STANDARD BANK (MAURITIUS) LIMITED v.

THE CENTRAL ELECTRICITY BOARD

2019 SCJ 22
Record No. SC/COM/PWS/01364/2015

IN THE SUPREME COURT OF MAURITIUS

(COMMERCIAL DIVISION)
In the matter of:
The Standard Bank (Mauritius) Limited
Plaintiff
v.

The Central Electricity Board

Defendant

Judgment

The plaintiff is claiming from the defendant payment in an amount of USD 802,054.78
which debt is allegedly due to the plaintiff, pursuant to a payment made by the plaintiff on behalf
of the defendant, under a letter of credit issued by the plaintiff. The plaintiff, as the issuing bank
under the Letter of Credit, effected the payment to the Mauritius Commercial Bank on behalf of
the beneficiary, Alternative Power Solution (APS).

Subsequent to the above payment and pursuant to the terms of the facility letter under
which the plaintiff had issued the Letter of Credit, the plaintiff proceeded to debit the equivalent
amount, together with SWIFT charges from the account which the defendant held at the plaintiff
bank. The funds in the said account were however insufficient to meet the payment and the
account is consequently overdrawn in an amount of USD 802,054.78, this sum has not been
paid by the defendant.

The plaintiff is now praying for a judgment ordering the defendant to pay the above
amount together with interests at LIBOR + 7% per annum in terms of the facility letter under
which the Letter of Credit was issued, as from 17 September 2014, i.e. the date when the
plaintiff effected the payment under the Letter of Credit and up to the date on which payment of
the above sum is effected to the plaintiff.
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The defendant has denied the debt and has lodged a counterclaim praying for a
judgment ordering the plaintiff to cause the sum of USD 802,054.78 held in its account with the
plaintiff to be cancelled and to cause the said account to be restored in the amount that stood in
it prior to the debit of the sum of USD 802,054.78.

It is the contention of the defendant that the plaintiff has unlawfully and negligently
effected the payment under the Letter of Credit on the basis of the initial documents submitted
by APS in December 2010 whereas at the time of payment in September 2014, the documents
were no longer compliant. The Bill of Lading and the Marine Insurance Certificate had by then
expired and further, the goods subject matter of the Letter of Credit have never been delivered
to the defendant. Furthermore the plaintiff had effected the payment in breach of its undertaking
not to do so until the goods had been examined and inspected by the defendant.

The facts of this case and the chronology of events, are not in dispute. Nor is it disputed
that the Letter of Credit is governed by the Uniform Customs and Practice for Documentary
Credits, 2007 (UCP 600) and that it is paid “at sight” i.e. upon presentation of compliant
documents.

The evidence has revealed that pursuant to a facility letter dated 4 November 2009 “The
Facility”, the plaintiff agreed to provide to the defendant banking facilities incorporating –

(a) a sight Letter of Credit facility for a sum not exceeding USD 10M and
(b) a settlement limit facility for a sum not exceeding USD 2M

The facility was subject inter alia to the following term and condition:

“if any sum payable by the defendant under the Facilities is not
paid when due, such sum will attract interest at LIBOR + 7% per
annum from the date on which such sum fell due to the date on
which it is actually paid.”

On 24 September 2010, the defendant requested the plaintiff to issue an irrevocable and
transferable letter of credit (‘the letter of credit’) in favour of a company by the name of
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Alternative Power Solutions Limited (‘APS’) for an amount of USD 763,725 to guarantee
payment for the purchase by the defendant of 660,000 lamps from APS.

On 27 September, 2010, the plaintiff issued an irrevocable and transferable Letter of

Credit in favour of APS for an amount of USD 763,725 to guarantee payment for the
defendant’s purchase of the lamps. The Letter of Credit was issued through the SWIFT (Society
for Worldwide Interbank Financial Telecommunication) network to the Mauritius Commercial
Bank Limited (MCB), which was acting as advising bank for the beneficiary, APS. The Letter of
Credit was valid up to 30 December, 2010.

It was stipulated, inter alia, in the Letter of Credit that at the time that it made its request
for payment, APS was required to submit the following documents:

(a) signed commercial invoices stamped in three originals and

three copies issued in the name of the opener, showing FOB
value, freight charges and insurance premiums and total DDU
value separately;

(b) full set clean on board ocean Bill of Lading;

(c) Packing List in triplicate;

(d) Marine Insurance Certificate;

(e) Beneficiary’s certificate.

