[*168]Société Metallurgique d’Aubrives & Villerupt v.
British Bank for Foreign Trade
(1922) 11
Ll. L. Rep. 168
COUNSEL: For the plaintiffs Mr. Stuart J. Bevan, K.C., and Mr. D. B. Somervell (instructed by Messrs.
Coward & Hawkesly, Sons & Chance) appeared
and the defendants were represented by Mr. R. A. Wright, K.C. and Sir H. Cassie
Holden (instructed by Messrs. Roney & Co.).
JUDGE: Before
Mr. Justice Bailhache.
DATE: Tuesday, May 23, 1922.
Banking—Letter of Irrevocable Credit—Sale
of Goods—Payment on Presentation of Shipping Documents—First
Consignment paid for—Later payments refused — Description,
Quantity and Quality of Goods.
This was an action in which the plaintiffs, the Société Metallurgique d’Aubrives
& Villerupt, France, claimed damages for alleged breach of contract in
the terms of a letter of credit dated Aug. 2, 1921, from the defendants to Mr. A. G. Cloake, on behalf of the plaintiffs.
The
plaintiffs were sellers of pig iron to a Mr. Ford, and irrevocable credit under the contract of sale had to be opened in favour of the plaintiffs’ agent, Mr. A. G. Cloake, and payments made to their bank, the Comptoir National d’Escompte
de Paris, King William Street, against invoices and Antwerp shipping agents’
receipts in respect of 610 tons of pig iron at the price of 200 French francs
per ton. The plaintiffs said they duly supplied the iron, and the first
consignment was paid for on presentation of the documents, but that later the
bank on instructions from Mr. Ford refused to pay on presentation of further
documents, asserting that the pig iron was not of the quality contracted for. The bank now denied liability.
Mr. STUART BEVAN said the action was one arising in
connection with an irrevocable confirmed credit opened in favour
of the London agents of the plaintiff company, a French firm,
against invoices of the Antwerp shipping agents’ receipts, in reference
to a quantity of pig-iron sold by the plaintiff company to a Mr. Ford. The quantity
was 610 tons, sold f.o.b. Antwerp, at 200£. per
ton. The plaintiff delivered one consignment of iron covered by the credit to
the buyer, Mr. Ford. They presented their documents to the defendant bank
covering this first delivery of 10,160 kilos, and the bank paid. Then, when
plaintiffs’ agent presented documents for the subsequent consignment,
the bank, on the instructions of Mr. Ford, refused to acknowledge these
documents, and plaintiffs had not been paid.
The bank
said they were entitled to refuse because the plaintiffs did not comply with
the terms of the contract in the matter of the description and quantity of
goods supplied. The arrangement between the parties was that originally payment
should be made by the bank against shipping documents, the sale being f.o.b.
Subsequently for shipping documents was substituted weight receipts of the
buyer’s (Mr. Ford’s) agent in Antwerp, and the documents they
found in the first case were an invoice in the terms of the contract and Mr.
Ford’s Antwerp agent’s weight receipt. The weight receipt
described the iron as “fonte brute,”
which he (Counsel) understood was the French equivalent for pig-iron. “Fonte brute” covered pig-iron of every
description. The reason he suggested why Mr. Ford instructed the bank not to
pay against documents was not because the agent in Antwerp had given weight
receipts for fonte brute, but because he (Mr. Ford)
had sold himself to certain buyers pig-iron of a different description from the
pig-iron he had purchased from the plaintiffs, to whom he sent some of the
plaintiffs’ iron, and there had been complaints.
He (Mr. Bevan) did not, however, propose to go into this question
of Mr. Ford’s dispute with other persons.
Until the trouble arose between Mr. Ford and his buyers Mr. Ford was content to honour the documents about which this dispute had
arisen. Then Mr. Ford said he contracted for high-grade foundry pig-iron, but
that the plaintiffs had only delivered fonte brute,
which was not high-grade foundry iron, and, in those circumstances, the
plaintiffs were not entitled to receive payment against documents which
referred to fonte brute. The contract was in fact for
pig-iron of good quality, and that had been supplied, and he said fonte brute was the French description for practically all
pig-iron.
