IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION (COMMERCIAL COURT)
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday, 28 January 2000
LORD JUSTICE POTTER
and
Mr JUSTICE FERRIS
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| CREDIT AGRICOLE INDOSUEZ | Appellant | |
| – and – | ||
| CHAILEASE FINANCE CORPORATION | Respondent |
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
– – – – – – – – – – – – – – – – – – – – –
Stephen Males QC (instructed by Middleton Potts, London) for the appellant.
Hugo Page Esq (instructed by Penningtons of London; London Agents for Penningtons of Paris) for the respondent.
As Approved by the Court
Crown Copyright ©
Friday, 28 January 2000
LORD JUSTICE POTTER:
INTRODUCTION
1. This is an appeal from an order of Mr Stephen Tomlinson QC sitting as a deputy High Court Judge whereby he dismissed the challenge by the defendant/appellant Credit Agricole Indosuez (“CAI”) to the jurisdiction of the English Court by way of application under RSC Order 12 rule 8 and gave summary judgment under RSC Order 14 for the claimant/respondent Chailease Finance Corporation (“Chailease”) for US$ 556,750 plus interest. CAI appeals both limbs of the judge’s decision. The issues raised are (1) whether England was “the place of performance of the obligation in question” for the purpose of Article 5(1) of the Brussels Convention and (2) whether the bill of sale and acceptance of sale required to be presented by Chailease to CAI under an irrevocable stand-by letter of credit were non-conforming documents by reason of the fact that the date of delivery stated therein was 21 August 1998 when the credit stated that it was in respect of the sale agreement of a vessel for delivery during 17-20 August 1998.
THE FACTS
2. CAI is a French bank with a branch in Geneva. On 19th August 1998 that branch issued the letter of credit in favour of Chailease as beneficiary. The letter of credit was subject to the Uniform Customs & Practice for Documentary Credits (1993 Revison) (“UCP 500”). It was for an amount of US$ 556,750
“covering vessel MV `Mandarin’ sale agreement dated July 31, 1998 for delivery in Taipei during August 17-20, 1998 …. valid until November 30, 1998 at our counters in Geneva … available by payment at sight but not before than ten days of vessel’s delivery for US$ 400,000 and not before than 50 days of vessel’s delivery for US$156,750 against presentation of the following documents …”
The documents required included a bill of sale and
“copy of acceptance of sale (aceptacion de compra) duly signed by Buyer’s representative at Taipei on delivery Mr Panagiotis Stavropoulos, countersigned by Panama Consulate/Mission in Taiwan showing date/time of delivery.”
Presentation of documents was to take place in Geneva, the letter of credit stating:
“Upon receipt at our counters in Geneva of documents in strict conformity with this stand-by letter of credit terms and conditions, we shall pay you as per your instructions, value two Geneva/New York Bank working days”.
3. On 6th October 1998 Chailease presented documents to CAI in Geneva and instructed CAI to make payment of the first tranche of US$ 400,000 to its bank in Taipei. The documents included a bill of sale dated 21 August and an acceptance of sale which stated that delivery had taken place at 1600 hours Taipei time on 21 August. The acceptance of sale was signed by the buyer as required and confirmed the absence of any note of protest. On 12 October, CAI rejected the documents giving four reasons for such rejection.
4. On 30th October 1998 a second presentation was made which included not only the documents earlier presented but also the original bill of sale and acceptance, together with documents relating to the second tranche of US$ 156,750. Again the instructions were for payment to Chailease’s bank in Taipei. Again CAI rejected the documents.
5. A third presentation took place on 24th November by Chailease’s solicitors. It included a certified copy of the bill of sale, absence of which had been one of the grounds given for rejection on first presentation. On this occasion revised payment instructions were given by Chailease, namely that the funds should be paid by transmission to Chailease’s account at the Midland Bank in London. Again the documents were rejected. By this stage CAI were relying upon one only alleged discrepancy in the documents as a reason for rejection, namely that the date of delivery of the vessel was stated in the bill of sale and the signed acceptance of sale to be 21 August 1998 when the letter of credit stated that the vessel “was for delivery … August 17 -20 1998”.