The Letter of Credit was subject to the following conditions:

(a) in consideration of the plaintiff issuing the aforesaid Letter of

Credit, the defendant undertakes to provide funds to the
plaintiff to meet its obligations in paying the Letter of Credit;

(b) if the defendant fails to provide such funds on demand or

maturity, the plaintiff shall be entitled to debit the defendant’s
accounts with the plaintiff, whether in credit or otherwise, of all
credits honoured on and under the Letter of Credit by the
plaintiff, and

(c) the defendant shall indemnify the plaintiff against all liabilities,
losses, damages, costs, expenses, claims, demands, actions
and proceedings whatsoever which the plaintiff may incur or
 4

sustain by reason of or in any way connected with the Bank

opening and establishing the Letter of Credit.

On 8 November 2010, 1 December 2010 and 21 December 2010, the defendant made
three successive applications before the Judge of the Commercial Division, for injunction
orders. On 21 December 2010 upon the third application, the Judge (Lam Shang Leen, J)
issued an interim order prohibiting the plaintiff from giving effect to and paying the irrevocable
Letter of Credit and the order was made interlocutory on 18 February 2011. The interlocutory
order was maintained on appeal before the Supreme Court but was subsequently set aside on
appeal by The Judicial Committee of the Privy Council in its judgment delivered on 9
September 2014.

Following the Judgment of The Judicial Committee, on 17 September 2014 the plaintiff
effected payment to APS on the Letter of Credit and debited the defendant’s account with the
sum of USD 801,911.18 paid to the MCB for the benefit/account of APS, together with; the sum
of USD 143.60 being the plaintiff’s swift charges for the transaction. As a result of the above
debit, the defendant’s account is overdrawn in the amount which is the subject matter of the
present claim.

The main question which first arises is whether on 17 September 2014 the plaintiff was
entitled to effect payment on the Letter of Credit on the basis of documents submitted to it
nearly four years earlier on 14 December 2010. The focus of the defendant’s arguments was
with regard to the presentation of compliant documents at the time that the plaintiff effected the
payment in September 2014.

The plaintiff contends that the MCB’s presentation of the documents on 14 December
2010 upon its request for payment under the Letter of Credit (Doc. P18 refers), satisfied all the
conditions of a “complying presentation” as defined by Article 2 of the UCP 600 and as such, the
plaintiff was bound to effect payment under the Letter of Credit.

The plaintiff contends that it was however prevented from effecting the payment due to
an intervening event namely the issue of the interim order, by the Judge on 21 December 2010
prohibiting the plaintiff from giving effect to and from paying the Letter of Credit which interim
 5

order was made interlocutory on 18 February 2011 and was confirmed on appeal before the
Supreme Court. The matter was finally determined by The Judicial Committee in its judgment
delivered on 9 September 2014 which set aside the interlocutory order issued by the Judge.

On 11 September 2014, the plaintiff notified the defendant that following the judgment of
The Judicial Committee, it would be proceeding to effect the payment on the Letter of Credit.
On 12 September 2014 the defendant objected to the payment to APS. On 17 September 2014
the plaintiff informed the defendant that it had already effected the payment and debited the
defendant’s account.

It is the case for the plaintiff that it was bound to effect the payment under the Letter of
Credit in the light of the compliant presentation made on 14 December 2010 and following the
decision of The Judicial Committee which finally and authoritatively dealt with the contentious
issues raised by the defendant to contest the validity of the Letter of Credit. The defendant
accordingly has to make good the amount now due to the plaintiff. The defendant on the other
hand contends that the plaintiff was not entitled to effect payment on the Letter of Credit for the
reasons advanced by counsel and analysed hereunder.

Counsel for the defendant has firstly argued that the plaintiff had given an undertaking
not to effect any payment until the goods had been verified by the defendant but however in
breach of the undertaking, it proceeded to effect payment without any such prior verification by
the defendant. Counsel referred to the defendant’s first application before the Judge in
Chambers on 12 November 2010 wherein APS had stated that no shipment would be effected
until an inspection of the goods had been carried out by the defendant whereupon the plaintiff
had stated that it would not effect payment until shipment had been effected.

