ROSS P BUCKLEY* Associate Professor of Law, Bond University and ..... compliance was the appropriate standard to limit of the credit the documents will either ...
POTENTIAL PITFALLS WITH LETTERS OF CREDIT ROSS P BUCKLEY* Associate Professor of Law, Bond University and Visiting Fellow, Faculty of Law, University of New South Wales With
a View
to canvassing
the Γ pnncipal potential problems in advising upon letters of credit, this article considers the following topics: (i) the J Γ . documents of a typical credit
stakes: sharpened bamboo stakes, often poisoned, set mto the bottom for greater effiperspective c a c y F r o m t h e practising lawyer's there are many potential pitfalls in advising u ??n l e t t e r s ° f c r e ^ t a n d a t times the punji stakes are sharp mdeed. This article is about those pitfalls and some steps open to our courts
transaction,
to ameliorate their harshness.
particularly
bills of lading;
(U) the doctrine of strict compliance A l e t t e r o f c r e d i t typically comes into being and the high incidence of noncomplying because an exporter is not prepared to part with documents; (iii) time and procedures for 1 J 8 S o o d s w i t h o u t m a s s u r a ? c e o f payment and _, ι . _ • the importer is not prepared to pay m advance rejection of noncomplying documents; shipment of the goods. The exporter has of (iv) the doctrine of autonomy; and (v) three options. standby credits and the risks in their «. _ _ , Λ y cfc^^c* m m w«^ tioivo mei, First, an exporter may arrange a documentary use. In particular, this article raises collection 1 in which its bank will coordinate w i t h a b a n k two questions. First, is the doctrine of representing the importer to ... -,. _v- . . . exchange the documents of title to the goods for 1
strict compliance effective when in a ^ 6
pr
£ e 2 .-__. i s
common
i y known as D/P
majority of transactions the documents terms: documents against payment. initially tendered are discrepant and, Alternatively, an exporter may arrange export r ,, , . , . insurance from their export credit msurer to secondly, what IS the appropriate de- cover the risk of non-payment for exports made gree of autonomy for Standby credits on deferred payment terms. 3 The major such
given tne ease of perpetrating fraud thereunder?
_^*£_j_%&Af^
federal statutory corporation formed to enhance the competitiveness of Australian exporters. 4 It is self-funding through the insurance premiums Introduction it charges. 5 Most developed countries have a . _ _ ι ι · ,._ n ·__· ι ι similar body. In the United Kingdom it is the A A pitfall is literal y a pit designed and _ ¿ . Guarantee Department, cornconcealed so that people or animals will fall mto £_ ^ ^ as ^ - C G D J it. In many Asian countries it mcludes punji The third option for an exporter concerned *I would like to thank Richard Morris of Deacons, Hong Kong; Ian Murphy of Murphy Podmore and Bernard Wheble, Honorary Chairman, ICC Commission on Banking Technique and Practice, for their helpful comments on earlier drafts of this article. All
responsibility is mine. MARCH 1996
w_th
p a y m e n t risk is to require the i m p o r t e r to ί Λ~^~~ ^C --. Λ ^;Ι-ή T " U ^ U ~ - 4-ν-Λ* *AA*A a l e t t e r ° °f C r e d l t 1 ^ h a S Λ θ . a d d e d advantage i n s o m e c a s e s of i m p o r t i n g a n uu -
b t a m
element of credit into the transaction so that the 217
POTENTIAL PITFALLS WITH LETTERS OF CREDIT
importer has time to pay. The importer would, in this case, approach their bank and ask it to issue a letter of credit on its behalf to the exporter. A letter of credit is an undertaking by a bank to pay a certain sum upon presentation
^^^^^^^^^^^^^^^_^_^_^_^_^mm _C y^g
¡g
a
r
Q00(J practical lOaSOIl tO Seek _• _ _r* • J L
to it of specified documents which comply with
confirmation of a credit issued Dy a
the requirements of the credit. A letter of credit offers two advantages to the exporter. It adds the creditworthiness of a bank to that of the importer and insulates the bank's undertaking to pay from impeachment due to issues in the underlying sale of goods transaction. An ex porter with a letter of credit and the documents called for by it should be able to ship the goods secure in the knowledge that the bank will pay. This article considers some factors which may in practice undermine that assumption.