6. Because of an issue raised for the first time on this appeal, it is pertinent to note that at no stage in connection with the three presentations of the documents above referred to, did CAI suggest that Chailease was not entitled to give instructions for payment outside Geneva or, upon the occasion of the third presentation, to change the instructions previously given for payment in Taipei to payment in London. Further, at the hearing before the judge, as recorded in his judgment, it was common ground that Chailease was contractually entitled under the letter of credit both to require payment in London and to make that request on the third presentation, by way of revision of its earlier requirements under the rejected presentations. It was accepted that the letter of credit gave the beneficiary a completely unfettered choice as to the place of payment.
THE FIRST ISSUE
7. It was and is the plaintiff’s contention that its claim is based upon the failure of CAI to pay money and that, for the purposes of Article 5(1) of the Brussels Convention, the place of performance of the obligation in question was London in accordance with the instructions given to CAI upon the third presentation.
8. So far as material, the Convention provides:
“Article 2.
Subject to the provisions of this Convention persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State
………..
Special Jurisdiction.
Article 5.
A person domiciled in a Contracting State may, in another Contracting State, be sued –
1. In matters relating to a contract in the Courts for the place of performance of the obligation in question ..”
9. Thus, whereas, Article 2 prima facie required that the defendant, as a legal person domiciled in France, should be sued in that country, it was open to Chailease to establish the special jurisdiction of the English court under Article 5 on the basis that England was the place of performance of the obligation in question.
What was the obligation in question?
10. The European Court of Justice has held that, in order to identify the obligation in question, one must identify the obligation
“which corresponds to the contractual right on which the plaintiff’s action is based”
see Custom Made Commercial Limited -v- Stawa Metallbau [1994] ECR I-2913 and 2957 (para 23), affirming de Bloos -v- Bouver [1976] ECR 1947 at p.1508 (paras 11,14); and see generally Kleinwort Benson -v- Glasgow City Council [1997] per Lord Goff of Chieveley at 163H-164G.
11. The judge held that the relevant obligation was the obligation of CAI to pay the plaintiff in London pursuant to its instruction on the occasion of the third presentation. He said:
“It is true that that obligation does not arise unless and until conforming documents are presented to the bank, and that on the facts of this case that presentation had to take place in Geneva. But, provided that conforming documents have been presented to the bank in Geneva, the contractual right on which the beneficiaries’ action is thereafter based is the right to receive payment in London. No doubt the bank has a separate obligation to examine documents presented and to take up only conforming documents, although I should have thought that is likely to be a duty which is owed to the applicant for the credit, rather than to the beneficiaries. The beneficiary has no need to rely upon such a separate obligation. If conforming documents are presented, the bank owes an autonomous duty to the beneficiary to make payment to it at the place designated for payment. The beneficiary’s entitlement is contingent not upon examination of the documents but upon their objective conformity. If the documents are, objectively judged, conforming, then the bank is obliged to pay the beneficiary at the designated place of payment. In the event that it does not do so, then the contractual obligation whose performance is sought in the ensuing judicial proceedings (employing the language used in Shenavai -v- Kreischer [1987] ECR 239 at para 18 on pages 255-6) is the obligation to pay the beneficiary at the designated place of payment.”
12. For CAI, Mr Males QC has attacked those conclusions of the judge on the following basis. He submits that on the true construction of the letter of credit contract, and in accordance with the principles on which Article 5(1) is based, the `obligation in question’ was the bank’s obligation to examine and take up conforming documents, which obligation was to be performed in Switzerland (`at our counters in Geneva’). He submits that the bank’s obligation following receipt of conforming documents in Geneva, to pay `as per your instructions’ was dependent on and no more than secondary to that principal obligation. That being so, he relies upon the judgment of the European Court of Justice in Shenavai -v- Kreischer, para 19:
“… in a particular case of a dispute concerned with a number of obligations arising under the same contract and forming the basis of the proceedings commenced by the plaintiff … it will be the principal obligation which will determine …. [the Court’s] jurisdiction.”
He cites also the approach of the House of Lords in Union Transport -v- Continental Lines [1992] 1 WLR 15 and the references in the judgment of Lord Goff of Chievely to the “more fundamental obligation” and “the real ground of complaint”.
13. Mr Males also submits that such a conclusion gives proper weight and effect to UCP 500 and the various articles within it which condition the bank’s obligation to pay upon the proviso that the stipulated documents are presented, as well as emphasising the need for examination of such documents to ascertain whether they comply with the credit.