According to counsel for the defendant, the proceedings before the Judge in Chambers
on 12 November 2010 specifically concerned the obligations under the Letter of Credit so that
the above “undertaking” became part of the terms and conditions of the Letter of Credit so that
the Letter of Credit had thus been impliedly varied.

On the other hand counsel for the plaintiff has submitted that The Bank had never given
any undertaking before the Judge in Chambers on 21 December 2010 to the effect that it would
not effect payment until the goods had been inspected by the defendant. Counsel further
 6

pointed out that the issue regarding the alleged “undertaking” had been canvassed before The
Judicial Committee which had addressed it lengthily in its judgment.

Counsel referred to large extracts from the judgment of The Judicial Committee in
which the court had held that the defendant’s allegations that APS had shipped the goods
without prior verification, is a contractual matter between the defendant and APS and it is
irrelevant to the plaintiff’s liability under the Letter of Credit.

The “undertaking” was indeed a live issue which was dealt with by The Judicial
Committee. Their Lordships did not agree with the reasoning of the Judge (Lam Shang Leen,
J) and pointed out that his approach to this issue “was flawed” and that he had erred in relying
upon the allegations pertaining to the inspection and verification of the goods prior to shipment
which “are allegations of breach of contract” and irrelevant to the plaintiff’s liability under the
Letter of Credit. The relevant extracts of their Lordships’ judgment are reproduced verbatim
below:

“68. … APS denies that it was in breach of contract in either of those respects
and blames the CEB for failing to co-operate in setting up an inspection of the
goods. For present purposes the difficulty with those allegations is that they are
allegations of breach of contract and thus matters for arbitration and irrelevant to
the liability of Standard Bank under the letter of credit. In so far as the judge
relied upon them he erred in principle. The judge stressed on more than one
occasion that what mattered was that no shipment was to be effected until the
goods had been verified by the CEB at the relevant factory. Moreover he held
that Standard Bank knew that that was the position and could not properly pay
under the letter of credit. However, as the Board reads the judgment, the judge
placed considerable weight on what Mr Dookhee said to him (and to Standard
Bank) in court. Leaving that on one side, there is, in the opinion of the Board no
possible basis upon which the fraud exception could apply, whatever the test.”
(Emphasis added)

Their Lordships went further in their judgment and pointed out that any alleged
subsequent undertaking by the plaintiff, could only be valid if it would have been made part of
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the conditions of the Letter of Credit and this, could only be achieved by a variation agreeable to
the plaintiff.

I feel bound to reproduce in extenso the analysis and conclusions of their Lordships in
dealing with the issues raised by the defendant since they demonstrate in an unequivocal
manner that the issues now being rehashed on behalf of the defendant in the present matter,
would be res judicata as they have already been authoritatively dealt with by Their Lordships.

“70. It is striking that neither the judge nor the Court of Appeal considered
whether Standard Bank agreed to a variation of the letter of credit. In order to be
valid, such a variation would have to be agreed by Standard Bank. The bank
relies upon articles 4 and 10 of the relevant UCP, which is UCP 600. Article 4a
provides:

“A credit by its nature is a separate transaction from the sale or other

contract on which it may be based. Banks are in no way concerned with
or bound by such contract, even if any reference whatsoever to it is
included in the credit. Consequently, the undertaking of a bank to honour,
to negotiate or to fulfil any other obligation under the credit is not subject
to claims or defences by the applicant resulting from its relationships with
the issuing bank or the beneficiary.”

Article 10a provides that, subject to an irrelevant exception, a credit can

neither be amended nor cancelled without the agreement of the issuing
bank, the confirming bank, if any, and the beneficiary. Thus if, contrary to
the case for APS, APS and the CEB had at any stage agreed to a
variation of the terms of the contract, in order to be effective against
Standard Bank, the bank would have had to agree to any variation of the
terms of the letter of credit.”

