
On this basis, BNP argued that the email amounted to a ratification or confirmation by Abani of BNP’s decision to accept the documents that had been presented for payment. BNP further argued that in any event, the email contained unequivocal instructions by Abani for BNP to accept the documents and make payment pursuant to the letter of credit. On this basis, BNP submitted that Abani had waived its rights against BNP.
[54] Whilst it is accepted that in appropriate cases, issues of ratification, waiver or estoppel may arise in relation to disputes over monies being debited pursuant to payments for letters of credit, the absence of any finding by the DJ on what actually transpired during the telephone conversation complicates the entire matter. In this respect, whether Abani had reserved its rights against BNP is a relevant factor in determining whether there is any merit to BNP’s arguments concerning ratification, waiver or estoppel. In the absence of any such finding, coupled with the fact that I have already decided that there was no breach on the part of BNP, no further comments will be made on the submissions by BNP. In any event, the issue of ratification, waiver or estoppel is strictly irrelevant given that BNP had not breached its duties or the terms of the letter of credit.
The losses suffered by Abani
[56] To this end, it will be recalled that the DJ arrived at the finding that even in the event that the bill of lading presented was discrepant, Abani had failed to prove that they suffered any loss as a result of BNP’s payment under the letter of credit. In particular, it was noted that there was no evidence of any attempt by Abani to obtain delivery of the goods from the carrier on the strength of the bill of lading. Nonetheless, the DJ acknowledged that in the event that the loss could be attributable to BNP’s breach, the sum of US$64,431.53 was a reasonable settlement by Abani.
[57] In the present appeal, BNP submitted that the loss had not been established on three broad grounds. First, it was argued that there was no evidence of the settlement agreement entered into between Abani and Codiscomad. Furthermore, there was no evidence that Abani had actually paid the settlement amount to Codiscomad. Second, BNP argued that Abani’s claim was fundamentally flawed as no causal connection had been established between BNP’s alleged breach under the letter of credit and the loss suffered by Abani in its sale contract with Codiscomad. To this end, even if it is accepted that Metal Market had indeed shipped the goods late, that late shipment would have been the true cause of the loss suffered by Abani under its sale contract with Codiscomad. Third, BNP also advanced the argument that the loss claimed by Abani in respect of the sub-sale to Codiscomad was too remote under the principle of remoteness established in the seminal decision of Hadley v Baxendale (1854) 9 Exch 341. In this regard, BNP argued that there was no evidence to establish that it had known of Abani’s intention to sub-sell the goods in question. On this basis, the loss suffered by Abani in the sub-sale would be too remote.
[58] In the circumstances, given that I have arrived at the decision that there was no breach on the part of BNP, it is not necessary for me to make a finding on whether the settlement sum represents the true loss suffered by Abani or whether the loss was caused by BNP’s alleged breach. That said, it must be emphasised that the issues concerning causation and remoteness of damage have to be carefully dealt with. This is especially so in the context of international trade where goods are often sold and re-sold to multiple parties. In these circumstances, multiple contracts between different contracting parties are likely to be involved. This would include, amongst others, the underlying sale contract (including sub-sale contracts), the contract of carriage of goods, and the financing agreement (eg, letters of credit).
[59] Whilst these contracts are often related to one another, it must be recognised that each contract carries its own bundle of obligations and duties. To this end, the breach of one contract may result in losses being suffered under another contract, such as where the carrier causes damage to cargo which has been sold or sub-sold to another buyer. In some cases, the causal link between the losses may be less clear.