14. Mr Males referred us to the decision in Bank of Baroda -v- Vysya Bank [1994] 1 Lloyd’s Rep 87 in which, for the purposes of Article 4 of the Rome Convention on governing law, Mance J held that the performance which is characteristic of the contract of a letter of credit is the acceptance of conforming documents at the place of presentation, observing in that context that the place of payment under the credit is generally insignificant. Whilst acknowledging that the decision in that case was concerned with a different test, Mr Males relies upon it (a) as recognising the importance to banks and beneficiaries of a simple and clear test, a consideration which he submits is also applicable to 5(1) of the Brussels Convention, (b) as demonstrating that the principal matter with which such a contract is concerned is the presentation and acceptance of documents and (c) as demonstrating that to hold that the relevant obligation for the purposes of Article 5(1) is that of payment would mean that in many letter of credit cases there would be no substantial connecting factor between the dispute and the forum of the court called upon to hear it, contrary to the broad principle underlying Article 5(1) that a close connecting factor should be present to establish the special jurisdiction provided for: see Shenavai -v- Kreischer at para 18 and Martin Peters Bauunternehmung GmbH -v- Zuid Nederlandse Aannemers Vereniging [1993] ECR 987 at paras 9-11.
15. Forceful as Mr Males’ submissions have been, I do not consider that they can succeed. In the Kleinwort Benson case at p.164E-G Lord Goff stated:
“(4) It follows that, in order to identify the relevant court, it is necessary first to identify the obligation in question. This was made plain in Ets. A. de Bloos s.p.r.l. -v- Societe en Commandite Par Actions Bouyer … in which the European Court of Justice held, at p.1508, para. 11, that the word “obligation” in article 5(1) refers to “the contractual obligation forming the basis of the legal proceedings.”
16. The Court of Justice subsequently affirmed that “the obligation”
“cannot be interpreted as referring to any obligation whatsoever arising under the contract in question, but is rather that which corresponds to the contractual right on which the plaintiff’s action is based:”
See Custom Made Commercial Limited -v- Stawa Metallbau G.m.b.H. (Case C288/92) [1994] ECR 1-2913 2957 (para 23).”
See also the observation of Lord Clyde at p.181C:
“Moreover the reference is to `the obligation in question’. That is a reference not to the contract but the obligation which is at the heart of the dispute.”
17. The claim in this case is based on the contractual right of Chailease to be paid, conditional on presentation of conforming documents prior to expiry of the credit. Where a claim is based upon failure to pay money, the obligation in question is the obligation to pay the money, and the place of payment is the place of performance for the purposes of Article 5(1): see the Custom Made Commercial case referred to by Lord Goff at paras 23 and 29; see also Briggs: Civil Jurisdiction and Judgments (2nd ed) 1997 paras 2.136-137.
18. It seems to me that the attempt of Mr Males to characterise the obligation of CAI to accept the conforming documents as the principal obligation, with payment merely dependent upon (and therefore secondary to) it, must fail. It certainly does not seem to me that he can derive assistance from the Bank of Baroda -v Vysya.. The test for ascertaining the jurisdiction with which the contract has the closest connection for the purposes of the Rome Convention, which was at issue in that case, is a different test for a different purpose from that under Article 5(1) of the Brussels Convention. In the Custom Made Commercial case, the European Court of Justice considered, and expressly rejected, the argument that Article 5(1) does not apply to the place of performance of a payment obligation because so to apply it would confer jurisdiction on a court which otherwise had no connection with the dispute.
19. So far as the obligation of CAI to examine and take up documents is concerned, Chailease do not sue or otherwise base their cause of action upon an allegation of breach of that obligation; they base it simply upon the refusal to pay. As Mr Page put it in argument, provided CAI pays under the letter of credit, it is a matter of complete indifference to Chailease whether it takes up or examines the documents. It is the failure to pay which is `the real ground’, if not the only ground, of Chailease’s complaint.
20. In Shenavai -v- Kreischer the European Court of Justice was concerned with contracts of employment, which it was acknowledged (at para 16 of the judgment) differ from other contracts by virtue of `certain particularities’, on account of which the court best suited to resolve disputes under such contracts is the court of `the place in which the characteristic obligation of such contract is to be performed’. However, the Court stated
“17. When no such particularities exist, it is neither necessary nor appropriate to identify the obligation which characterizes the contract and to centralize at the place of performance thereof jurisdiction, based on place of performance, over disputes concerning all the obligations under the contract. The variety and multiplicity of contracts as a whole are such that the above criterion might in those other cases create uncertainty as to jurisdiction, whereas it is precisely such uncertainty which the Convention is designed to reduce.
