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record(s)
1 to 10 of 58
KBC Bank v. Industrial Steels (UK) Ltd.
Queen's Bench Division (27 November 2000) [England]
2000 CASE SUMMARIES
Banco Santander SA v. Banque Paribas
[2000] 1 All ER (Comm) 776 [England] Abstracted by James
G. Barnes
2000 CASE SUMMARIES
Bank Brussels Lambert v. Credit Lyonnais
40 U.C.C. Rep. Serv. 2d (CBC) 1217 (S.D.N.Y. 2000) [U.S.A.]
Summarized by James G. Barnes
2000 CASE SUMMARIES
Bank One, Milwaukee, N.A. v. Williams Bay Trading Co.
Bank One, Milwaukee, N.A. v. Williams Bay Trading Co.
620 N.W.2d 482 (Wis. Ct. App. 2000) [U.S.A.]
2000 CASE SUMMARIES
Banque Nationale de Paris v. Credit Agricole Indosuez
2000-4 SLR 254 (27 June 2000) [Singapore]
2000 CASE SUMMARIES
Brunswick County v. The Bank of Tokyo-Mitsubishi Limited
214 F.3d 510 (4th Cir. 2000) [U.S.A.]
2000 CASE SUMMARIES
Berliner Handels-Und Frankfurter Bank v. Lone Star Steel
Company
(In re: East Texas Steel Facilities, Inc.) 41 U.C.C.
Rep. Serv. 2d (Callaghan) 1201 (N.D. Tex. 2000) [U.S.A.]
2000 CASE SUMMARIES
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KBC Bank v. Industrial
Steels (UK) Ltd. |
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| Queen's
Bench Division (27 November 2000) [England] |
Topics:
Fraud
Type of Lawsuit:
Nominated bank sued beneficiary for fraud, seeking damages representing
the difference between moneys paid under LCs and the settlement
with the applicant.
Parties:
Plaintiff/Nominated Bank - KBC Bank NV (Counsel: D. Matthews)
Defendant/Beneficiary/Consignor - Industrial Steels (UK) Limited
(Counsel: J. Nash)
First Issuer - Punjab National Bank, Indore (PNB)
Second Issuer - State Bank of Travancore (SBT)
Applicant/Consignee - Metalman Industries Limited
Employee of Beneficiary - Mr. Hewson
Underlying Transaction:
Purchase and consignment of Russian steel.
LC:
Two LCs for US$ 1,200,000 and US$ 157,000,000. Subject to UCP500.
Decision:
The Queen's Bench Division, David Steel, J., ruled that the
nominated bank was entitled to damages.
Rationale:
Where documents are presented with the knowledge that they are
non-compliant, the beneficiary is liable for the misrepresentation.
Factual Summary:
Factual Summary: To pay for a shipment of steel, two LCs were
issued by two different banks. The first LC was issued for US$
1,200,000, and the second LC was issued for $157,000,000. Documents
for both LCs were presented, and the nominated bank paid the
beneficiary.
When the documents were forwarded to the first and second issuers,
they rejected the documents, however, alleging that they were
not in compliance with the terms of the LCs. The nominated bank
commenced an action in the Commercial Court against the first
and second issuers for wrongful dishonor and against the applicant
because of allegations that the applicant had caused the dishonor
of the LCs. The nominated bank contended that the dishonor of
the documents was for "spurious" discrepancies and
perhaps the result of applicant's desire to renege on the contract
due to a price drop in the steel market. However, following
expert testimony that the certificate of origin was discrepant,
the nominated bank chose to discontinue the action against issuers
and settled with applicant whereby applicant would take delivery
the goods at a discount price.
The nominated bank then sued the beneficiary for the deficiency
on a theory of deceit, claiming damages of approximately $500,000,
which was the difference between moneys paid under the LCs and
the nominated bank's recovery made from applicant in the settlement
and approximately UKŁ162,000 paid in legal fees from the first
action against the issuers and applicant.
Legal Analysis:
1. Fraud: Fraud does not require proof of dishonesty.
Instead, the requirements necessary to prove fraud are the state
of mind and knowledge of the person making the false statement,
reliance upon those statements, and damages resulting from those
statements. In this case, the only question was whether the
perpetrator's state of mind at the time when the false statement
was made was deceitful.
The certificates of origin were a "photocopy of the white
originals [and] unstamped, undated and unissued certificates."
The beneficiary's employee testified that the letters of credit
called for a "nonnegotiable" document and any "copy
document, whether signed or not" would constitute a "nonnegotiable"
document. The beneficiary further contended that there "were
other people who subscribed to the same view of what non-negotiable
meant", and that it was usual practice to supply "unstamped
and unsigned copies". In rejecting the beneficiary's argument,
the court inferred from the testimony of the beneficiary's employee
that the original Russian certificates of origin had not arrived
at the time the documents were sent, for which the documents
sent were discrepant.
The court found that the beneficiary's employee was fully aware
that the "Beneficiary's Certificate" contained a false
statement, for which the beneficiary was liable for deceit.
Comments
The result is proper. The rationale is troublesome. The only
question is whether the documents are those indicated in the
LC. If not, the motive or culpability of the beneficiary is
irrelevant. The issuer's undertaking is only to pay against
genuine documents. The negotiating bank's purchase was similar.
It does not, as between itself and the beneficiary, assume the
risk of non-genuine documents.
© 2000 INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
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