ίΟΓθίαΠ bank WflICh does not have B hranrh in AiiQtralia Drdliui III HUMidiid
A
typical credit transaction — «-,C/Lo ->ηΛ A*M—>~~I*
the
parties and documents While it is usually the exporter who insists on the security of a letter of credit, it is the importer who will seek the credit from its bank and is therefore called the applicant for the credit. The exporter is the beneficiary of the credit. The importer's bank is known as the issuing bank for it issues the credit. If the issumg bank does not have a branch m the exporter's jurisdiction it will typically appoint a correspondent bank to represent it there in the transaction. 7 This bank is known as the advising bank for it advises the exporter of the terms of the credit. 8 If the beneficiary is not comfortable with the undertaking of the issuing bank either because it does not know the bank or is not satisfied with the bank's creditworthiness or because it wants a bank in its own jurisdiction if litigation becomes necessary, the beneficiary will ask for a confirmed credit. By confirming a credit at the request or upon the instructions of the issuing bank, the advising bank becomes liable on the credit as if it had issued it (while of course acquiring rights against the issuing bank) and it is then known as the confirming bank. These obligations of the confirming bank are in addition to, and not substitution for, the obligations of the issuing bank under the credit.9 218
JJ __^_^_^_^_—^MMMWMMMMMM^MMM In England and Australia, confirmation is usually by a simple sentence to that effect in the letter advising the credit. In the United States of America most confirming banks follow this practice 10 while a few issue their own form of letter of credit directly to the exporter. 11 There is a good practical reason to seek confirmation of a credit issued by a foreign bank which does not
h a y e
a
bra¿h
^
A * s t r a l i a : if U t i g a t i Q n
becomes necessary, the exporter can sue the local confirming bank and avoid all the expense, unpredictability and difficulty of a law suit abroad. 12 ^^^^^^^^^^^^^^^^^^^^^^^^™ Cί J h e document ITIOSt HkelV tO COIltain . , ' - . ,. pitfallS IS the Dili Of lading JJ __^__^__^__^__^__^________^_______^___|__________¡ The exporter, having been advised of the credit, will proceed to ship the goods making sure in the process that it acquires the documents required under the credit. These documents would typically include a bill of lading (or sea waybill or air waybill), commercial invoice, insurance certificate, certificate of inspection, packing list and, in some cases, a certificate of origin of the goods. The document most likely to contain pitfalls is the bill of lading to which we now turn, A bill of lading serves three functions. If in negotiable form, it is a document of title to the goods — the goods will typically only be THE AUSTRALIAN LAW JOURNAL— Volume 70
ROSS P BUCKLEY
delivered by the carrier against surrender 13 of the original bill of lading. 14 — It is evidence of the contract of carriage for the goods and specifies such terms as the description and quantity of the goods, the name and ports of departure and destination of the vessel, and who is to pay for freight and insurance. Finally, the bill of lading serves as a receipt for the goods. _^_^_^_^_^_^_^_^_^_^_^_^_— ^^^^^^^^^^^^^^^^^^^^^^^^ i i the transfer Of a hill Of ladina t r a c e r s
me iransier οι a DUI OT iamng iransrers title ¡Π the gOOdS . . . and Constructive
Accordingly, if a bank is to avoid registration of its interest in the goods its security needs to be by way of a pledge and only bills of lading allow a pledge without physical possession of the goods. 18 It is here that we encounter the first potential pitfall for there are certain bills of lading and other title documents which are not negotiable documents of title able to support a pledge. For a bank to have an effective security in the goods, the bill of lading must be an order bill, one which permits delivery to "the order of" Üie consignee. A bill which only provides for a s p e c i f i c c o n s i g n e e i s k n o w n a s a strai
g h t bill. As
it is not negotiable the bank cannot obtain a