18. On the other hand, no such uncertainty exists in most cases if regard is had solely to the contractual obligation whose performance is sought in the judicial proceedings. The place in which that obligation is to be performed usually constitutes the closest connecting factor between the dispute and the court having jurisdiction over it; it is this connecting factor which explains why, in contractual matters, it is the court of the place of performance of the obligation which has jurisdiction.” (emphasis added)
I have emphasised the word `usually’ because it seems to me clear that the Court was there explaining the broad rationale for the special jurisdiction rule in Article 5(1), rather than indicating that it is necessary in all cases that the obligation sued on should be demonstrably the closest connecting factor. Thus, it also seems clear to me that, following the decision in Shenavai -v- Kreischer, in contract cases other than those concerning contracts of employment it is neither necessary nor appropriate to identify the obligation which characterises the contract, but rather to identify the contractual obligation of which performance is sought (in this case payment).
21. Nor do I think that various articles of UCP 500 referred to by Mr Males carry the matter further. Article 9(a) provides:
“An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with:
(i) if the Credit provides for sight payment – to pay at sight;
(ii) if the Credit provides for deferred payment – to pay on the maturity date”
22. Article 10(b)(i) provides:
“Presentation of documents must be made to the Issuing Bank or Conferring Bank, if any, or any other Nominated Bank.”
23. Both articles demonstrate that there is a condition precedent to the beneficiary’s right to payment (namely presentation of the stipulated documents), but neither is framed in terms of an obligation owed to the beneficiary to deal with the documents in a particular way.
24. Article 13(a) provides that:
“Banks must examine all documents stipulated in the credit with reasonable care, whether or not they appear on their face, to be in compliance with the terms and conditions of the Credit.”
25. Insofar as this provision imposes an obligation, it seems to me that it is at least primarily an obligation owed to and protective of the issuing bank’s customer rather than the beneficiary (c.f. the view of Parker J. in “The Lena” [1981] 1 Lloyd’s Rep 68 at 78). Even if it be right to regard it also as an obligation owed to the beneficiary, it is yet one in respect of which the remedy is a claim for payment in accordance with the issuing bank’s undertaking rather than a claim for damages for breach of the obligation properly to examine the documents.
26. Article 14(b) provides:
“Upon receipt of the documents the Issuing Bank … must determine on the basis of the documents alone whether or not they appear on their face to be compliant with the terms and conditions of the Credit. If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such bank(s) may refuse to take up the documents …”
Subsequent provisions in Article 14 provide for various steps to be taken by the issuing bank, all within the period of seven days from receipt of documents, including the requirement to give notice of refusal to the beneficiary. Again the same comment arises as in respect of Article 13(a).
27. Although it is clear that, in providing a code in respect of the procedures, responsibilities and liabilities of the various parties to a Letter of Credit, UCP 500 lays down a number of detailed requirements for the examination of documents and the determination whether or not they are discrepant, it does nothing to erode the undertaking of the issuing bank to make, and the interest of the beneficiary to claim, payment under the terms of the credit, that being the obligation the performance of which is sought in the proceedings brought by the beneficiary. Accordingly, it seems clear to me that the obligation in question in these proceedings is the obligation to make payment under the credit.
Where was the place of performance of the obligation in question?
28. As already made clear, it was the case for Chailease below that the place of performance was London as the place of payment called for by Chailease upon the occasion of the third presentation, the obligation of CAI being to `pay you as per your instructions’. That point was conceded by CAI, the judge recording in his judgment that:
“It was common ground before me that the Plaintiff was contractually entitled under the letter of credit both to require payment in London and to make that request on the third presentation by way of revision of its requirement under the first two, rejected, presentations. It was accepted that the letter of credit gave to the beneficiary a completely unfettered choice as to the place at which payment should be effected by the defendant.”
29. Upon this appeal, Mr Males for CAI, sought to withdraw that concession and to argue as follows. He submitted that, on a true construction of the credit, the place for performance of the payment obligation was Switzerland. He argued first that the statement that the letter of credit was `available by payment at sight … against presentation of documents ..’ coupled with the later undertaking that `upon receipt at our counters in Geneva of documents … we shall pay you …’ were sufficient to make clear that Geneva was the place for payment; second, that the additional words `as per your instructions, value two Geneva/New York bank working days’ were essentially surplusage so far as payment was concerned or, at best, an indication of willingness to effect payment in whatever precise manner or by whatever route Chailease might request. In the alternative, he submitted that the reference to payment as per Chailease’s instructions meant that the place of the obligation in question could not be ascertained from the terms of the contract itself, and that, since it was dependent on the subsequent conduct of the party seeking to enforce the obligation in question, it was a `floating’ place of performance, unamenable to the application of Article 5.1 of the Brussels Convention.