[60] In the present case, assuming that all of Abani’s assertions have been established, there would have been two separate breaches. First, the sale contract between Metal Market and Abani would have been breached in respect of the stipulated contractual date of shipment. Second, there would have been a breach on the part of BNP when it accepted the discrepant bill of lading in respect of that shipment. Clearly, the breach on the part of Metal Market would have the effect of placing Abani in breach of its contractual obligations with Codiscomad. Subject to the principle of remoteness, the loss under the sub-sale with Codiscomad may well have been recoverable if a claim had been brought against Metal Market. In this regard, the only remaining question is whether Abani is able to establish that the losses it sustained under the sub-sale agreement were caused or contributed to by BNP’s alleged breach under the letter of credit. For the avoidance of doubt, I am not making any finding on the issues of causation and remoteness. The point being made is that such issues pertaining to losses have to be addressed with care when there are multiple interrelated contracts, which are commonplace in the context of modern international trade.
[61] For the reasons above, I dismiss Abani’s appeal in DCA 19/2013.
The appeal in DCA 24/2013
Whether a claim for costs on an indemnity basis has to be specifically pleaded
Apart from that, BNP has also referred to D B Casson, Odgers on High Court Pleading and Practice (Sweet & Maxwell, 23rd Ed, 1991), where the learned author commented at p 148 that “[i]t is unnecessary for either party to plead any matter, or to plead to any matter, which merely affects costs”.
It was also argued by BNP that matters relating to costs are, in any event, not material facts. In this respect, it was submitted that there was no need for BNP to include its claim for indemnity costs in its pleadings, in so far as it was only required to plead in its defence facts which it intended to rely on to meet Abani’s claim.
Whilst it is acknowledged that the bank’s claim for indemnity costs was eventually dismissed on the exercise of discretion by the learned judge, the extract above suggests that the learned judge was at least of the view that the bank’s failure to include a prayer for indemnity costs in its defence was a significant fact worthy of notice.
Whether Abani suffered prejudice as a result of BNP’s failure to include its claim for costs on an indemnity basis in its pleadings
[71] In the appeal before me, BNP argued that the DJ ought to have permitted the unpleaded point to be raised as no injustice had been caused to Abani. To support its position, BNP referred to the Court of Appeal decision of OMG Holdings Pte Ltd v Pos Ad Sdn Bhd [2012] 4 SLR 231, where it was held at [18] that the court may permit an unpleaded point to be raised provided that it does not cause injustice or irreparable prejudice:
(a) Clause 11.4 of the STC was a material fact which ought to have been pleaded by BNP.
(b) Clause 11.4, on a true construction, only applied to claims brought by third parties. On this basis, it should not be applicable in the present case where Abani, a contracting party, had brought an action against BNP.
(c) Clause 11.4 (as interpreted by BNP) was unfairly one-sided, and being an onerous condition, BNP should not be allowed to rely on it unless there was evidence of adequate notice being given to Abani before the contract was entered into by both parties.
(d) Clause 11.4 cannot be relied upon by BNP unless it meets the requirements set out in the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (“the UCTA”).
For these reasons, Abani argued that it was caught by surprise and would thereby suffer prejudice in the event that BNP was allowed to rely on the indemnity clause.
[76] In its submissions, Abani has referred to the need for BNP to establish compliance with the provisions set out in the UCTA. Section 3 of the UCTA reads as follows:
[77] Given that the STC of the facility letter falls within the scope of BNP’s written standard terms of business, the question which arises is whether reliance on cl 11.4 of the STC will render contractual performance substantially different from that which was to be reasonably expected. In this respect, it must be recognised that such indemnity clauses are not uncommon in financing agreements. This will be dealt with in greater detail at [91] below. On this basis alone, I am of the view that s 3 of the UCTA is not applicable on the facts of the present case. Meanwhile, it bears noting that s 4 of the UCTA, which subjects indemnity clauses to the test of reasonableness, only applies in favour of a “person dealing as consumer”: see generally Andrew Phang Boon Leong et al, The Law of Contract in Singapore (Academy Publishing, 2012) (“The Law of Contract in Singapore”) at para 7.67. In the present case, there is no doubt that Abani did not enter into the contract as a “consumer”. Therefore, s 4 of the UCTA will not be applicable on the facts of the present case.