Their Lordships went on to emphasise that there was not any evidence as to
variation of the Letter of Credit –
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“71. There is no evidence that Standard Bank agreed to any variation of

the terms of the letter of credit. On the contrary, as stated in para 11
above, when the CEB submitted a request to Standard Bank for the letter
of credit to be amended with regard to the additional documents to be
submitted by APS, namely (i) a copy of an inspection certificate to be
submitted to the CEB prior to shipment and (ii) a copy of written
confirmation by the CEB that the goods could be released for shipment,
APS declined to agree and on 4 November MCB informed Standard Bank
that APS was not agreeable to the amendment sought. The CEB was
informed accordingly.”

“72. … This is important because it appears to the Board that, in the case
of both the judge and the Court of Appeal, the underlying basis for their
conclusions was, not so much that APS was in breach of contract, but
that it dishonestly gave undertakings to the court which it had no intention
of honouring. This was no doubt based on the evidence of Mr Tulloo
referred to in para 29 above that APS twice breached undertakings given
to the court. Even if there were some force in this case as against APS, it
is of no assistance to the CEB in this appeal unless Standard Bank either
agreed a relevant variation of the letter of credit or knew that APS was
acting fraudulently. There is no evidence of any such agreement and, in
the opinion of the Board, notwithstanding the views expressed by the
judge and the Court of Appeal, there is no evidence that Standard Bank
knew that APS was acting fraudulently.” (Emphasis added)

“74. The central theme running through the parts of the judgment quoted
above is that The Judge considered that no shipment of the goods could
be effected until they had been verified by or on behalf of the CEB at the
factory in China in accordance with the terms of the contract and that
Standard Bank was aware of the position because it was aware of the
terms of the contract and because of the statements made by Mr
Dookhee to the court. However, as stated above, the Judge’s approach
was flawed ...” (Emphasis added)
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At paragraph 75 of the judgment Their Lordships also pointed out that the representative
of APS, Mr. Dookhee, did not agree with the remarks which were attributed to him by the Judge
and which constitute the basis of APS’s alleged “undertaking” and that, “the account may not be
accurate”. The relevant extract is set out below:

“75. As to the hearing on 3 December, the Board does not think that the
remarks attributed to Mr Dookhee provide any real assistance to the CEB
in this context. Mr Dookhee disputed the account as attributed to him and
the account may not be accurate. His account is consistent with the point
he made that when he said that inspection at the factory could still be
made available, that was on the basis that the vessel would turn back and
that there would be agreed extensions of the letter of credit. Moreover
Standard Bank did not perceive that the events of 3 December had
somehow altered its obligations under the letter of credit. As stated at
para 26 above, in its response to the “Mise en Demeure” it took issue with
the case against it, including any suggestion that it had given any such
undertaking …” (Emphasis added)
(Alternative Power Solution Limited v Central Electricity Board and
Another [2013 PRV 35])

It is also apposite to refer to the following extract which emphasises the binding nature of
a bank undertaking which is contained in a Letter of Credit:

“3.37 A bank undertaking contained in a letter of credit constitutes a

binding contract between the bank and the beneficiary. So, just as any
contract can only be amended by the agreement of all parties to it, a bank
undertaking contained in a documentary credit can only be amended by
the agreement of the parties to the undertaking, namely the bank giving
the undertaking and the beneficiary …”
(Documentary Credits – Third Edition – R. Jack, A. Malek and D.
Quest – Butterworths – 2001 at page 59)

In view of all the above, it clearly emerges that –

(i) it was not a condition of the Letter of Credit that the defendant had to inspect
and verify the goods before they were shipped;
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(ii) as such, unless the Letter of Credit was varied with the agreement of the
plaintiff to include that a certificate of inspection/verification was required, there is
no possible basis for the defendant to contend that the plaintiff should not have
proceeded with payment under the Letter of Credit;

(iii) there was no such variation of the Letter of Credit;

(iv) the plaintiff has consistently denied that it had given any undertaking not to
effect payment under the Letter of Credit unless the goods were inspected by the
CEB and has maintained that it was bound to effect payment if compliant
documents in terms of the Letter of Credit were presented to it.

In the present case the evidence as highlighted by Their Lordships, has clearly revealed
there was no variation of the Letter of Credit. Indeed on 22 October 2010 the defendant
requested The Bank to amend the Letter of Credit to specify “submission of Inspection
Certificate to CEB prior to shipment and upon written confirmation from CEB that the goods can
be released for shipment” (Doc. P6). In its reply dated 4 November The MCB, the advising
bank, informed the plaintiff that APS was not agreeable to the amendment sought (Doc. P7).