30. Mr Page, for Chailease, objected to the withdrawal of CAI’s concession before the Judge on the ground that, had the action not proceeded from the start upon the uncontested assertion by Chailease, and later upon concession by CAI, that Chailease were at liberty to choose the place of payment and/or to stipulate for payment in London, Chailease would have proffered evidence of banking practice as to the implication of the provision for `value two Geneva/New York Bank working days’. It does not seem to be necessary in the circumstances of this case to rule upon Mr Page’s objection. I say that for the following reasons.
31. It seems clear to me that the words `available for payment on sight …. against presentation of documents’, represent no more than a compliance with Article 10(a) of UCP 500 which provides that all credits must clearly indicate, inter alia, whether they are available by sight payment or by deferred payment. In the ordinary way, a sight payment credit provides for payment against presentation of documents, whereas a deferred payment credit provides for payment at a future date calculated in accordance with the formula set out in the credit: see generally Brindle and Cox: Law of Bank Payments (2nd Ed.) paras 8-32 to 8-34. The words quoted above, together with the complementary words `upon receipt at our counter in Geneva we shall pay you …..’ are in my view directed to the time at which the obligation of payment arises (i.e. immediately, and not upon a deferred basis), and are not intended to specify the place of payment, as to which the subsequent words `as per your instructions value two Geneva/New York Bank working days’ are apt and intended to apply. In the absence of evidence of banking practice to the contrary, I would construe those words as contemplating that the place for payment (which was to be in dollars) was at the option of Chailease and to be stipulated in their instructions at the time of presentation of documents to CAI at Geneva, the provision for `value two Geneva/New York Bank working days’ being designed to allow for a sufficient time to cover the international transfer of dollar funds from Geneva to the place of payment, bearing in mind that variations in international banking hours and the necessity for an electronic transfer or other instruction to be transmitted across a time zone might well result in the arrival of such an instruction after the close of business of the receiving bank. Thus, I consider that Chailease was contractually entitled to nominate London as the place of payment and that CAI was obliged to make payment there, subject to the presentation by Chailease of conforming documents.
A `floating’ place of performance.
32. Mr Males’ argument that, for Article 5(1) of the Brussels Convention to apply, `the place of performance of the obligation in question’ must be ascertainable from the contract itself is based not upon any words contained in the Article, but on his submission that the general principles underlying the Brussels Convention in a number of respects necessitate such a construction. First, he submitted that, because Article 5(1) is in derogation from the basic principle of jurisdiction set out in Article 2 it should be construed restrictively. Second, he submitted that the construction for which he argued would promote legal certainty in accordance with the general aim of the Convention that the rules for allocation of jurisdiction should be precise and clear. In this respect he quoted the decision in Jakob Handte -v- Traitements Mecano-Chimiques des Surfaces [1992] E.C.R. 1-3967, para 18:
“The objective of strengthening legal protection of persons established in the Community, which is one of the objectives which the Convention is designed to achieve, also requires that the jurisdictional rules which derogate from the general principle of the Convention should be interpreted in such a way as to enable a normally well-informed defendant reasonably to predict before which courts, other than those of the state in which he is domiciled, he may be sued.”
See also Mulox v Geels [1993] E.C.R. 1-4075, para 11. Mr Males submitted that the judge’s decision rendered it impossible for CAI as defendants to ascertain or take advice at the time the contract was made as to where proceedings might be brought for breach of the payment obligation under the contract.
33. Third, he submitted that to require that the place of performance be ascertainable from the contract itself rather than dependent on the unfettered choice of one party, would properly ensure that litigation did not take place in a country having little or no connection with the dispute, contrary to the decision in the Martin Peters case which stated (at para 11) that the principle underlying Article 5(1) is that there exists `a particularly close connecting factor between a dispute and the court which may be called upon to hear it’.