possession of those goods
s cured
Γ
straight bill unless the bank is the named consignee. Straight bills are very rarely seen in practice outside the United States except for goods paid for in advance. 1 9
Ό
' ' Bills of lading are unique in our legal system as the transfer of a bill of lading transfers title in
the goods to which it relates and constructive 15
possession of those goods, that is, the delivery of a bill of lading constitutes symbolic delivery of the goods. 1 6 This aspect of a bill of lading is central to the usual security of the issuing bank for the letter of credit facility. The letter of credit agreement between the applicant and the issu ing bank will typically provide that the documents of title and the goods themselves will be pledged to the bank upon the documents of title coming into the bank's possession. A pledge is a possessory security. It is therefore only possible for a bank to be secured when the goods are in transit because the bank is deemed to have constructive possession of the goods when it receives the bill of lading. A pledge of a bill of lading effects a pledge of the underlying goods. 1 7 These transactions occur with great rapidity and registration of the bank's secured interest under the Corporations Law would be completely unworkable. Accordingly, the Corporations Law affords an exemption from registration in s 262(2)(b) and (c). However, this exemption is limited to " a pledge of personal chattel" and a "charge created in relation to a negotiable instrument or a document of title to goods, being a charge by way of pledge, deposit, letter of hypothecation or trust receipt", MARCH 1996
f
**fest * *? s ° o d s , * * s " b i e c t
of
*
// .
. .
,.„
Waybills represent an entirely different SVSteiÎl ίθΓ the transfer Of title and MM©'*« Λ* «ΛΛ^Ο pOSSeSSIOn OT gOOOS. JJ MMWMM^MMWMMM^MMMMMMWMMM^MM On the other hand, air waybills and sea waybills are often seen in practice. 20 Waybills represent an entirely different system for the transfer of title and possession of goods. To take delivery of goods carried under a waybill it is not necessary to have possession of the waybill, All that is required is that the party collecting the goods identify itself as the consignee named in the waybill. 21 Waybills were developed initially in rail transport in Europe. They are used today in air transport (and often in shipping across Bass Strait and the Tasman Sea) as otherwise there may be no sure, convenient way to get the bills of lading to the importer before arrival of the goods. Sea waybills may look like bills of lading but they are not documents of title and not negotiable by delivery. Accordingly, for a bank to have a security in goods when either an air waybill or non-negotiable sea 219
POTENTIAL PITFALLS WITH LETTERS OF CREDIT
waybill is used it is necessary for the bank to be named as the consignee. The bank can then release the goods to the applicant upon payment or under the security of a trust receipt — a document which provides that the goods have been released to the importer as agent of the bank upon condition that the importer will hold the goods and any proceeds of sale upon trust for the bank and not mix the proceeds of sale with any other funds.22 ^_^_^_^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^^^^^^^^^^^^^^ __
The doctrine of strict compliance produces a practical paradOX . ^^^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^^^^^^^^^^^^^^^^ The third potential pitfall also concerns bills of lading. Most credits will require "clean, onboard" bills of lading. 23 The term "on-board" is explained below and should pose no particular difficulties. "Clean" is another matter A clean bill of lading is one that bears no clause or notation which declares a defect in the goods or the packaging." The Hague Rules require the carrier to issue a bill of lading which states the apparent order and condition of the goods"," the Hamburg Rules require that the apparent condition of the goods * be noted^As the bill of ading serves as the receipt from the carrier that the goods have been received in good condition, if that is not the case the carrier wi indorse the bill it issues with words to the effect that the goods when received were m broken or split packaging or were not m apparent good order and condition.