Article

Note: This case concerned applications to set aside certain judgments rendered in 2015, referred to as the “original case”. In the original case, Jamtoff Trading Ltd. (Seller/Beneficiary) was awarded almost EUR 800,000 in damages after it was fraudulently induced, inter alia, by forged copies of letters of credit to ship merchandise for which it never received payment. In the original case, the Trial Court ordered the fraudsters, among them Century Financial Holdings Ltd. (Alleged Bank), to compensate Seller/Beneficiary for its loss. The defendants in the original case were held to be jointly and severally liable for the perpetrated fraud.

When permission to appeal was refused by the Trial Court, and on further application also refused by the Court of Appeal, Alleged Bank made the present applications nevertheless to set aside the judgments in the original case. Alleged Bank relied on two aspects for its applications, both of which failed before the High Court.

First, Alleged Bank submitted that new evidence showed that Seller/Beneficiary had started preparations to ship goods before Alleged Bank’s draft letter of credit was shown to Seller/Beneficiary. Alleged Bank argued that it was itself defrauded and not part of a group of fraudsters. The Court rejected that contention because in the original case the Judge had established, and relied on the fact, that Alleged Bank had made fraudulent representations to Seller/Beneficiary that a letter of credit had been issued, and that Alleged Bank was a bank. These misrepresentations were made before actual shipment of the goods. Suggestions that Alleged Bank itself may have been defrauded by the other defendants in the original case and that this could justify setting aside the judgments in the original case were not accepted by the High Court. Burrows QC, sitting as High Court Judge, stated: “But the fact that, within a joint fraud, the fraudsters may have in some respects lied to each other does not undermine their joint and several liability to the victim [Seller/Beneficiary] of their fraud.”

Second, Alleged Bank based its application to set aside the judgments in the original case on the claim that Seller/Beneficiary had failed to deliver the bill of lading to Alleged Bank and thus committed conversion of the bill of lading. The High Court rejected this aspect in clear terms: “There is no contractual duty or tortious duty of care owed to anyone by a seller – who is the ‘beneficiary’ under a letter of credit arrangement – to present conforming documents. All that happens is that, if the beneficiary fails to present conforming documents, the beneficiary does not get paid under the letter of credit. […] Nor, in any event, can I see how [Alleged Bank] can be said to have any possessory right to the bill of lading or the goods; [Alleged Bank] is the issuing bank under a letter of credit and there can be no claim for conversion of a bill of lading until the issuing bank has received the bill of lading (in return for payment) which it did not.”

Accordingly, the High Court struck out both claims advanced by Alleged Bank and refused to order the setting aside of the judgments in the original case.

* Brunswick European Law School, Ostfalia University of Applied Sciences (Germany); Visiting Researcher at Centre for Banking Law, University of Johannesburg (South Africa).

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