34. Fourth, Mr Males submitted that such a requirement would prevent the vice of a beneficiary seeking to designate a place of payment which would offend the decision in MSG -v- Gravieres Rhenanes [1997] E.C.R. 1-911 para 31 to the effect that:
“Whilst the parties are free to agree on a place of performance for contractual obligations which differs from that which would be determined under the law applicable to the contract without having to comply with specific conditions as to form, they are nevertheless not entitled, having regard to the system established by the Convention, to designate with the sole aim of specifying the courts having jurisdiction, a place of performance having no real connection with the reality of the contract..”
35. Finally, Mr Males relied upon an observation of Lord Clyde in Kleinwort Benson -v- Glasgow City Council [1999] 1 AC 153 at 184F to the effect that, for the purpose of invoking Article 5(1):
“.. there must be an identifiable place of performance.”
36. I shall deal with the last point first. The remark of Lord Clyde referred to was stated to be based on an observation of Lord Maxwell in the case of Bank of Scotland -v- Investment Management Regulatory Organisation Ltd. [1989] S.L.T. 432 at 445 in relation to the provision in paragraph 2(2) of Schedule 8 to the 1982 Act, corresponding to Article 5(1). In that case the Bank of Scotland sought, in the courts of Scotland, judicial review of certain decisions of IMRO, the registered office of which was in London and of which the Bank was a member and therefore bound by its rules. The Bank having submitted to IMRO an application for waiver of one of its rules, such waiver was refused and the Bank sought judicial review and reduction of IMRO’s decisions. The Bank maintained that the rules under which the decisions were made were contractual in nature and the performance of the contractual obligation in question took place in Scotland, so that the Scottish court had jurisdiction under rule 2(2). The court held that rule 2(2) was concerned with contractual obligations for which a particular place or particular places of performance was or were provided expressly or by implication and that in the instant case the contract did not provide for a particular place of performance. Having described the peculiarities of IMRO’s position and modus operandi and observed that, if anywhere, the more probable place of performance was London, Lord Maxwell observed:
“…I did not understand it to be suggested that the Board had in fact considered and decided on the Petitioner’s application in any particular place…If they are unable to identify the place and performance of the obligation in question, in my opinion they cannot rely on rule 2(2).”
37. The context in which that remark was spoken does not seem to me to assist in this case. It is clear, however, that at the outset of his judgment Lord Maxwell made clear that he agreed with the opinion of Lord Dunpark who stated at 442 that:
“The rule requires the contract to specify either expressly or by implication, where the place of the performance is.”
See also the judgment of Lord Morrison at 443:
“Secondly, the wording of rule 2(2) assumes that the proceedings are based on an obligation for which there is provided a place of performance, whether expressly or by implication.”
38. Whenever a question arises under Article 5(1), once the `obligation in question’ has been determined, a question arises as to what law determines its place of performance. Although Article 5(1) is silent on the question, the European court has held on several occasions that the place of performance of the obligation in question is to be determined by the law governing that obligation according to the conflict rules of the National Court seised: see Industrie Tessili Italiano Como – v – Dunlop A.G. [1976] ECR 1473, para 13; also the Custom Made Commercial case (above) at para 26 and Leathertex Divisions Sinetici -v- Bodetex BVBA (Case C-420/97) (1999) CLC 1976 at para 33.
39. It will frequently be the case in international contracts under which payment falls due as between parties who reside in different jurisdictions, that the contract is silent upon the question of the due place of payment e.g. in sale of goods cases, in which the normal English rule applied is that, in the absence of contrary implication, the debtor must seek out his creditor, whereas in countries such as France and Germany the normal rule is that the place of payment is the debtor’s address. In such cases and, as it seems to me, in the instant case which concerns the due place of payment under a documentary credit, the court does not abdicate from its task of ascertaining the due place for payment according to the apparent intention of the contract (i.e. `expressly or by implication‘). In the course of that task, the Court may and, in my view, should have regard to any subsidiary agreement by the parties in that respect or to the outcome of any machinery or method for subsequent determination of the place of payment which is anticipated and/or permitted within the terms of the contract. If by those terms, the parties anticipate that the place for payment may be determined at the option of one party and subsequently communicated in instructions to the other, then there seems to me no convincing argument of principle or policy why the rule of jurisdiction in Article 5(1) should be treated as inapplicable, simply because the parties have agreed that the crystallisation of the obligation as to the place of payment be postponed in that manner. That certainly seems to me to be the position under English law. Mr Males pointed out in argument that it is probable that under English Conflict of Law rules the applicable law of the letter of credit contract is not English but Swiss law. That may well be so. However, as there is no evidence before the court that application of Swiss law would give rise to any different result, that point does not require further consideration.
