Den Danske Bank A/S and others v Surinam Shipping Ltd

An advising bank under the Uniform Customs and Practice for Documentary Credits does not assume liability to the beneficiary for payment merely by advising a credit or communicating with the parties. Direct liability requires conduct showing that the bank undertook the role of a confirming bank or otherwise accepted responsibility for payment. A defendant entitled to an indemnity from a third party may challenge its own liability where the third party has been joined, even if that third party has not appealed. The third party is entitled to advance any defence available to the defendant because it will be bound by findings made between claimant and defendant.

Surinam Shipping Ltd sued Mauritius Commercial Bank Ltd (“MCB”) for USD 75,000 under a transferable documentary credit concerning the sale of a vessel. MCB maintained that it was only an advising bank. Den Danske Bank A/S, which had confirmed the credit, was joined as a third party and ordered to indemnify MCB after the trial judge found for Surinam.

The Supreme Court of Mauritius, on Den Danske Bank’s appeal, held that MCB was purely an advising bank and set aside the judgment. It did not determine whether the documents had been presented in compliance with the credit. The appeal to the Privy Council concerned MCB’s liability and whether Den Danske Bank could raise that issue in the Court of Appeal.

1. MCB’s status. The Board dismissed the appeal. Under the Uniform Customs and Practice for Documentary Credits (1993 Revision) ICC Publication No 500 (“UCP 500”), an advising bank’s duties do not include responsibility to the beneficiary for payment due from the issuing or confirming bank. The credit and MCB’s letter of 6 September 1996 made clear that MCB was advising the credit without adding confirmation.
2. MCB’s guidance concerning documentary compliance, transmission of correspondence, custody of documents and communications with the parties did not demonstrate a change of role. The Board found no letter or other basis for concluding that MCB accepted direct liability for payment or effectively became a confirming bank.
3. Procedural point. The Court of Appeal had a discretion to permit Den Danske Bank to argue that MCB was not liable, although that point had not appeared in its notice of appeal. The Board would not interfere with that procedural decision absent a real miscarriage of justice. Surinam had an opportunity to argue the issue before the Board, and no such miscarriage occurred.
4. Third-party indemnity. A defendant entitled to an indemnity from a third party may have no interest in disputing its own liability. A joined third party will be bound by findings made between claimant and defendant and is therefore entitled to advance any defence available to the defendant. MCB’s failure to appeal did not prevent Den Danske Bank from challenging the finding of MCB’s liability.
5. The question whether Surinam had made due presentation of the documents remained undecided, since it had not been argued before the Board.

• Privy Council: Appeal dismissed on 16 April 2014.
• Supreme Court of Mauritius: The Court of Appeal allowed Den Danske Bank’s appeal, held that MCB was purely an advising bank, and set aside the trial judgment. It did not decide documentary compliance.
• Trial court in Mauritius: Judgment was given for Surinam against MCB, with Den Danske Bank ordered to indemnify MCB.