On 10 December 2010 the defendant again caused a mise en demeure to be served on

the plaintiff requiring it to confirm in writing that it would not effect payment under the Letter of
Credit until it had received confirmation in writing that the verification of the goods had been
carried out to the satisfaction of the defendant.

In its reply to the mise en demeure on 15 December, The Bank had again denied any
such undertaking and had maintained that if compliant documents were presented to The Bank
on or before 30 December 2010, The Bank would be bound to effect payment within five
banking days following a compliant presentation inasmuch as failure on its part to do so would
amount to a breach of the terms and conditions of the Letter of Credit as well as Article 14(b) of
UCP Rules (Doc. P33 refers).

The Bank was accordingly bound to effect payment upon presentation of the requisite
compliant documents stipulated in the Letter of Credit, a stand which it has consistently taken as
was observed by their Lordships at paragraph 73 of their judgment, “The Bank has throughout
taken the reasonable stance that, subject to the injunction it was ready to pay under the
letter of credit when compliant documents were presented to it.”
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The next issue that needs therefore to be addressed is, whether The Bank was under an
obligation to pay and to that end whether the documents upon which it had acted to effect
payment, constituted compliant documents under the Letter of Credit. Counsel for the
defendant submitted that the documents were not compliant and pointed out that The Judicial
Committee delimited the issues in the appeal, to the standard of evidence required to establish
the fraud exception in order to prevent payment under a Letter of Credit. The Judicial
Committee held that the Judge had failed to apply the correct test for granting an injunction
where the subject matter concerned documentary credits and that in the light of the evidence,
the Judge should not have found that the fraud exception had been met.

Counsel pointed out that The Judicial Committee did not however order the plaintiff to
effect payment under the Letter of Credit nor did it make any pronouncement as to whether the
documents presented, complied with the Letter of Credit. According to counsel following the
judgment, the plaintiff had an obligation to pay only if the documents were strictly compliant with
the terms and conditions of the Letter of Credit which he contended was not the case here. In
any case, counsel added that the banking facility under which the Letter of Credit was issued
remained valid only until 31 October 2012 so that in September 2014 when the payment was
effected, there was no contract or agreement governing the banking facility between the parties
which would effectively give authority to the plaintiff to execute the Letter of Credit and debit the
defendant’s account.

In so far as the legal implications concerning the expiry of the facility letter are
concerned, I agree with the submissions made by counsel for the plaintiff. The Letter of Credit
constitutes an autonomous contract and it is an independent transaction; its performance is
independent of the performance of the underlying transaction giving rise to it. The obligations of
the parties under the Letter of Credit remain in force and could not be extinguished with the
expiry of the facility letter, these obligations only came to an end when the Letter of Credit itself
expired which in this case was 30 December 2010.

It is clear that in order for payment under the Letter of Credit to be honoured, the Letter
of Credit must still be valid that is, its expiry date has not yet been reached and all the requisite
documents must be presented within the period of validity of the credit and cannot be presented
 12

once the expiry date for the Letter of Credit has passed. Articles 6(d)(i) and 6(e) of UCP 600
thus provide:

Article 6

“d.(i) A credit must state an expiry date for presentation. An expiry date
stated for honour or negotiation will be deemed to be an expiry date for
presentation.

(e) Except as provided in sub-article 29(a), a presentation by or on behalf

of the beneficiary must be made on or before the expiry date.”

Counsel for the defendant has also argued that The Bank could not have effected
payment inasmuch as the documents were not compliant. Counsel submitted that two of the
documents which were required to be presented for payment to be effected under the Letter of
Credit, namely the Marine Insurance Certificate and a full set of clean on board ocean Bill of
Lading, were no longer valid when payment was effected in September 2014. The insurance
policy had been cancelled ever since 12 May 2011 and regarding the Bill of Lading upon which
the plaintiff has acted, counsel submitted that the Bill of Lading was issued in respect of a ship
which never reached Mauritius. Counsel referred to Articles 316(3)(a)(b) and (c) and 316(4) of
the Code de Commerce concerning “connaissement” (the French term for Bill of Lading) and to
relevant extracts from Dalloz Répertoire de Droit Commercial, Ventes Maritimes (Tome VII,
Février 2007) paragraph 90 and Dalloz, Répertoire de Droit Commercial, Crédit
Documentaire (Tome III, Mai 2004), paragraph 60. Counsel concluded that there was no
shipment for which the Bill of Lading could effectively operate so that there was accordingly no
Bill of Lading compliant with the terms and conditions of the Letter of Credit.

