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Note:LG Electronics Hong Kong (Beneficiary), a Hong Kong corporation, entered a contract with Royal Information Electronics Company Limited (Applicant) for the sale of 17-inch color display tubes with deflection. As payment, Applicant provided an LC issued by the Panchiao branch of the Bank of Taiwan. The LC was subject to UCP500. The LC contained the following conditions:

"(1) the expiration date of the letter of credit was 14 October; (2) the latest date of shipment to Hong Kong was 23 September 2000; (3) the documents required were -(a) commercial invoice in quadruplicate manually signed; (b) cargo receipt issued and signed by applicant; (c) packing list in triplicate; and (4) the documents had to be presented for negotiation within 21 days after the issue of the cargo receipt but not later than the validity of the letter of credit."

On behalf of Beneficiary, HSBC presented the documents to the Panchiao branch which noted these discrepancies:

"1. COMMERCIAL INVOICE AND PACKING LIST DESCRIPTION OF GOODS AS 17 FEET COLOR DISPLAY TUBE WITH DEFLECTION YOKE M41LFQ903X05 NOT COMPLIED WITH LC STIPULATION. 2. DRAFT COMMERCIAL INVOICE AND PACKING LIST WERE SHOWN LC NO DIFFER FROM CARGO RECEIPT. 3. CARGO RECEIPT STAMPED INSTEAD OF SIGNED BY APPLICANT."

HSBC replied that the first two discrepancies were immaterial and "obvious typing errors," and that the cargo receipt did not have to be manually signed. On the same day, HSBC presented a second set of documents, which Issuer also found unacceptable.

A third set of documents was issued two weeks later, and the Panchiao branch once again found discrepancies, alleging that both the packing list and the cargo receipt had been forged since some of the dates had been changed, even though the cargo receipt was manually signed by an agent for Applicant. Beneficiary then sued Issuer for wrongful dishonor.

At trial, Issuer asserted the defenses of lack of jurisdiction, forum non conveniens and lack of service. The trial court, Kwan, J., ruled against the bank on all issues raised and refused to grant a stay based on the bank's grounds of forum non conveniens. Issuer appealed the trial court's refusal to stay the Hong Kong proceedings on the basis of forum non conveniens. The High Court of the Hong Kong Special Administrative Region Court of Appeal, Hon Rogers VP and Le Pichon JA, J., affirmed.

The Appellate court noted that to prevail the bank had to demonstrate first, that Hong Kong was not the appropriate forum, and second, that there was a "distinctly more appropriate forum." Especially in regarding the first presentation of documents, although the bank conceded that the first two discrepancies were unsustainable, the court found that the bank still had to show that Hong Kong was not the proper forum to determine whether under UCP500, the cargo statement had to be manually signed.

The appellate court concluded that Issuer's arguments regarding place of performance, the situation of the debt, and the applicable law being Taiwanese, did not address the question of Hong Kong being the appropriate forum. It also found that the forgery allegations were irrelevant since they do not arise until the third presentation of documents is considered. The appellate court ruled that, "as this appeal concerns the exercise of a judicial discretion, unless it can be shown that the judge exercised her discretion under a mistake of law or in disregard of principle or had misunderstood the evidence, it is doomed to fail." The court deemed the bank's defense to be "wholly lacking in substance and merit" and, pointedly suggesting that "[a] re-assessment by [Issuer] of its position at this stage may not be amiss", affirmed the trial court's decision.

The appellate court noted that the trial court had intimated to Issuer's counsel that the first two reasons for dishonor were "unsustainable".

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