ComC Rionda (claimant) obtained ex parte injunction from Tuckey J under the ‘clear fraud exception’ (Edward Owen) to prevent its bank, Standard (first defendant), from paying out under three letters of credit to two Swiss banks (non-parties) who had confirmed the credits and had discounted the deferred payments due under them in part directly to the beneficiary (Vivalet, fifth defendant) and in part under back to credits to the third party suppliers of alcohol. The Swiss banks applied to discharge the injunction inter partes.
Held: injunction discharged. (1) Even assuming the clear fraud exception to have been made out, the balance of convenience was in favour of discharge: Harbottle, UTC, GKN applied, Themehelp v West distinguished; (2) Semble, the clear fraud exception does not rest simply on the court’s concern to prevent fraud, but on an implied term that a bank will not act in pursuance of a credit if it has not had timely notice of a clear fraud by the beneficiary. Bolivinter, UCM and Deutsche v Walbrook considered; (3) In the present case, it was doubtful whether Rionda was entitled to invoke the fraud exception, since (i) it had not sought to rescind its contracts until after the documents had been negotiated and the goods supplied; and (ii) notice of the fraud had not come to the banks until after the documents had been negotiated and the beneficiary had received the benefit of the transactions; (4) There was misrepresentation of Rionda’s financial situation and non-disclosure of the close cooperation, possibly amounting to collusion, between Rionda and Standard.
Judges:
Rix J
Citations:
[1999] 1 All ER (Comm) 890, [1999] 2 Lloyd’s Rep 187, [1999] Lloyd’s Rep Bank 197, [1999] CLC 1148, Independent 14-Jun-1999
Jurisdiction:
England and Wales
Banking
Updated: 23 October 2022; Ref: scu.225406