Article

Factual Summary:

Issuer requested adviser to add its confirmation but it did not do so. A second, third, and fourth amendment requested the advising bank to advise the beneficiary of amendment through Second Advising Bank. The third amendment stated that the credit was available "with the confirming bank by negotiation." After the fourth amendment, the second advising bank telexed the issuer informing them that they had added their confirmation to the LC but the issuer did not respond. The beneficiary presented the documents to the second advising bank which discounted them and forwarded them to the issuer in Vietnam. The documents were delivered on 17 February 1996 and a notice of rejection was given on 4 March 1996.

The second advising bank sued the issuer in Singapore. Since the issuer had no presence in Singapore, service was made at an office in Bihn Thuan province in Vietnam by leaving a summons, the compliant, and a certified Vietnamese translation. Thinking that the service was invalid under Vietnamese law by which service must be effected through the Ministry of Foreign Affairs, the issuer did not respond. When the time to respond had lapsed, the second advising bank obtained a default judgement and garnished the assets of the issuer in the hands of Singapore banks which placed the issuer in default on some of its obligations. The issuer then applied to set aside the default judgement and stay execution. Subsequently, the second advising bank sought an ex parte Mareva injunction to prevent the issuer from removing or depleting their assets in Singapore. The High Court set aside the default judgement and the issuer applied for discharge of the Mareva injunction. On a hearing, the High Court discharged the Mareva injunction and ordered that the matter proceed to trial.

Legal Analysis:

1. Nomination: The second advising bank claimed that it had been authorized to confirm the credit by the second amendment. The issuer contended that it had not nominated the second advising bank to confirm and that any such action on its part was without authority. It also stated that the telex informing it of the purported confirmation had not been received and, in any event, had not been agreed to by it.

The court stated that:

The arguments made by both parties raised interesting questions relating to the interpretation of the amendments to the credit and the provisions of the Uniform Customs and Practice for Documentary Credits 1993 Revision to which the credit was expressly made subject. Another issue involved was what the true effect and consequence of the plaintiffs' telex of 25 January 1996 had been. After hearing both parties, I considered that the plaintiffs had been able to demonstrate the existence of a good arguable case.

2. Mareva Injunction: Discussing the Mareva Injunction, the court noted:

It is well known that the purpose of a Mareva injunction is to prevent a defendant from acting dishonourably. It is not designed to provide the plaintiffs with security or to ensure that any judgment that they obtain will be fully, or even partially satisfied. If the plaintiff is unable to obtain payment under a judgment because the defendant is a foreigner and has no assets in Singapore, that is a pity but it is not something which a court can prevent. The court only renders its assistance when there is evidence that the defendant will act with the express intention of evading his obligations.

It would be recalled that in Third Chandris Shipping Corpn v Unimarine SA {1979} QB 645 at p 669 Lord Denning MR held:

The plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied. The mere fact that the defendant is abroad is not by itself sufficient. No one would wish any reputable foreign company to be plagued with a Mareva injunction simply because it has agreed to London arbitration ... Other grounds may be shown for believing there is a risk. But some such should be shown.

Lawton LJ in the same case reiterates these principles at pp 671-672:

... In my judgment an affidavit in support of a Mareva injunction should give enough particulars of the plaintiff's case to enable the court to assess its strength and should set out what inquiries have been made about the defendant's business and what information has been revealed, including that relating to its size, origins, business domicile, the location of its known assets and the circumstances in which the dispute has arisen. These facts should enable a commercial judge to infer whether there is likely to be any real risk of default. Default is most unlikely if the defendant is a long established, well known foreign corporation or is known to have substantial assets in countries where English judgments can easily be enforced either under the Foreign Judgments (Reciprocal Enforcement) Act 1933 or otherwise. But if nothing can be found out about the defendant, that by itself may be enough to justify a Mareva injunction.

Based on its assessment of the situation and assets of the issuer, the court decided that no risk to the second advising bank had been established and that the injunction had to be discharged. The court also noted that the injunction interfered with the ordinary business of the issuer.

Comment:

A trial was commenced in this matter subsequently. The issues in the case were whether notice of dishonor was timely given, whether there were discrepancies, and whether the second advising bank had duly confirmed or negotiated the credit. As to the time issue, the issuer argued that the documents were delivered to a rural branch of the issuer on the first day of the week-long Tet (New Year) holiday and that they were not taken up until the Monday of the following week, making the time within which notice was given within the seven-day period under the UCP, thus creating an issue of whether the time was reasonable After presenting their case, the second advising bank sought to withdraw the case, but the issuer refused to agree and a judgment was entered dismissing the matter and providing for attorney's fees and costs for the issuer.

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