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Note: Kirin Industrial Shares Corp. (Purchaser) contracted with Chimei Innolux Corp. (Beneficiary/Seller) to purchase a number of LCD parts to be delivered in installments in September and October of 2010. Purchaser began experiencing financial difficulties and entered into a separate arrangement with Toyota Tsusho (Hong Kong) Corporation Ltd. (Financer/Applicant), the subsequent purchaser of the goods. Financer was to fund the purchase from Beneficiary/Seller. Financer/Applicant opened an LC with Mizuho Corporation Bank Ltd (Issuing Bank), and Hua Nan Commercial Bank (Advising Bank) advised. The contract provided that Beneficiary/Seller was to ship the goods to Da Tien International Company Ltd. (Delivery Agent).

When Beneficiary/Seller attempted to draw on the LC, Financier/Applicant threatened to sue Beneficiary/Seller if they did not cancel the LC, claiming there were issues of quality as well as delays in shipping and irregularities in documents. Issuing Bank, however, honored the LC. Financer/Applicant sued the Beneficiary/Seller and Purchaser to recover the amount paid. The High Court of Hong Kong, Court of First Instance, Yee, J., issued two orders in this case. First, the Judge dismissed charges against Beneficiary/Seller, and entered judgement for fraud against Purchaser. Second, the Judge ordered that costs for both the Beneficiary/Seller and Financer/Applicant be paid by Purchaser.

The Judge focused on whether an employee of Beneficiary/Seller signed off on specific documents that were part of the transaction. This employee claimed the documents were forged, as although the employee’s signature is on certain documents, the employee did not remember signing the documents. This claim was addressed by handwriting experts who either opined that it was conclusively not his handwriting or that a conclusion could not be reached. The Judge decided that the documents in question were forged, citing evidence and testimony which suggested that the documents in question were never communicated within the internal emails of Beneficiary/Seller, and that the terms, as well as the quick turnaround time between submission of revisions and approval made it likely that employees of Purchaser forged the documents without the approval or authority of Beneficiary/Seller.

[ARB]

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