Note: Cementia Trading AG (Seller) brought two "winding up" petitions: one against Fortress Commodities Ltd. (Buyer) and the other against Premier Distributors (Hong Kong) Ltd. (Third Party/ Applicant). Heny Lachman Mahtani (Director) was the sole director and shareholder of both Buyer and Third Party/Applicant at the time of the transaction at issue. Both companies also shared the same business address in Hong Kong.

Buyer entered into an agreement with Seller for the purchase of 25,000 metric tons of cement for USD 2,695,000. After Seller agreeing to the sale, Buyer requested a pro forma invoice to facilitate the issuance of a commercial LC. The pro forma invoice was addressed to Buyer. However, instead of issuing one LC, Buyer proposed to split payment between two LCs, one from HSBC covering 10,000 metric tons and the other from BNP covering the other 15,000 metric tons. Third Party/Applicant was named as the Applicant in both LC drafts. Evidence showed it to be common for the LC Applicant to be a differently named company than the one named on the purchase agreement. Seller believed that, although Third Party/ Applicant took the role of financier rather than Buyer, the contractual relationship with Buyer remained unchanged. Seller issued two commercial invoices to "[Buyer] on behalf of [Third Party/Applicant]".

HSBC and BNP each issued LCs in favor of Seller. After the cement was shipped, Buyer requested an amendment of the two bills of lading, a change to the destination port, and that Seller permit the cement to be delivered without production of the original bills of lading. According to the Judge, "[n]egotiations culminated in [Buyer] providing a letter of indemnity (written on [Buyer's] stationery) on 21 October 2011 for each of the two bills of lading." When Seller presented documents pursuant to the LCs, the banks dishonored. Seller then contacted Buyer regarding the discrepancies, to which Buyer explained that it does not normally issue LCs prior to receiving the funds from its commercial entity in Ghana, but in this case had done so to maintain a good working relationship with Seller. Buyer stated that, in fact, there was an issue related to the takeover at a bank used by Buyer in Ghana. Buyer continued to provide assurances, while continuing to postpone each anticipated date of payment.

Seller served a "statutory demand" for payment of the amount owed on Buyer, but after the debt remained, unsatisfied Seller filed a petition to wind up Buyer, claiming that Buyer was insolvent and unable to pay its debts. Buyer claimed a "wrong party" defense by denying that it owed the debt claimed by Seller on the basis that it was not the contracting party, relying on a purchase order that listed Third Party/Applicant and Seller as the contracting parties.

The Court of First Instance, Le Pichon, J., ordered the winding up of Buyer at the conclusion of the hearing. Seller also filed a winding up petition against Third Party/Applicant. The Judge noted that Seller was content to accept the LCs from a third party, Third Party/Applicant, as the financier. In addition, the Judge determined that Buyer considered itself, rather than Third Party/Applicant, to have established the LCs, noting that it was more likely that Third Party/Applicant acted as the agent for Buyer in this situation rather than vice versa. As a result, the Judge dismissed the petition against Third Party/Applicant.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.