[78] Leaving aside the provisions in the UCTA, there exists a line of common law decisions which lay down the broad principle that onerous terms have to be brought to the attention of the contracting party before it can be relied on as a valid contractual term. Many of these cases involve situations where notice of the onerous term was only given after the contract was entered into by the contracting parties, such as Thornton v Shoe Lane Parking [1971] 2 QB 163 (“Thornton”) and Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433 (“Interfoto”). In the latter case, the factual matrix involved a plaintiff who ran a photographic transparency lending business. Following a telephone inquiry, 47 transparencies were delivered to the defendant, together with a delivery order which set out the terms and conditions of the loan. One of the conditions required the transparencies to be returned within 14 days, failing which a fee of £5 would be levied. The English Court of Appeal found this particular condition to be onerous and unusual. It was held that the party seeking to rely on this term was required to show that the term had been brought fairly and reasonably to the attention of the other contracting party.
[79] An interesting attempt to rely on this principle can be found in the local High Court decision of Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association [1992] 2 SLR(R) 195 (“Consmat”). In that case, the plaintiff was the customer of the defendant bank. During the account opening process, the plaintiff had signed an agreement (“the General Agreement”) with the defendant bank. To that end, cl 3(c) of the General Agreement required the customer to verify the statements of accounts, and to notify the bank within seven days of any discrepancies, omissions or debits wrongly made to or inaccuracies or incorrect entries in the account. The clause in question also made any such disputes unchallengeable after the expiry of a certain time limit. This particular clause was found by L P Thean J (as he then was) to be clear and unambiguous. It was held that the clause satisfied the “rigorous” test laid down in Tai Hing Cotton Mill Ltd v Liu Chong Hin Bank Ltd [1986] AC 80 (“Tai Hing”).
[80] In brief, the decision of Tai Hing raised a number of issues, including the question of whether a customer would be bound by a term which stipulated that the failure of the customer to notify the bank of any errors within the specified time would mean that the customer could no longer challenge the correctness of the monthly statements. The Privy Council held that the term in question was not sufficiently clear to bring home to the customer the importance of inspecting the monthly statements carefully. Lord Scarman described the test as “rigorous”, such that (Tai Hing at 110):
[81] Returning to the decision in Consmat, it is noted that Thean J found the particular clause before him to be clear and unambiguous as to its meaning and effect. On that basis, it was held that the bank was entitled to rely on that contractual term. Although the learned judge was of the view that the UCTA did not apply, it was held that, in any event, the clause would have satisfied the test of reasonableness set out in the UCTA. In particular, the learned judge made the following observations at [25]:
Although the observations were made in the context of the UCTA, it is noted that the plaintiff also relied on Interfoto to advance the argument that inadequate steps had been taken to draw its attention to the contractual term in question. Thean J, however, found on similar reasoning that it was too late in the day for the plaintiff to complain that the clause had not been drawn to its attention. The agreement had been freely entered into by both parties and there was no evidence to suggest that the plaintiff had been placed in a position where it had no choice but to sign the agreement. In fact, unlike the facts in Thornton and Interfoto, the plaintiff in Consmat had signed the agreement itself. Having signed the agreement, the plaintiff must be taken to have read and understood the terms set out in the agreement itself.
[82] When a contractual term is found to be onerous and unusual, the question as to whether sufficient steps have been taken to draw the other party’s attention to it prior to the contract being entered into is partly a question of fact. For instance, in the High Court decision of Hakko Products Pte Ltd v Danzas (Singapore) Pte Ltd and another [1999] 1 SLR(R) 651 (“Hakko Products v Danzas”), the defendant freight forwarder submitted a quotation to the plaintiff for airfreighting a machine from Hanover to Singapore and thereafter transporting it to the plaintiff’s factory. At the bottom of the quotation, there was an incorporating clause which stated: “All business transacted in accordance with SAAA’S standard trading conditions. Copy available on application.” On that basis, the court had to address the issue of whether the exemption and limitation of liability clauses set out in the SAAA’s standard trading conditions could be relied upon by the defendant freight forwarder. In rejecting the defendant’s arguments, Goh Joon Seng J held that the relevant clauses could not be relied on and one factor that was taken into account by Goh J was the fact that the incorporating clause “was in very small print and was not legible” (Hakko Products v Danzas at [46]). Goh J observed that the incorporating clause read with the exemption and limitation of liability clauses should have been brought to the attention of the plaintiff’s representative. In the circumstances, it was not surprising that the defendant’s attempt to rely on the specific clauses failed.