40. Further, I do not think that the statements of principle quoted by Mr Males from various decisions of the European Court are offended by such an interpretation. First, while Article 5(1) is indeed a derogation from the basic principle of jurisdiction in Article 2, it is one which has been clearly and forcefully recognised as desirable and justifiable in the interests of certainty, although it is recognised that in individual cases it may give rise to a result which is contrary to the policy generally underlying Article 5, namely to allot jurisdiction to a court having a close connection with the facts of the dispute: see the Custom Made Commercial case at paras 13-22.
41. Second, whilst I would accept the broad sweep of the passage quoted from the decision of the European Court in Jakob Handte case, its context is important, namely a dispute in which the sub-buyer of goods which he had purchased from an intermediate seller sought to bring an action against the original manufacturer for damages on the grounds that the goods were not in conformity with the purchase contract, the issue being whether (as the sub-buyer asserted) the action involved `matters relating to a contract’ in a situation where there was no contractual relationship between the parties. The court emphasised (at para 16) that the jurisdictional rules which derogate from Article 2 must not lead to an interpretation beyond the situations envisaged by the Convention, prior to making its observation about the need for a normally well-informed defendant reasonably to be able to predict before which court or courts he may be sued. The court then went on to observe (para 19):
“However, in a situation such as that with which the main proceedings are concerned, the application of the special jurisdictional rule laid down by Article 5(1) of the Convention to an action brought by a sub-buyer of goods against the manufacturer, is not foreseeable by the latter and is therefore incompatible with the principle of legal certainty.”
It is thus clear that the Jacob Handte case was concerned with the broad question of whether or not contractual obligations were involved, and hence whether Article 5(1) was applicable at all, and not with a case where (as here) the terms of the contract itself rendered it foreseeable that the place of payment, and hence the locus of any proceedings in respect of non-payment, would be uncertain until receipt of the beneficiary’s instructions.
42. Third, it is true that a requirement that the place of performance be ascertainable from the terms of the contract itself, rather than being dependent upon the subsequent exercise of an option or choice as to place of payment, would generally prevent choice of a place of performance which had no connection with the contract. However, that seems to me no more than another way of putting the argument which did not prevail in the Custom Made Commercial case, i.e. that the criterion of the place of performance may in certain cases have the effect of conferring jurisdiction on a court which has no connection with the dispute.
43. Fourth, I accept that it is in principle correct that a term conferring the choice of place of payment upon the beneficiary may enable him to exercise such choice with an eye to founding jurisdiction in the event of non-payment. Further, it was decided in the case of MSG v Gravieres Rhenanes [1997] E.C.R. 1-911 at 1-946 that:
“The Convention of 27 September 1968 must be interpreted as meaning that an oral agreement on the place of performance which is designed not to determine the place where the person liable is actually to perform the obligations incumbent upon him, but solely to establish that the courts for a particular place have jurisdiction, is not governed by Article 5(1) of the Convention, but by Article 17, and is valid only if the requirements set out therein are complied with.” (emphasis added)
44. However, there is no evidence before the court that the choice by Chailease of London as the place of payment was made solely to establish that the English courts should have jurisdiction in the sense dealt with by the European Court in that case. The key words in the passage quoted which enabled the court to find that the agreement in that case was made solely to establish jurisdiction, was the finding that what was characterised as an oral agreement on the place of performance was designed not to determine the place where the person liable is actually to perform the obligations incumbent upon him. In this case, as the judge held, given that the plaintiff was contractually entitled to nominate London as the place of payment because the contract contemplated payment in accordance with such instructions as Chailease might give, those instructions when given (whatever the motive underlying them), were indeed designed to determine the place where CAI was liable to perform the obligation of payment; thus we are not here concerned with the effect of what was no more than a `deeming’ provision of the kind before the court in the MSG case. In this case, on the nomination of London as the place of payment, an actual or direct connection was created between the dispute and the English court, if called upon to determine it, of a kind that was absent in the MSG case (see para 34). As stated by Saville L.J. in Boss Group Ltd v Boss France S.A [1996] 4 All E.R. 970 at 977:
“The charge of forum shopping can only be made good by assuming that a party which takes advantage of the Convention exceptions to the general rule of domicile is somehow doing something illegitimate; but that assumption cannot be sustained if in truth one of the exceptions is applicable.”
