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Note: To obtain garments for the 2009 fall and winter seasons, clothing designers, Toy G and Pinko Black (Applicants/Buyers) obtained transferable commercial LCs in favor of Freenet Asia Ltd. (Trader), a Hong Kong based garment trader. The LCs were transferred in favor of Canning International Ltd. (Manufacturer), a Hong Kong garment manufacturer.

Due to delays in production and shipment, Manufacturer was unable to present complying documents since the LCs had expired. Nonetheless, it shipped and presented documents which were refused under some of the LCs. Seeking to recover for the goods, Manufacturer sued Trader for damages including US$ 582.92 in discrepancy fees. Trader counterclaimed for air freight and other claims related to the quality and quantity of the goods. The Hong Kong District Court Leung, J., entered judgment in favor of Manufacturer for US$ 97,684.98 and allowed Trader a US$ 71.61 offset on its counterclaim. In considering whether Manufacturer could recover the bank fees for the dishonored LCs, the Judge asked "whether there was any consensus between the parties that after shipment, though later than the delivery dates specified in the LCs, [Manufacturer] was nevertheless expected to present the documents for payment by way of the LCs."

Reviewing the correspondence and the conduct of the parties, the Judge concluded that Trader had urged Manufacturer to seek payment under the LCs. Moreover, the Judge noted that payment had been made on some LC presentations, a result that was attributed to Trader's intervention. The Judge, therefore, ruled that a consensus existed that documents would be presented. That Trader claimed amounts in offset and had subsequently decided not to settle the invoices was not communicated to Manufacturer which continued to make presentations under the LCs. As a result, the Judge ruled that Trader had caused the bank fees to be incurred.

[JEB/dgs]

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