- This is a rea di ficulty for the exporter whose goods (or at least their packaging) are damaged in transit to the vessel as the advising bank should reject a bill of lading bearing any clause or notation 28 unless the specific clause or notation has been expressly permitted under the credit. There are a number of other types of bills of lading. In negotiating the terms of the credit, exporters will typically seek to be able to tender a "received-for-shipment" bill of lading which they can obtain when the goods are on the relevant wharf and under the control of the 220
carrier. This enables early presentation of the documents and the potential opportunity, upon learning of any discrepancies, to either remedy the discrepancies in the documents or retrieve the goods prior to shipment. Importers will seek an "on-board" bill of lading which as its name implies certifies that the goods have been loaded on the vessel.29 "On-board" bills of lading are more common and the credit should specify which type is required. If the credit fails to so specify and is subject to the Uniform Customs and Practice for Documentary Credits (UCP),30 Art23(a)(ii) thereof requires an onboard biU of l a d i n
s
The
fourth potential pitfall concerns charterparty bills of lading. Unless expressly permitted by the terms of the credit these are not acceptable 31 for, in the event of unpaid charter fees, the owner of the vessel may have a claim over the goods on board in priority to the bank's secured interest and, furthermore, the carriage of certain goods or the carriage to certain ports may be prohibited under the charter.32 L e t t e r s o f c r e d i t a r e d o c u m e n t a r y transactions _ the bank tíes are concerned with the t e n d e r e d d o c u m e n t s n o t m e underlying goods e s e n t e d b y m o s e documents.* This has led * ^ ^ 0 l a m e n t a i p r i n c i p i e s of the law of documents tendered must letters of credit: ^ , s t r i c ü w i t h m e t e r m s of ^ 6 c r e d i t ^ d ^ i t obligation is entirely autonomous Λ β ____,,» m s a l e s t r a n s a c ' t i o n . χ ^ a r e f r o m ^ §,e d o c t r i n e s o f s t r i c t c o m . c o m m o n l c a l l / d ___ · ¿u ioo_ ΛΛ Λ A 1 0 M r u TTr * d d e d to * * 1 J ^ rf ^ ( YCP J ? * * l " \ * e v i s l o n ° f f e r s ***** *?f f r o m * e n S o u r ° f ? e doctrme of strict compliance and, de P e n d m g upon judicial interpretation of its T ^ ' S ° * ?T 1 ^ ? T ; P r o v i d e f * 3 Ϊ 7 ^ l·?™ ™d Customer in Australia (The % « L a w B o o k C o L t d ' S ^ n e ^ l o o s e l e a f service), par 12,801 and the other cases cited there. Weaknesses arise with trust receipts if the goods are processed or otherwise used in manufacture or i f t h e g o o d s a r e s o l d a n d m e proceeds of sale are mixed with other funds. In either case the bank has only an in personam action against the applicant. 23 A t c o m m o n law "when a credit calls for bills of circumstances it means clean l a d i n g / i n n o r m a l bills of lading": British Imex Industries Ltd ν Midland Bank Ltd [1958] 1 QB 542 at 551 per Salmon J. 24 S 6 6 t h e definition of "clean" in UCP, Art 32(a) and i n B r i t i s h l m e x industries, ibid, and in M Golodetz & Co v Qzarnïkow-Rionda [1980] 1 WLR 495. 25 χ η θ Hague Rules, Art III, r 3. „___,__ , ' '.,A 26 T h e Hamburg Rules, Art 15.
Baxter, International Banking and Finance Law (Carswell, Toronto, 1989), ρ 18. See the confirmed credit reproduced as Appendix G to Letters of Credit and Bankers' Acceptances 1988, Commercial Law and Practice Course Handbook Series No 450 (Practising Law Institute, 1988). This is a curious practice for it exposes the confirming bank to any differences between the fine print in its standard letter of credit and the letter of credit from the issuing bank under which it will be seeking reimbursement. If an international law suit proves necessary it will then be brought by the local confirming bank against the issuing bank.
