Article

Factual Summary: Bank issued LC for US$1,380,000 in favor of Beneficiary. Beneficiary presented documents under LC to Issuer, and Issuer refused to pay on the basis of three discrepancies: 1) Article No. MRT5571 in Bill of lading differs from Article No. MRT5671 in the Credit and other documents; 2) Bill of lading is signed for DFDS OCEAN TRANSPORT A/S by DFDS TRANSPORT (UK) LTD whereas bearing a chop of DFDS TRASPORT LTD; and 3) 40' OT in Packing List and Weight Memo differs from 40' DV in B/L.

Beneficiary sued Issuer for wrongful dishonor. The trial court ruled in favor of Beneficiary. On appeal, the trial judgment was reversed.

In trial and appeal, Mr. SOH Chee Seng, the Singaporean representative to the ICC Banking Commission, who was a member of the ICC Task Force of ISBP, and sits on the Panel of Experts constituted by the ICC Banking Commission for the purpose of providing Documentary Credit Dispute Expertise ("DOCDEX"), gave his expert opinion on whether discrepancies exist. Mr. Soh stated that, in his expert opinion, the difference in Article Number between "MRT5571"and "MRT5671"on the B/L and the issuer's failing to indicate its capacity constituted discrepancies but that the difference between 40'DV case in B/L and 40'DV case in the Packing List did not constitute a discrepancy.

Trial Court Decision:

1. Application of UCP500 and ISBP: The trial court stated that both UCP500 and ISBP shall apply since both Issuer and Beneficiary agreed to the rules.

2. Standard of Examination of Documents: The trial court stated that, in accordance with UCP500 and ISBP, such principles should be followed when examining documents presented: a) the description of the goods in the invoice must correspond with the description in the credit, and the description in other documents shall not be inconsistent with the description in the credit; b) the requirement is not that the data contents be identical, merely that the documents under the credit not be inconsistent; c) documents not stipulated in the Credit shall not be examined by banks, and d) misspellings or typing errors are not discrepancies when an ordinary person cannot tell any substantive difference between them. Therefore, the three discrepancies alleged by the Issuer did not exist. Specifically, Article Number as "MRT5571" is merely a typing error since Article Number is different from a "MODEL" and any ordinary person who is careful enough will find it is merely a typing error; the chop of DFDS TRASPORT LTD contains a place name, which is actually located in UK, and the "(UK)" in DFDS TRANSPORT (UK) LTD is not a part of the company name, thus the names are not inconsistent; the difference in types of containers does not constitute a discrepancy since it is not stipulated in the Credit.

Appellate Court Decision:

1. Application of UCP500 and ISBP: The appellate court confirmed that UCP500 and ISBP applied in light of the mutual agreement of the application of both Issuer and Beneficiary. The appellate court noted that ISBP is not international practice, but it can apply as well as a standard of examination of documents since it is reflected in UCP articles in accordance with UCP500 Article 13.

2. Standard of Examination of Documents: The appellate court noted that examining documents is a highly professional job which is undertaken by bank checkers. The trial decision erred in holding that the examination of document should be grounded on the perception of "an average person" or "an ordinary person who is careful enough". This does not comply with UCP500 or ISBP. The documents need to be complied with each other to the extent that their date contents are not inconsistent with each other and the difference, if any, would not affect the meaning of the expressions where it occurs.

The appellate court found in Beneficiary's presentation: inconsistency between "MRT5571" and "MRT5671" lead to a different meaning of the description, making the documents discrepant. As to the issuer of the bill of lading, since the bank is not obliged to inquire whether the two names refer to the same company or whether there exists only one company at the address contained in the chop, the Issuer of the B/L failed to identify its own capacity, which makes the documents discrepant. The difference in types of containers is found not to be discrepant because the seal number or package number show that they are the same container.

3. Expert Opinion: The appellate court noted that in both the trial and appeal, Mr. SOH Chee Seng was invited as Issuer's Expert Witness to give his opinion on whether there existed discrepancies. Beneficiary argued that because Mr. SOH was invited by the Issuer, which paid for his expenses incurred for giving his testimony, the opinion expressed in his testimony must be biased.

The appellate court noted that though Mr. SOH's opinion on this case is authoritative to a certain extent, his statement in this case is not the opinion on finding of facts but his opinion on the applicable law. No foreign legal expert could do more than testify about the existence of foreign laws and international practices, and it falls into the Judge's scope of authority to apply the laws and decide the case. Therefore, the appellate court found that Mr. SOH's opinion is the contention made by the Bank on the applicable laws.

Comment:

It is unfortunate that the court refused to take advantage of Mr. SOH's expertise in LC practice. Courts need expert assistance in understanding what it is and how it is applied.

[JS/FJ/dw]

*JIN Saibo is partner of Tongshang Law Firm, FENG Jing is lawyer of Zhonglun Law Firm.

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