The importance of honouring documentary credits, is well established in international

trade. This is made clear in the following extract from Edward Owen Engineering Ltd v.
Barclays Bank International Ltd [1978] QB 159, 169 (per Lord Denning M.R):

“… It has long been established that when a letter of credit is issued and
confirmed by a bank, the bank must pay it if the documents are in order and the
 13

terms of the credit are satisfied. Any dispute between buyer and seller must be
settled between themselves. The bank must honour the credit. (per Jenkins L.J in
Hamzeh Malas & Sons v. British Imex Industries Ltd [1958] 2 QB 127 at p. 129):-

“… it seems to be plain enough that the opening of a confirmed letter of

credit constitutes a bargain between the banker and the vendor of the
goods, which imposes upon the banker an absolute obligation to pay,
irrespective of any dispute there may be between the parties as to
whether the goods are up to contract or not.”
In the present case, it has been authoritatively determined, as pointed out at paragraph
73 of the judgment of The Judicial Committee that The Bank “has throughout taken the
reasonable stance that, subject to the injunction it was ready to pay under the letter of credit
when compliant documents were presented to it.”

It is well established that payment on a Letter of Credit will only be honoured if the
documents presented are compliant and a very strict standard is applied for the purposes of
determining compliance.

The issue to be determined here is the point in time at which there needs to exist a
“complying presentation” i.e. at the time of submission of the documents to the issuing bank as
argued by counsel for the plaintiff or, upon payment effected by the issuing bank as submitted
by counsel for the defendant.

The relevant applicable provision here is Article 14 of the UCP 600 which provides that:

“A nominated bank acting on its nomination, a confirming bank, if any,

and the issuing bank must examine a presentation to determine, on the
basis of the documents alone whether or not the documents appear on
their face to constitute a complying presentation.”

Article 2 of the UCP 600 reproduced below provides the following definitions:

“a. “Credit” means any arrangement, however named or described, that is

irrevocable and thereby constitutes a definite undertaking of the issuing bank (i.e.
SBML) to honour a complying presentation. (Emphasis added)

b. “Presentation” means either the delivery of documents under a credit to the

issuing bank or nominated bank or the documents so delivered.
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c. “Complying presentation” means a presentation that is in accordance with

the terms and conditions of the credit, the applicable provisions of these rules
and international standard banking practice.”

In the light of the above, it is clear that what is required is a complying presentation in
terms of Article 2 of UCP 600. This means that the presentation i.e. “the delivery of
documents” “to the issuing bank or nominated bank or the documents so delivered” must be “in
accordance with the terms and conditions of the credit, the applicable provisions of
these rules [the UCP rules] and international banking practice”. In the present case both the
Marine Insurance Certificate and the Bill of Lading were compliant on 14 December 2010 at the
time that they had been “presented” i.e. delivered to the Bank (Doc. P18). There is no evidence
that The Bank was dissatisfied with the documents presented to it on 14 December 2010. The
Bank could not obviously effect payment on that date as it was prohibited from doing so by the
order issued by Lam Shang Leen, J on 21 December 2010.

The Marine Insurance Policy was valid on 14 December 2010 given that it was only
cancelled on 12 May 2011. Regarding the Bill of Lading, I have given due consideration to the
argument raised by counsel to the effect that the Bill of Lading was issued in respect of a ship
which never reached Mauritius so that it was invalid and obsolete at the time it was presented to
the plaintiff in December 2010.

It is clear from Article 14 of UCP 600 entitled “Standard for Examination of Documents”
that documentary credits issued pursuant to commercial transactions, must be examined for
compliance “on their face” i.e. on the basis of the documents alone.