13 Bills of lading are traditionally issued in sets and state how many originals have been issued in the set. The more desirable and efficacious practice is to issue a sole original bill of lading and a preference for sole bills (or full sets of 1/1) is now enshrined in UCP, Art 23(a)(iv). 14 Gronfors, "The Paperless Transfer of Transport Information and Legal Functions", in Schmitthoff and Goode (eds), International Carriage of Goods: Some Ugal Problems and Possible Solutions (Centre for Commercial Law Studies, London, 1988), ρ 27. 15 The Prince Adalbert [1917] AC 586 and E Clemens Horst ν Biddell Bros [1912] AC 18. 16 Baxter, op cit η 9 ρ 7 17
19
20
21
While this is probably not a true trust relationship but an amalgam of trust, agency and bailment, it is moderately effective: see Re David Allester Ltd I1922I Z
Relattn
2
C h t0
21
\
B
a n d
nker
2? T h i s
A e c a r r i e r ™^α(?'/°5 w ] * ? u t 5 ^ * d a T notation it will be liable for failing to deliver the S°°ds i n S°°d c o n d l t i o n · 28 Pursuant to UCP, Art 32(b) (for credits in which the UCP has been incorporated by reference), 29 ^ H e d l e y / BiUs of Exchange and Banters' Documentary Credits (Lloyd's of London Press Ltd, London, 1986), pp 221-222. 30 U C P i s a set of standard terms for letters of credit promulgated by the ICC, Paris. UCP is the worldwide standard and only applies to a credit if explicitly incorporated by reference in the credit. The latest revision was in 1993, came into effect on * J a n u a r y 1994 and is contained in ICC Pub o r
See generally ANZ Banking Group Ltd ν Curlett, Cannon and Galbell Pty Ltd (1992) 10 ACLC 1,292 and Aitken, "Lien, Pledge or Charge? — Registrability Under the Corporations Law" (1993) 4 JBFLP 83.
_ , . _ T ^„ A „_, w .x ... reflected in UCP, Art 23(a)(vi) which provides that unless otherwise stipulated a bank "contains no w i l l a c c e p t a b i l l o f l a d i n g w h i c h indication that is subject to a charterparty". See also Art 25, a new Article in the recent revision of regulates the use of charterparty bills U C P / w h i c h of lading.
O'Hanlon, "Documentary Collection and Letters of Credit" in Bradlow (ed), International Borrowing— Negotiating and Structuring International Debt Transactions (2nd ed, International Law Institute, Washington DC, 1986), ρ 261. The recent revision of the UCP has two entirely new Articles on point. Article 24 governs the use of non-negotiable sea waybills and Art 27 governs the use of air transport documents. Gronfors, op cit η 14, ρ 29.
32 O'Hanlon, op cit η 19, ρ 259. „„ _ „ . ' , . _. TTA_„ ' ^ See UCP, Art 4: in credit operations the parties concerned deal with documents, and not with S o o d s · · · t o w h i c h t h e documents may relate. M S e e t e x t a r o u n d footn otes 4 5 a n d 4 7 o f m i s article35 Equitable Trust Co of New York ν Dawson Partners (1927) 27 LlL Rep 49 at 52 per Viscount Sumner, Ltd ν Hambro's Bank Ltd [1945] 1 KB 3 6 j H R a y n e r & Co 36.
Official Assignee of Madras ν Mercantile Bank of India [1935] AC 53 at 58 per Lord Wright.
