Banco Santander Sa v Bayfern Ltd and Others: ComC 29 Jun 1999

The court was asked whether the risk of fraud on the part of the beneficiary of a confirmed deferred payment letter of credit is to be borne by the issuing bank (and so possibly the applicant for the credit) or by the confirming bank where the confirming bank has discounted its own payment obligations to the beneficiary and paid over the discounted sum to it and the fraud is discovered only after it has done so but before the maturity date of the letter of credit.
Held: It is well established that the beneficiary of a deferred payment letter of credit, if he has obtained it by fraud or deception, will not be entitled to the benefit of the deferred credit. A bank having made discounted advances against the letter was therefore unable to claim re-imbursement when such fraud was later discovered.
ComC Deferred payment letter of credit – fraud on part of beneficiary discovered before maturity date of letter of credit – confirming bank having discounted own obligation to beneficiary of letter – whether risk of fraud to be borne by issuing or confirming bank.
Langley J
Times 29-Jun-1999, Gazette 30-Jun-1999, [1999] EWHC 284 (Comm)
Uniform Customs and Practice for Documentary Credits (1993) of the International Chamber of Commerce
England and Wales
CitedStoddart v Union Trust Ltd CA 1912
. .
CitedEuropean Asian Bank AG v Punjab and Sind Bank CA 1983
The court heard a claim by the appellant bank against the issuing bank of a deferred payment letter of credit. The appellants had negotiated the credit by paying its discounted value to the Beneficiary. Between that date and the maturity date fraud, . .
CitedThe Society of Lloyds v CIB 1993
. .
CitedIn re Charge Card Services Ltd ChD 1987
The court discussed the historic availability of set-off in an insolvency: ‘By the turn of the [20th] century, therefore, the authorities showed that debts whose existence and amount were alike contingent at the date of the receiving order, and . .
CitedUnited City Merchants v Royal Bank of Canada HL 1983
The House was asked as to the question of fraud which would entitle a banker to refuse to pay under a letter of credit notwithstanding the rule requiring payment when the documents were in order on their face.
Held: The whole commercial . .

Lists of cited by and citing cases may be incomplete.
Updated: 25 July 2021; Ref: scu.78128