Lord Justice Potter:
INTRODUCTION
1. This is an appeal from an order of Mr S. T. QC sitting as a deputy
High Court Judge whereby he dismissed the challenge by the defendant/
appellant C. A. I. (“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 C. F. C. (“Ch.”) 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 Ch. 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 Ch. 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$156,750 against presentation of
the following documents …”
The documents required included a bill of sale and
“copy of acceptance of sale (aceptacion de compra) duly signed by
Buyer’s representative at Taipei on delivery Mr P. ., countersigned by
Panama Consulate/Mission in Taiwan showing date/time of delivery.”
Presentation of documents was to take place in Geneva, the letter of
credit stating:
“Upon receipt at our counters in Geneva of documents in strict conformity
with this stand-by letter of credit terms and conditions, we shall pay you
as per your instructions, value two Geneva/New York Bank working days”.
3. On 6th October 1998 Ch. presented documents to CAI in Geneva and
instructed CAI to make payment of the first tranche of US$ 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 Ch.’s bank in
Taipei. Again CAI rejected the documents.
5. A third presentation took place on 24th November by Ch.’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 Ch., namely that the funds
should be paid by transmission to Ch.’s account at the M. 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
Ch. 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 Ch. 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 –
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 Ch. 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 M. 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 M. 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 M. 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 M. 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 M. 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 Ch. 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 M. 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, Ch. 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 P. put it in argument, provided CAI pays under the
letter of credit, it is a matter of complete indifference to Ch. 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 Ch.’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 M.
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:
if the Credit provides for sight payment – to pay at sight;
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 Ch. below that the place of
performance was London as the place of payment called for by Ch. 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 M. 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 Ch. might request. In
the alternative, he submitted that the reference to payment as per Ch.’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 P., for Ch., 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 Ch., and later upon concession
by CAI, that Ch. were at liberty to choose the place of payment and/or
to stipulate for payment in London, Ch. 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 P.’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 Ch. 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 Ch. 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 Ch. of conforming documents.
A ‘floating’ place of performance.
32. Mr M.s’ 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 M. 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.
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’.
Fourth, Mr M. 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 M. 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.”
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] E.C.R. 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.
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 M. 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.
Further, I do not think that the statements of principle quoted by Mr M.
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.
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
Ch. 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 Ch. 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.”
In my view, the gravamen of Mr M.s’ argument is a charge of forum
shopping, which I do not find to be made out. I should add that it was
Mr M.s’ ‘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 M.s’ 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 Ch. 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 M.s’ 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 M. 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 M. did not take any point concerning the commercial invoice which
was in fact presented by Ch.; 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.
I would therefore dismiss this appeal.
Mr Justice Ferris: I agree
Order: Appeal dismissed. Counsel to lodge minute of order.
(Order does not form part of approved judgment).