234
„ __„
31 T h i s
i s
,
a l s o
THE AUSTRALIAN LAW JOURNAL— Volume 70
ROSS P BUCKLEY 37
Equitable Trust Co of New York ν Dawson Partners (1927) 27 LlL Rep 49. 38 ¡bid at 51 *> η , w »· -, ο ι χ, ι r.™ , , r, „-, ι 39 Bank MeUi Iran ν Barclays Bank DCO Ltd [1951] 2 Lloyd s Rep 367. 40 See footnote 30 of this article for an explanation of the role and function of UCP. 41 See Guaranty Trust Co ν Van den Berghs Ltd (1926) 22 LlL Rep 447 and Midland Bank ν Seymour [1955] 2 Lloyd's Rep 147 (a case decided before British banks regularly issued their credits subject to '* This is the case at common law and is reflected in UCP Article 13(a) provides that "documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in accordance with the terms and conditions of the Credit". 43 For instance, Davidson, "Developments in the Utilisation of Letter of Credit Transactions" (1995) JIBFL 328 at 330-331. 44 c UAi1 1 · c .u· · 44 For a much fuller analysis of this issue, see Buckley, op cit η 7, at 82-84 ,y v 45 [1991 1 Lloyd's Rep 587 confirmed on appeal to the Court of Appeal at [1991] 2 Lloyd's Rep 443 r at449
42
Which one would expect to be one of the most sophisticated of markets for these operations. 47 Banque de L'Indochine et de Suez SA v JH Rayner (Mincing Lane) Ltd [1983] 1 QB 711 at 733; 1 Lloyd's Rep 228 at 233. 48 Credit for this question is due to PJ Short who first raised it with me. 49 Intraco Ltd ν Notis Shipping Corp (the "Bhoja Trader") [1981] 2 Lloyd's Rep 256 at 258 per Donaldson LJ. 50 United City Merchants ν Royal Bank of Canada [1982] 2 All ER 720 at 725. « Equitable Trust Co of New York ν Dawson Partners (1927) 27 LlL Rep 49 „ L ._ -Ibid at 52. 53 c c; Sechon 5-109(2). 54 Article 13(a). 55
56
McLaughlin, "The Standard of Strict Documentary Compliance in Letter of Credit Law: An American Perspective" (1990) 1 JBFLP 81 and see Dolan, The Law of Utters of Credit — Commercial and Standby Credits (2nd ed, Warren, Gorham & Lamont, Boston, 1991), pars 6-2-6-8. For example, see Banco Español de Credito ν State Street Bank & Trust Co 385 F 2d 230 (1st Cir 1967)
MARCH 1996
57
and Flagship Cruises Ltd ν New England Merchants National Bank, 569 F 2d 699 (1st Cir 1978): see also tne Hong Kong decision in Hing Yip Hing Fat Co Ltd ν The Daiwa Bank Ltd [1991] 2 HKLR 35 at 44-45 a n d 51_52 w h e r e a l e s s t h a n s t r k t s t a n d a r d 0f compliance was applied to an error in name of the applicant in the letter of credit and to an inspection certificate. Far Eastern Textile Ltd ν City National Bank and Trust, 430 F Supp 193 at 196 (SD Ohio, 1977) and see Transamerica Délavai Ine ν Citibank NA, 545 F Supp 200 at 203-204 (SDNY 1982).
58
Transamerica Délavai c a s e , i b i d . 59 G ivray, "Letters of Credit" (August 1990) 45 The Business Lawyer 2381-2382.
Dolan, op cit η 55, par 6-4. Morris, "The Need for an International Court of Commerce" [1994] 6 JIBL 219. 62 See UCP, Art 13(a). 63 c e e TJCP Art 14 _„„----, '. . Τ ^ - , Λ " 1 9 8 3 Revision, UCP, Art 16(c). __ „ , __ _ „ . . « · , / • τ _· r-inrvn * 6 5 Bankers Trust Co v State Bank °f l n d m ^ 1 9 9 1 I 2 Lloyd's Rep 443 at 455. __ TI n ,h l. c a s e . w a s 1 ^9 8n 3- π · · _ τ τ ™ Λ _ -,_/ χ " * f * V i s i o n of UCP, Art 16(e) (which applied only to issumg banks) — an equivalent provision is now to be found in the R e v i s i o n , Art 14(e) (which also applies to 1 9 9 3 confirming banks). β? M 9 9 1 ] _ Lloyd's Rep 587 at600. * ^ ' T, J# „ __0 „ „ft ^ [1991] 2 Lloyd's Rep 443 at 449. 61
69 I b i d a t
70
71 72
4 5 L
Ibid at 455. This was in accord with the decision of the trial judge: [1991] Lloyd's Rep 587 at 599 per Hirst J. Ibid at 455. Furthermore, banks will later be estopped from relying on new grounds for dishonour that were n o t n o t i f i e d ™$* f i r s î effective notice of rejection — s e e A r t 1 4 ( d X n ) a n d Ve) a n d t n e a n a l y s i s thereof in Buckley, op cit η 7, at 78-79.
