The claimant was the confirming bank and the defendant was the issuing bank under a letter of credit arrangement subject to the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce 600 (2007 revision) (“UCP 600”). The confirming bank advised the issuing bank that it had paid under the letters of credit and sought reimbursement. The issuing bank refused reimbursement on the basis of asserted discrepancies in the documents. In the subsequent proceedings started by the confirming bank to recover from the issuing bank the payments made to the beneficiary, the issuing bank served a request for information asking for details of how the confirming bank had made payment to the beneficiary, asserting that it was entitled, as a matter of principle and in accordance with article 7(c) of UCP 600, to evidence that the confirming bank had honoured the presentations made by the beneficiary. The confirming bank refused to provide the information sought, arguing that the issuing bank under a letter of credit had to accept on its face a confirming bank’s statement that it had paid the beneficiary. The words “states that” were to be read in to article 7(c) such that it was to be construed as an undertaking to reimburse a confirming bank that had stated that it had honoured a complying presentation. The confirming bank having refused to respond to the request for further information, the issuing bank issued an application for an order under CPR r 18.1.
On the defendant’s application—
Held, application granted. The issuing bank under a letter of credit could not be obliged to make any reimbursement to the confirming bank if the confirming bank had not in fact paid the beneficiary. It was not enough, for the purposes of article 7(c) of UCP 600, for the confirming bank to state that it had honoured the complying presentation. That article was not to be construed by writing in words that materially changed its sense. That article, read together with the definition of “honour” in article 2 of UCP 600 of “paid at sight”, provided that an issuing bank’s undertaking to reimburse the confirming bank arose where the confirming bank had honoured a complying presentation by making payment under the credit. An issuing bank raising as an issue whether the confirming bank had in fact paid the beneficiary was therefore entitled to use the machinery in CPR Pt 18 to make a request for further information related to that issue. The defendant issuing bank was therefore entitled to inquire further of the claimant confirming bank as to the payments that the latter stated that it had made to the beneficiary. As the issuing bank had not, in its defence, admitted payment by the confirming bank and the confirming bank had, in its reply, pleaded a detailed case as regards payment, the issuing bank was entitled to make a request for information arising out of the reply on that issue, provided it limited its request to what was strictly necessary to understand the confirming bank’s case (paras 38, 40, 41–42).
Andrew Fulton (instructed by Sullivan & Worcester LLP) for the claimant.
Andrew Fletcher QC and Richard Hanke (instructed by Holman Fenwick Willan International LLP) for the defendant.