For the
defendants, Mr. CHARLES FORD, the purchaser of the iron, was called, and said
he instructed the bank not to pay, because, in his opinion, the iron was not up
to the quality specified in the contract.
[*169] In
reply to Mr. Stuart Bevan, he said he bought on the
analysis and not as No. 3, and the iron did not, he asserted, come up to it. He
admitted that he had sold 400 tons of it.
Mr.
WRIGHT, for defendants, submitted that the documents presented must be entirely
within the terms of the mandate, and the essential part of the case was the
analysis and shipping documents for highgrade foundry
pig-iron. A shipping document was not tendered here, and he said that in these
circumstances the documents were clearly insufficient. In the documents presented the
iron was described as fonte brute, which meant
nothing more than pig-iron pure and simple, and did not comply with the terms
of the contract. No document contained an analysis of the iron. When Mr. Ford
told them they must not pay any more they were bound to scrutinise
the documents, and, having done so, they came to the conclusion that they could
not pay on them. He submitted that in this the bank were
right and that there was no ground of action against them.
JUDGMENT.
Mr. Justice BAILHACHE
gave judgment in favour of
the plaintiffs with costs, and in doing so said: This is an action which is
common enough in one way, but which here presents some uncommon features, and I
am not sure that it is covered by authority, and if it is not I am not sure
that I am altogether the better pleased with it on that account.
The
action is an action by the Société Metallurgique, &c., against the British Bank of Foreign
Trade, and the plaintiffs’ complaint against the bank is that although
the bank opened an irrevocable credit to pay for pig-iron bought by a Mr. Ford,
who carries on business in this country, the British Bank of Foreign Trade
declined to pay against documents, which documents, the plaintiffs,
say, were in accordance with the terms of the letter of credit. So far as the
short facts of the case go, the matter stands in this way. Mr. Ford bought a
quantity of pig-iron, 610 tons, which is described as “Fonte Moulagetesse
Sangrade,” containing a minimum of 3 per cent. of
silicon and is sold apart from that upon an approximate analysis. Now, Mr. Ford
had been asking about a certain No. 3 quality, but that was not the quality
that was sold to him by the contract of July 30. It is agreed that if the iron
complied with the analysis of July 30 it might fairly be described as a
high-grade pig-iron. Payment was arranged for in this way: First of all the
bank would pay in the ordinary way against shipping documents and invoices. The
price was f.o.b. Antwerp. But afterwards that was altered in this respect,
that instead of paving against shipping documents and invoices they were to pay
against Mr. Ford’s Antwerp agent’s weight receipts showing
the weight which had been received by Ford’s agent from the
manufacturers. The bank were to have the weight
receipts and invoices instead of shipping documents and invoices.
The
result of paying in that way was that there was some delay in getting over the
goods, and as goods come rapidly from Antwerp to this country, there was a probability that the
goods would arrive in this country before the documents, and the goods did
arrive before the documents. With regard to the first lot, the documents were
taken to the bank by Mr. Cloake, plaintiffs’
agent, and Mr. Ford went with him. There was some question about the weights receipts but the bank persuaded Mr. Ford that in the
circumstances they were bound to pay against documents. On the weight receipts
so produced and in all the weight receipts there was
no description of the iron at all. It was merely called fonte
brute, and I am satisfied that fonte brute is merely
the generic name for all pig-iron.