73 1 9 9 3
( c ) · S e e t h e considerfor this consultation with the applicant in Buckley, ibid at 84-86.
a t i o n
Revision o f
t h e
>
u c p
tíme
/
A r t 14
a v a ii a ble
74
Apparently in the great majority of cases the applicant waives the discrepancies and accepts the documents (see Bankers Trust [1991] 2 Lloyd's Rep 443 at 456) doubtless because most defects are minor and technical. 75 F o r the situation when the beneficiary is not aware of the fraud, see text around footnote 86 of this article. 235
POTENTIAL PITFALLS WITH LETTERS OF CREDIT 76
Letter from Richard Morris to author, 22 February 1995 (copy on file), ρ 3.
77
Apparently in the great majority of cases the applicant waives the discrepancies and accepts the documents (see Bankers Trust [1991] 2 Lloyd's Rep 443 at 456) doubtless because most defects are minor and technical.
92
78
177 Mise 719, 31 NYS 2d 631 (Sup Ct 1941). See generally Dolan, op cit η 55, pars 7-48-7-63.
94
79
80
81 82
Fellinger, "Letters of Credit: The Autonomy Principle and the Fraud Exception" (1990) 1 JBFLP 1 at4: "Fraud has never been found to exist, pursuant to the standard applied, on the facts of the cases before the United Kingdom courts." Fraud by a third party was found to have been perpetrated in United City Merchants Ltd ν The Royal Bank of Canada [1982] 2 All ER 720 — see the analysis thereof in the text accompanying footnote 89 of this article. [1984] 3 NSWLR 110. Ib'd 1116
83
Sarna, Letters of Credit (2nd ed, Carswell, Toronto, 1986), ρ 141: "It is too early to tell whether the English case law will evolve in such a way as to restrict the [restraint of payment for fraud] purely to matters of documentary fraud or will permit consideration of fraud in relation to the underlying contract."
84
Young J, in obiter in The Inflatable Toy Company Pty Ltd ν State Bank of New South Wales (unreported, Supreme Court, NSW, 23 March 1994, No 1010 of 1994), noted that the weight of authority is perhaps on the side of confining the fraud exception to fraud in the documents. For a consideration of this
and that does not speak with one voice: see Dolan, op cit η 55 par 7.04. [1990] 2 QB 514; 3 WLR 634. 93 See generally the criticism of this decision (with w h i c h I agree) in Mugasha, "Set-Off and Letters of Credit: Hongkong and Shanghai Banking Corp ν Kloeckner & Co" (1991-1992) 7 BFLR 307. Intraco Ltd ν Notis Shipping Corp (the "Bhoja Trader") [1981] 2 Lloyd's Rep 256 at 258 (my , ' „ „ ,,. T x J TA , _ . _ f Halesowen Presswork & Assemblies Ltd ν Westminster ß ^ L f r f [1971] I Q B 1 at34 per Lord Denning MR, with w h o m ^ ™ ^ A a ^ e d ; overturned on u another S r o u n d _ [-972] AC 785. For the juridical ^asis of set-off, see McCracken, The Bankers Remedy of Set-Off (Buttewortte, London, 1993) and o n t h i s i s s u e s e e PP 7 5 " 7 6 a n d 7 9 ' At least until the recent extension of estoppel in cases such as Waltons Stores ν Mäher (1988) 164
o c TT 95
%
CLR
8
* (1985) INSWLR 545.
387
' P ' t h e beneficiary is likely to have more influence over the choice of the confirming bank, if any, than of the issuing bank but most things are negotiable. Credits (Butterworths, London, 98 J a c k / O o c u m e n t a r y 1991) η 244 λP · " Poulton, "Standby Letters of Credit and Guarant e e s (^ 1 1 Australian Viewpoint)" a paper delivered at the International Trade Law Conference in Canberra in October 1991 and see generally Ryan, "Letters of Credit Supporting Debt Instruments", i n Letters 0f Credit and Bankers' Acceptances 1988, op c j t n _Q p o$\ . ' „.„ , , „ _ „
