Deutsche Bank v. CIMB  EWHC 1264 (Comm)
In May 2017, the High Court ruled against Deutsche Bank in its dispute with CIMB following a detailed Request for Further Information (RFI) in which CIMB sought details of a payment made to a beneficiary under letters of credit.
The dispute concerns a series of 10 letters of credit between the claimant (Deutsche Bank), the confirming bank (CB, the London branch of Deutsche Bank), and the defendant, the issuing bank (IB, the Singapore branch of CIMB, a Malaysian bank). In summary, CB seeks repayment of the sums it paid under the letters of credit, in the amount of some US$ 9.9 million. IB claims that the transactions in question were sham transactions, entered into for the purposes of obtaining payment under the letters of credit. It argues that the documents presented under the letters of credit were discrepant, were presented late and did not comply with the terms and conditions of the letters of credit. Further, IB does not admit that payment was made by CB to the beneficiary, Global Tradinglinks Ltd.
The issue that fell to be considered by the court arose out of a lengthy RFI made by IB, in which it sought information from CB regarding its claim that it had indeed made payment to the beneficiary under the letters of credit. CB argued that it was a question of principle whether or not the issuing bank can enquire at all as to whether the confirming bank had made payment or whether it must simply take the confirming bank’s word for it.
The starting point in considering the issuing bank’s undertaking to the confirming bank in such circumstances is Article 7(c) of the Uniform Customs and Practice for Documentary Credits (UCP 600), which provides that an issuing bank undertakes to reimburse a nominated bank that “has honoured...a complying presentation”. CB had sought to read into Article 7(c) the words “states that” before “it has honoured”, but this was rejected by the court. The court concluded that it was not correct, as a matter of principle, to construe Article 7(c) by writing in words that materially changed its sense. The UCP 600 is revised periodically, and that is the occasion for introducing changes, if thought desirable.
The court held that, on a true construction of Article 7(c), read with the definition of “honour” set out in Article 2, an issuing bank’s undertaking to reimburse a confirming bank arose where the confirming bank had honoured a complying presentation by making payment under credit.
As to whether IB was entitled to the information sought, the court noted that, in its defence, IB did not admit payment by CB. Therefore, CB was put to proof that it had honoured presentations by the beneficiary under the letters of credit. Indeed, in its reply, CB pleaded a detailed case as regards payment, and it is that pleading that was the subject of the RFI seeking details as to how CB says it made the payment to the beneficiary. The court concluded that, the claimant having made assertions as to payment, the defendant was entitled to ask for further information in the usual way.
The court also noted that there was a significant qualification on the issue, and that the length and breadth of the RFI served by IB had something of an air of a fishing expedition. The court would not entertain requests seeking unduly to investigate the CB’s payment arrangements in the hope that something by way of a defence would turn up. The judge indicated that the legitimate scope of what should be produced in response to the RFI had been explored in oral argument and that the parties should be able to agree the terms of the appropriate order amongst themselves.
The judgment in this case provides helpful clarification as regards the interpretation of Article 7(c) of the UCP 600, and serves as a reminder of the fact that the court will not readily accept an interpretation which requires writing wording into the UCP 600 which does not already exist.
Further, and of perhaps broader application, this case is a reminder that, irrespective of the points of principle that underlie an RFI, the Commercial Court will give short shrift to any attempt at a fishing expedition. The wording of the Admiralty and Commercial Courts Guide, which provides that the court will only order further information to be provided if it is satisfied that the information was strictly necessary, must be adhered to.
Thanks to Serene Allen, Matilda Cox O’Brien, Karen Jacobs, Amandeep Khara, Ralph Kellas, Tom Kiernan, Beth Lovell, Rupal Nathwani, Lara Seabourne and Thomas Simpson who contributed to this publication.