Credit Agricole Indosuez v Banque Nationale de Paris: Letter of Credit Construction & UCP Rules

Credit Agricole Indosuez ('CAI') appealed against the High Court's decision in favor of Banque Nationale de Paris ('BNP') regarding the construction of a letter of credit. The Court of Appeal of Singapore, comprising Chao Hick Tin JA, L P Thean JA, and Yong Pung How CJ, heard the case on 14 February 2001. The primary legal issue was whether the letter of credit was a deferred payment credit or a negotiation credit. The court allowed the appeal, holding that the letter of credit was a deferred payment credit, not a negotiation credit.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal allowed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Appeal regarding the construction of a letter of credit. The court determined whether it was a deferred payment credit or a negotiation credit.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Banque Nationale de ParisRespondentCorporationAppeal DismissedLost
Credit Agricole IndosuezAppellantCorporationAppeal allowedWon

3. Judges

Judge NameTitleDelivered Judgment
Chao Hick TinJustice of AppealYes
L P TheanJustice of AppealNo
Yong Pung HowChief JusticeNo

4. Counsels

Counsel NameOrganization
Gan Kam YuinBih Li & Lee
Choi Yok HungBih Li & Lee
Rowena Chew KiatBih Li & Lee
Toh Kian SingRajah & Tann
Steven ChongRajah & Tann
David Tan Yew BengRajah & Tann

4. Facts

  1. Solo Industries Ltd applied to Credit Agricole Indosuez for a letter of credit in favor of Amerorient Pte Ltd.
  2. Credit Agricole Indosuez telexed Banque Nationale de Paris regarding the irrevocable letter of credit.
  3. Banque Nationale de Paris informed Credit Agricole Indosuez that it had advised Amerorient as to the contents of the letter of credit and added its confirmation.
  4. Banque Nationale de Paris negotiated the letter of credit and paid Amerorient.
  5. Credit Agricole Indosuez advised Solo of the receipt of documents.
  6. Credit Agricole Indosuez advised Banque Nationale de Paris that the documents were accepted to mature for payment on 21 September 1999.
  7. Credit Agricole Indosuez later discovered a fraud suspicion involving Amerorient and Solo.

5. Formal Citations

  1. Credit Agricole Indosuez v Banque Nationale de Paris, CA 52/ 2000, [2001] SGCA 12
  2. Credit Agricole Indosuez v Banque Nationale de Paris, , [2000] 4 SLR 254

6. Timeline

DateEvent
Solo Industries Ltd applied to Credit Agricole Indosuez to establish a letter of credit.
Credit Agricole Indosuez telexed Banque Nationale de Paris regarding the irrevocable letter of credit.
Banque Nationale de Paris informed Credit Agricole Indosuez that it had advised Amerorient as to the contents of the letter of credit and added its confirmation.
Banque Nationale de Paris negotiated the letter of credit and paid Amerorient.
Credit Agricole Indosuez advised Solo of the receipt of documents.
Credit Agricole Indosuez advised Banque Nationale de Paris that the documents were accepted to mature for payment on 21 September 1999.
Credit Agricole Indosuez requested copies of the bills of lading and invoices from Banque Nationale de Paris.
Credit Agricole Indosuez advised Banque Nationale de Paris of a serious fraud suspicion and instructed them not to make any payment.
Banque Nationale de Paris responded that they had confirmed and negotiated documents in strict compliance with the letter of credit terms.
Banque Nationale de Paris informed Credit Agricole Indosuez that they had negotiated and discounted the bills under the letter of credit on 26 March 1999.
Credit Agricole Indosuez refused to pay Banque Nationale de Paris.
Court of Appeal allowed the appeal.

7. Legal Issues

  1. Construction of Letter of Credit
    • Outcome: The court held that the letter of credit was a deferred payment credit, not a negotiation credit.
    • Category: Substantive
    • Sub-Issues:
      • Ambiguity in terms
      • Interpretation of UCP rules
  2. Holder in Due Course
    • Outcome: The court held that BNP was not a holder in due course of the drafts.
    • Category: Substantive
    • Sub-Issues:
      • Negotiability of drafts
      • Indorsement requirements
  3. Estoppel
    • Outcome: The court held that estoppel did not arise because no representation was made and there was no reliance.
    • Category: Substantive
    • Sub-Issues:
      • Representation
      • Reliance

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract
  • Claim as Holder in Due Course

10. Practice Areas

  • Commercial Litigation
  • Banking
  • Documentary Credits

11. Industries

  • Banking
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Banco Santander SA v Bayfern LtdLloyd's Law ReportsYes[1999] 2 Lloyd`s Rep 239England and WalesCited to define the payment terms under a deferred payment credit.
Sinotani Pacific Pte Ltd v Agricultural Bank of ChinaCourt of Appeal of SingaporeYes[1999] 4 SLR 34SingaporeDistinguished on the basis that the dispute there was between the beneficiary and the issuing bank and did not concern the question of negotiation.
Reardon Smith Line Ltd v Yngvar Hansen-TangenHouse of LordsYes[1976] 1 WLR 989England and WalesCited for the principle that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
Ireland v LivingstonHouse of LordsYes[1872] LR 5 HL 395England and WalesCited for the principle that where an agent has been given ambiguous instructions by his principal, the agent is entitled to be reimbursed so long as he gives the instructions a reasonable consideration and acts accordingly.
Midland Bank Ltd v SeymourLloyd's Law ReportsYes[1955] 2 Lloyd`s Rep 147England and WalesCited for the principle that where an agent has been given ambiguous instructions by his principal, the agent is entitled to be reimbursed so long as he gives the instructions a reasonable consideration and acts accordingly.
European Asian Bank AG v Punjab and Sind Bank (No 2)Court of Appeal (Civil Division)Yes[1983] 2 All ER 508England and WalesCited to show that there must be some limit to the operation of the principle that an agent is entitled to be reimbursed so long as he gives the instructions a reasonable consideration and acts accordingly.
Korea Exchange Bank v Debenhams (Central Buying) LtdCourt of Appeal (Civil Division)Yes[1979] 1 Lloyd`s Rep 548England and WalesCited for the principle that where a bill was drawn payable at `90 days after acceptance`, it was not a bill of exchange that satisfied s 11(1).
RE Jones Ltd v Waring and Gillow LtdHouse of LordsYes[1926] AC 670England and WalesCited for the principle that the original payee could not be considered a `holder in due course` within the meaning of the Act.

13. Applicable Rules

Rule Name
Uniform Customs & Practice for Documentary Credits 1993

14. Applicable Statutes

Statute NameJurisdiction
Bills of Exchange Act (Cap 23)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Letter of Credit
  • Deferred Payment Credit
  • Negotiation Credit
  • UCP 1993
  • Drafts
  • Negotiation
  • Holder in Due Course
  • Estoppel
  • Bills of Exchange
  • Confirming Bank
  • Issuing Bank
  • Beneficiary

15.2 Keywords

  • letter of credit
  • deferred payment
  • negotiation
  • UCP
  • banking
  • finance

17. Areas of Law

Area NameRelevance Score
Letters of Credit95
Banking and Finance90
Documentary Credits80
Contract Law70
Construction of Contract60
Estoppel50
Customer Confidentiality30

16. Subjects

  • Banking
  • International Trade
  • Finance
  • Documentary Credits