Article 14(a) of UCP 600 thus provides:

“A nominated bank acting on its nomination, a confirming bank, if any,

and the issuing bank must examine a presentation to determine, on the
basis of the documents alone, whether or not the documents appear on
their face to constitute a complying presentation.” (Emphasis added)

The term “on their face” is explained in the following extract from “Law of Bank
Payments” (Michael Brindle and Raymond Cox, Sweet & Maxwell, 5th edition) –
 15

“7-046
The expression “on their face” has been retained within art. 14(a) UCP
600. The bank must determine, on the basis of the documents alone,
whether or not they appear “on their face” to constitute a complying
presentation. It is intended to indicate that the decision whether the
documents constitute a complying presentation (as defined in art. 2)
should be based on what the documents appear to show and not upon
extraneous information concerning the matters to which the document
relates. It does not, of course, exclude from consideration anything that
appears on the back of a document.” (Emphasis added)

There is an obligation on the issuing bank to honour payment once it has determined
that the presentation is compliant. This is clearly reflected in Article 15(a) of UCP 600 by which
the parties have agreed to be bound –

Article 15 reads as follows:

“Complying Presentation

(a) When an issuing bank determines that a presentation is

complying, it must honour.”

It follows therefore that what has to be considered when dealing with credit operations,
are the documents alone inasmuch as a documentary credit is a transaction in documents alone
and not the goods and services or other performances to which they relate. Indeed Article 5 of
UCP 600 provides that, “Banks deal with documents and not with goods and services or
performance to which the documents may relate”. The issuing bank is under an obligation to
pay if the documents are “on their face” in order and the terms of the credit are satisfied. It was
not incumbent upon The Bank to probe into the transaction between the parties nor did it have
to ascertain whether the seller had actually shipped the goods or whether the goods were in
conformity with the requirements of the contract, before effecting payment. Nor is any dispute
between the seller and buyer of any relevance to The Bank.

In the present case, there is nothing to suggest that the Bill of Lading was not compliant
on its face at the time of the presentation and the fact that no shipment was effected, is an
extraneous matter which could not provide any justification for The Bank to avoid or refuse
payment.
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The evidence reveals that the only reason why The Bank did not proceed with the
payment was because it was prevented from doing so by Lam Shang Leen, J’s order which
The Judicial Committee subsequently established had been wrongly issued by the Judge on
21 December 2010. The matter was indeed only finally concluded on 9 September 2014 by
The Judicial Committee setting aside the interlocutory order and holding that it had been
issued by the Judge on the basis of a flawed approach and upon an erroneous application of
the legal principles applicable to documentary credits. On 11 September 2014, immediately
after this final judgment, The Bank informed the defendant that it would effect the payment and
on 17 September notified the defendant that the payment had already been effected.

The successive applications to the court initiated by the defendant and which caused the
delays in payment on the Letter of Credit, cannot render documents satisfying all the conditions
of a compliant presentation in terms of Article 14, non-compliant solely because of a delay for
which the defendant and not the plaintiff, was wholly responsible.

In view of the above and given that the documents were compliant at the “time of
presentation”, The Bank was under a duty to effect payment on the Letter of Credit once the
issue had been finally determined by The Judicial Committee quashing the interlocutory order.
In the circumstances The Bank cannot be faulted for having executed its duty.

There is an additional reason why the defendant’s arguments with regard to the expired
Letter of Credit and non-compliance of documents, cannot stand.

As pointed out above, as at the relevant and material date, i.e. 14 December 2010, The
Bank was under an obligation to pay the Letter of Credit since compliant documents were
presented to it on that date. There was no question of any expired document at that juncture.

The evidence has revealed that the defendant made three successive applications to the
Judge in Chambers, on 8 November 2010, 1 December 2010 and 21 December 2010 to stop
payment on the Letter of Credit.
 17

It is only and solely as a result of the defendant’s initiatives to block payment which was
due in compliance with the documents presented to The Bank by APS on the material date
before expiry of the Letter of Credit, that the clock started running. There are a series of
occurrences which culminate with the judgment of The Judicial Committee which has
conclusively established that the defendant was wrong from the outset and the interlocutory
order had been issued by Lam Shang Leen, J on erroneous premises as set out above.

These occurrences arose as a result of the defendant’s successive applications for

injunction before the Judge in Chambers. The defendant which has lodged three applications to
stop payment of the Letter of Credit, is responsible for the delay of payment of the Letter of
Credit. It cannot now after causing the delay, invoke that same delay to challenge the Letter of
Credit the more so as the interlocutory order has been held to have been erroneously issued to
its detriment.