There
also appeals the description fonte en gueuse, but I am satisfied that there is no difference
between fonte brute and fonte
en gueuse. The weight receipts, therefore, give no
information as to the quality of the iron, and the first invoice accepted by
the bank described the iron simply as foundry pig iron. It so happened that
some of this pig iron had been sold to the Heatly-Gresham
Engineering Company, of Letchworth, and they had
written complaining of the quality of the iron. It was said that the pig iron
was not sold to the Heatly-Gresham Company under the
same description as that under which it was bought, but however that may be,
Mr. Ford having received complaints from his customers, told his bank, the
British Bank of Foreign Trade, not to pay against documents any more, and the
result was that when the second set of documents and three and four and five
were presented the bank took exception to the form of them on the grounds that
there was no evidence on them that this was a high-grade foundry pig iron.
It is
quite true that there was no statement to that effect on the weight receipts, It is equally true that when Mr. Cloake attended with the second set of
documents, one of his invoices described it as foundry pig iron but not
high-grade foundry pig iron. No bank having called his attention to the fact
that it should be high-grade foundry pig iron, he returned to his office and
made out a fresh invoice in those terms, and then went back with it and
demanded his money, and again the bank refused to pay.
The
question is whether that refusal, repeated in the case of all subsequent
documents, was justified or unjustified. In the first place, I should like to
say that, with regard to the question of weight receipts, I should not have
expected myself, and do not think it would in business be expected, that in the
weight receipts the quality of the pig iron would be referred to at all.
Certainly I should not expect to see the quality in the shipping documents, and
if the shipper put high-grade foundry pig iron on them the shipowner
would certainly have protected himself. I should not expect them to put in the
quality of the pig iron, and so far as the weight receipts are concerned, I
should think that from first to last they were in perfect order.
[*170] With
regard to invoices, it was first of all objected that the original invoices
sent over by the manufacturers were not the invoices taken to the bank, but I
am satisfied that the practice in these cases is that where the sale was
carried out in this country—as this one was—although
the goods come from abroad I am satisfied that the salesman in this country
makes out his own invoices and presents them to the customer or the customer’s
bank. More particularly is that so when the original
invoices, as here, come in a foreign language, and the business has been
conducted in the English language. It is reasonable that the document should be
translated, and there is nothing in the objection that Mr. Cloake
made out new invoices instead of presenting the original invoices from the
works. These invoices had not high grade foundry pig-iron upon them, but simply
had the figure 2, and the only question in this case is whether Mr. Cloake was justified in adding these words to them. Now,
the pig-iron was Sangrade, and was sold with an
analysis, and if the iron complied with that analysis it was high-grade
pig-iron. The attempt to show that it was not so has unfortunately, so far as
defendants are concerned, broken down, and I have no evidence that it was not
correctly described by the invoices Mr. Cloake
presented to the bank.
Under these circumstances, I think the invoices were in
order and were for goods accurately described as high-grade pig-iron. The only
other defence by the bank was that the documents were
not in order, and I have dealt with that. But there was a good deal of evidence
given as to the actual quality of the iron, and in any action against a bank
for failure to honour credit for goods which are not
in order the question of quality only comes in on one or other of two ways.
First of all, did the person presenting misdescribe
the goods in such a way as to be guilty of fraud. If that were so, then the
bank in refusing to pay would be justified. But nothing of that sort is
suggested in this case. There is another case in which the
bank would be entitled not to pay, i.e., if the goods were innocently misdescribed in the documents tendered to them—so
far misdescribed that the goods might be rejected by
the buyers and were so rejected by the buyers. Then in that case also the bank
would be entitled to refuse on the grounds of security of action, and would be
only liable for nominal damages, because in such a case if the bank pays the
buyer can sue the sellers for the return of the price, and he would then pay it
to the bank and the bank would be in the same position. I think the matter
could be put in order in that way.
But here not only am I satisfied that they were not misdescribed, but the buyer has not rejected them, but has
sold 400 tons of these goods to other buyers, who have kept them and paid for
them without complaint, and that leaves the simple question whether the goods
were in order or not having regard to the irrevocable credit the bank had
opened. The answer to that question, for the reasons I have given, is in the
affirmative, and the result must be judgment for plaintiffs, with costs.
His Lordship also allowed plaintiffs 5 per cent. interest.