Factual Summary:: Payment for 20,000 tons bitumen was to be made by confirmed LC. The LC required presentation of clean shipped on board bills of lading as well as other documents indicating that shipment was effected not later than 25 October 1993. The last date for negotiation of the documents was 10 November 1993, the expiry date for the LC. There were, however, delays in loading the goods and by 25 October 1993 the loading was incomplete. Nonetheless, loading continued, and the shipper together with the broker convinced the carrier to issue an antedated on board bill of lading indicating that the goods were loaded by 25 October 1993. They also prepared corresponding documents.

When the documents were presented to the confirmer on 9 November 1993, one day before expiry, the presentation lacked a certificate of inspection. Although the certificates were not delivered until 11 November 1993 at the earliest, the confirmer honored and forwarded the documents to the issuer with a statement that "documents were presented to us prior to the L/C expiry date ... ."

When the issuer dishonored based on discrepancies, the confirmer took possession of the cargo and sold it. It also brought an action against the beneficiary, beneficiary's agent, carrier, and shipping broker for participation in a fraudulent scheme in antedating the bill of lading. In these actions, the confirmer sought damages for the money it had paid on the LC. The trial court entered judgment against the carrier, shipper and its employee, and broker. On appeal by the carrier and agent, affirmed as to the carrier and reversed as to the agent.

Legal Analysis:

1. Bills of Lading Antedated: In his judgment, Evans, LJ., wrote, "Antedated and false bills of lading are a cancer in international trade. A bill of lading is issued in international trade with the purpose that it should be relied upon by those into whose hands it properly comes - cosignees, bankers, and endorsees. A bank, which receives a bill of lading signed by or on behalf of a shipowner (as one of the documents presented under a letter of credit), relies upon the veracity and authenticity of the bill. Honest commerce requires those who put bills of lading into circulation do so only where the bill of lading, as far as they know, represents the true facts...[A] bank which pays the seller the price of goods under a letter of credit against presentation of a bill of lading which falsely records that the goods were shipped on the carrying vessel by the specified date, when they were not, has no difficulty in recovering damages from the shipowner sufficient to indemnify it against loss, whether or not it can obtain repayment from the seller."

The agent of the beneficiary had encouraged the carrier and shipping broker to state falsely that the cargo was loaded by the 25 October 1993 deadline even though the loading was not completed until 5 December 1993. The court ruled that the confirmer relied upon the false representations made by the beneficiary, shipping broker, and carrier, and incurred damage resulting from its reliance because it would not have paid the beneficiary had it known that the bills of lading were antedated. The court also ruled that the carrier's actions, and not the actions of confirmer, were solely responsible for the damage suffered.

2. Contributory Negligence: One of the issues raised by both carrier and agent was contributory negligence or contributory fault, under the Law Reform (Contributory Negligence) Act of 1945, on the part of the confirmer. The carrier and agent raised the defense of ex turpi causa, stating that the confirmer had submitted its own unlawful document to the issuing bank and was therefore "disentitled to recover damages from [agent and carrier] for its loss, on the grounds of illegality." In their defense, the carrier and agent relied on the court's decision inTinsley v. Milligan,[1994] 1 AC 340, which stated, "[N]o court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa...the court says he has no right to be assisted." (Emphasis added).

It was pointed out that the misdating by the confirmer of the date on which the documents were received were "untrue" to the knowledge of confirmer's employees, and "there was a 'conscious decision' not to tell the transmittal department about the late presentation ... ."

In rejecting this argument, the court noted with approval the trial court's ruling that the confirmer was not liable for its false statement because of the inexperience of its agents in the formulation of such documents. In addition, the court stated that the issuer had not relied on the confirmer's false statement because it dishonored the presentation due to discrepancies within the documents. Finally, the court reasoned that this was a case of "contributory deceit," and not contributory negligence, for which the apportionment of damages could not be reduced under the 1945 Law Reform Act.



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.