The defendant’s line of defence does in effect tantamount to a collateral attack of the
judgment of The Judicial Committee. It is useful to refer to the case of Hunter v. Chief
Constable of the West Midlands Police [1982] AC 529. Although the facts in Hunter do not
present a precise parallel with those of the present case, we need to retain the governing
principles enunciated in Stephenson v Garnett [1898] 1 QB 677, 680-681 and Reichel v.
Magrath (1889) 14 App Cas 665, 668 and which were cited with approval in Hunter.

It is important to recall that the main question which arose for determination in the
course of the injunction applications, was the validity of the Letter of Credit, and whether as a
result of a successful challenge of the validity of the Letter of Credit, the plaintiff should be
estopped from making payment on the basis of that Letter of Credit.

Although the ground then invoked was essentially one of fraud, the only question which
had to be finally resolved for the determination of the case, was whether the same Letter of
Credit which is now being challenged again by the defendant, was valid or not.

As already pointed out, one of The Judicial Committee’s conclusions was that The
Bank –
 18

“… has throughout taken the reasonable stance that, subject to the

injunction it was ready to pay under the letter of credit when compliant
documents were presented to it.” (page 73 supra)

In the circumstances it would be apposite to refer to the extracts from Hunter,

Stephenson and Reichel (supra) which read as follows:

“… the court ought to be slow to strike out a statement of claim or

defence, and to dismiss an action as frivolous and vexatious, yet it ought
to do so when, as here, it has been shown that the identical question
sought to be raised has been already decided by a competent court.”
(A L Smith LJ in Stephenson v Garnett [1898] 1 QB 677, 680-681)
“… I think it would be a scandal to the administration of justice if, the
same question having been disposed of by one case, the litigant were to
be permitted by changing the form of the proceedings to set up the same
case again.’…
(Lord Halsbury LC in Reichel v. Magrath (1889) 14 App Cas 665, 668)

There is no doubt that in the present case the question which is being raised concerns
the validity of the Letter of Credit. This question has already been unequivocally, authoritatively
and finally determined in no uncertain terms, by the highest jurisdiction of our judicial system.

Furthermore it would indeed be nothing less than an abuse of the process of the court to
allow the defendant to invoke allegedly new grounds based on delay which have sprung from or
which have been triggered as a result of the defendant’s misconceived, but relentlessly pursued
applications.

The defendant’s complaints may have been favourably entertained if it had satisfied the
rigorous test laid down in the case of Phosphate Sewage Co. Ltd v. Molleson [1879 4 App
Cases 801, 814 i.e. that it had invoked new evidence which was not available at the material
time and which “entirely changes the aspect of the case” (per Earl Cairns L.J). Here the
defendant has raised an issue of delay; since the blame for the delay lies exclusively at the
defendant’s door and has been provoked by the defendant’s multiple applications before the
court, the defendant is precluded from taking advantage of such delay as a defence to avoid the
payment now due to The Bank.
 19

Conclusion

I am satisfied that the plaintiff has established on a balance of probabilities that it was
entitled to effect payment under the Letter of Credit on the basis of a timely presentation of
compliant documents, that the funds in the defendant’s account were insufficient to cover the
said payment and that in terms of the Facility Letter, the defendant is presently indebted to the
plaintiff in an amount of USD 802,054.78 as well as the plaintiff’s swift charges.

I give judgment ordering the defendant to pay to the plaintiff –

a. the sum of USD 801,911.18 paid by the plaintiff to the Mauritius

Commercial Bank for the benefit/account of Alternative Power Solutions
Limited in compliance with the terms of the Letter of Credit issued on 27
September, 2009; and

b. the sum of USD 143.60 being the plaintiff’s swift charges,

together with interests as agreed under the Facility Letter.

The counterclaim is accordingly dismissed. With costs.

R. Mungly-Gulbul
Judge
24 January 2019

For Plaintiff: Mr. R. Pursem, SC, together with

Mr. B. Nirsimulu, of Counsel
Mr. R. Bucktowonsing, SA

For Defendant: Mr. R. Chetty, SC, together with

Mr. Y. Reesaul, of Counsel
Mr. Attorney S. Sookia