[83] For completeness, it would also be useful to refer to the High Court decision of Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR(R) 712 (“Press Automation”). In that case, the defendant had contracted with the plaintiff to transport an exhibition machine to Bangkok. Whilst the machine was in the defendant’s custody, it was damaged. Apart from denying the damage, the defendant also attempted to rely on a contractual clause setting out a nine-month time bar to the claim, as well as a clause limiting its liability to $100,000. These clauses were found in the Singapore Freight Forwarders’ Association Standard Trading Conditions (1986) (“the SFFA Conditions”). It was undisputed that the plaintiff had signed a confirmation of acceptance which expressly stated that the business was to be transacted in accordance with the SFFA Conditions, a copy of which was available upon application. It was also undisputed that the plaintiff had not asked for a copy of the SFFA Conditions before entering into the contract. After an in-depth review of the English, Canadian and Singapore case law, Judith Prakash J arrived at the conclusion that the conditions were incorporated as a whole. It was held that the line of authorities deciding that onerous and unusual conditions cannot be incorporated unless the attention of the party sought to be bound has been specifically drawn to them does not apply to cases where there is a signed contract with an explicit incorporating clause. In particular, Prakash J made the following pertinent observations at [39]:
[84] In this regard, the Canadian decision of Tilden Rent-A-Car Co v Clendenming [1978] 83 DLR 3d 400 (“Tilden”) stands for the proposition that a signature can only be relied on as manifesting assent to a document when it was reasonable for the party relying on the signed document to believe that the signor really did assent to its contents. Whilst it may be argued that the approach in Tilden may be “fairer”, especially in the context of consumer contracts, there is no doubt that this will inevitably be at the expense of commercial certainty. In any event, it must be noted that the court in Tilden acknowledged that the position may be different where the parties had dealt with each other in a commercial context.
[85] The position adopted by the Prakash J in Press Automation has also been further explained by academic commentators. In The Law of Contract in Singapore, the learned author rightly comments at para 7.20 that the rule established in Press Automation was, in any event, subject to the principles of fraud and misrepresentation, as well as the provisions of the UCTA. Similarly, it was also acknowledged by the learned authors in Michael Furmston & G J Tolhurst, Contract Formation: Law and Practice (Oxford University Press, 2010) at para 10.47 that a party will be taken to have notice of the terms if the document signed is contractual, provided there has been no misrepresentation.
[86] Returning to the facts in the present case, it is noted that Abani had signed the facility letter with BNP on 6 August 2008. The facility letter expressly stated that BNP’s STC as attached applied to and formed an integral part of the facility letter. Furthermore, it is also noted that the acceptance page where the parties’ representatives had placed their respective signatures specifically referred to the terms and conditions set out in the facility letter and the STC. It bears noting that cl 13 of the letter of credit application form expressly provided that the application shall be subject to:
It is also undisputed that Abani and BNP had dealt with each other on a commercial basis. Abani certainly did not enter into the contract as a consumer. Given that Abani had signed the contractual documents, applying the principles laid down in the line of authorities set out above, in particular, the High Court decision of Press Automation, I am of the view that cl 11.4 of the STC was incorporated as a whole and thus applied to the letter of credit in question. As explained at [77] above, I am also of the view that the provisions of the UCTA are not applicable to the facts in the present case. For these reasons, I am unable to agree with the DJ’s finding that Abani had suffered prejudice as a result of BNP’s failure to specifically plead its claim for indemnity costs.

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Abani Trading Pte Ltd v BNP Paribas and another appeal

Laws this judgment relies on

Grounds of decision

Introduction

Background facts

The decision below

The issues

The appeal in DCA 19/2013

The losses suffered by Abani

The appeal in DCA 24/2013

Whether a claim for costs on an indemnity basis has to be specifically pleaded