45. In my view, the gravamen of Mr Males’ argument is a charge of forum shopping, which I do not find to be made out. I should add that it was Mr MaIes’ `fallback’ position that, even if the court was inclined to reject his submission that a `floating’ place of performance, in the sense of a place of performance unidentified in the contract but left to the subsequent nomination of one of the parties, renders the provisions of Article 5(1) inapplicable, that question should nonetheless be referred to the decision of the European Court. Since it seems to me clear, for the reasons stated in paragraphs 40-44 above, that Mr Males’ submission is incorrect, I do not consider it necessary or appropriate for the court to make such a reference. I would therefore dismiss the appeal under the First Issue.
THE SECOND ISSUE
46. Having come to his conclusion upon jurisdiction and dismissed the application of CAI under Order 12, r.8, the judge proceeded to give summary judgment upon the application of Chailease under Order 14, on the grounds that CAI had failed to demonstrate that the documents presented did not conform with the terms and conditions of the letter of credit.
47. In my view the judge was right to do so. The argument of CAI depends simply upon the fact that, whereas the letter of credit stated that it was in respect of a sale agreement for delivery during 17-20 August 1998, the acceptance and bill of sale presented stated that delivery had been made on 21st August 1998. Mr Males’ submitted that, on a true construction of the letter of credit contract, the acceptance of sale document (which was expressly required by the credit to state date and time of actual delivery) was required to state a date within the period 17-20 August, as also was the bill of sale. In my view that submission is incorrect.
48. There are, of course, two broad grounds upon which documents presented under a documentary credit may be rejected on grounds that they are discrepant. The first is that they do not, on their face, comply with the terms and conditions of the credit (as to which a strict test is applied), the Bank, save in cases of fraud, being solely concerned to ensure that the documents correspond with the description required in the letter of credit and not with the details of the underlying transaction between buyer and seller. The second is that, upon examination of the documents presented, they appear to be inconsistent with one another. As provided in Article 13 of UCP 500:
“Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the credit.”
49. So far as the first ground is concerned, it is plain that in this case each of the individual documents presented was on its face compliant with the requirements of the credit. The letter of credit does not state that the documents, and in particular the acceptance of sale and bill of sale, have to show that the vessel has been delivered within any range of dates, in particular the period 17-20 August. As the judge observed, if it had been intended that the Bank was obliged to pay only against documents showing that delivery of the vessel had been effected by a particular date, that could readily have been provided for. Nor, commercially, was there any good reason to require more than was in fact specified. There was, on the other hand, an obvious reason for the credit to provide that the actual date be shown, because payment of the first and second tranches due under the credit was to be 10 and 50 days respectively after delivery. Assuming that the buyers accepted delivery of the vessel pursuant to the sale agreement (demonstration of which was no doubt the substantial reason for requiring presentation of a formal notice of acceptance), the fact that it was a day or so later than the delivery date provided for in the sale agreement would commercially be neither here nor there.
50. Mr Males did not advance any argument that the documents presented were inconsistent as between themselves. However, he sought to rely on Article 37 of UCP 500, which deals with Commercial Invoices, and which in paragraph (c) provides:
“The description of the goods in the commercial invoice must correspond with the description in the Credit. In all other documents, the goods may be described in general terms not inconsistent with the description of the goods in the Credit.”
51. Mr Males did not take any point concerning the commercial invoice which was in fact presented by Chailease; he could not, because the letter of credit did not call for delivery of any such invoice. However, he relied on the second sentence of paragraph (c) and asserted that, by reason of the delivery date given in the documents presented, there was a description of the vessel which was inconsistent with the description of the vessel in the credit. The judge held that, on a true construction of the credit, the words `for delivery in Taipei during 17-20 August 1998′ were not part of the description of the goods. In my view he was right; however, I do not consider that it is necessary to resolve the question. Given that there was ample descriptive information in the acceptance and bill of sale presented which made clear that the vessel delivered and accepted was the vessel the subject of the sale agreement, it does not seem to me that the date of actual delivery stated, i.e. one day beyond the range 17-20 August appearing in the credit, rendered the description of the vessel contained in the documents inconsistent with the description of the goods in the credit. In my opinion, the Judge was right in the decision which he reached on the Second Issue.
52. I would therefore dismiss this appeal.
MR JUSTICE FERRIS: I agree
