Summary
A winding-up petition should not be used to determine a debt subject to a substantial dispute raised in good faith. A dispute is substantial if it has a rational prospect of success, and the court may examine the evidence in detail to determine whether that threshold is met.
Where the UCP 600 is incorporated into a documentary credit, departure from its provisions requires clear wording or irreconcilable inconsistency. The credit must be construed consistently with its international commercial purpose, autonomy and irrevocability. An issuer which releases discrepant documents to the applicant without complying with Article 16 cannot rely on the discrepancies unless an effective contractual modification applies.
Factual background
Heytex petitioned to wind up Unity Trade Capital Limited on the basis of an unpaid demand under an irrevocable letter of credit issued in connection with a sale of fabrics. Unity disputed liability, arguing that the credit had been issued by a connected Gambian company, that the presented documents were discrepant, and that contractual Credit Norms modified the UCP 600 and released Unity from liability.
The court considered the identity of the issuer, the meaning of the requirement that documents be signed by all sides of the letter of credit, the incorporation and effect of the Credit Norms, and whether the petition debt was substantially disputed in good faith.
Held
The petition succeeded. There was no real or substantial dispute as to the debt. Unity was the issuer and the correct respondent.
The documents presented on 9 November 2020 complied with the requirement that they be signed by all sides of the letter of credit. In context, that expression meant the seller and buyer, Heytex and Jibran. Requiring the issuer’s signature would have made the expressly irrevocable credit effectively revocable and would have conflicted with the commercial function of documentary credits.
The UCP 600 operated as incorporated contractual terms. Its international character and commercial purpose had to guide construction. Modification or exclusion required clear language or irreconcilable inconsistency. The reference to the Credit Norms in the SWIFT message did not provide sufficient notice of the substantial and unusual departures alleged by Unity.
Article 16 provided exhaustive options for dealing with discrepant documents. An issuer which released them to the applicant could not rely on the discrepancies unless it complied with the contractual requirements and accepted liability to the beneficiary. Unity’s release of the documents therefore precluded reliance on the alleged discrepancies.
Alternatively, even if incorporated, the Credit Norms did not have the effect contended for. The term Facility referred to the arrangement between Unity and Jibran, not the letter of credit itself. Avoidance of the Facility and release from further liability did not extinguish Unity’s existing obligation to Heytex under the credit.
The petition was granted on the basis that the debt was not substantially disputed.
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Key cases cited
22 authorities cited.
- Taurus Petroleum Limited v State Oil Marketing Company of the Ministry of Oil, Republic of Iraq [2017] UKSC 64
- Tallington Lakes Ltd v South Kesteven District Council [2012] EWCA Civ 443
- Fortis Bank SA/NV & Anor v Indian Overseas Bank [2011] EWCA Civ 58
- Sirius International Insurance Company (Publ) v FAI General Insurance Ltd. & Ors [2003] EWCA Civ 470
- Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433
- Spurling (J) Ltd v Bradshaw [1956] 1 WLR 461
- Yuchai Dongte Special Purpose Automobile Company Ltd v Suisse Credit Capital (2009) Ltd [2018] EWHC 2580 (Comm)
- Barrier Ltd v Redhall Marine Ltd [2016] EWHC 381 (QB)
- Rusant Ltd v Traxys Far East Ltd [2013] EWHC 4083
- Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch)
- TTMI SARL v Statoil ASA [2011] EWHC 1150 (Comm)
- Habas Sinai VE Tibbi Gazlar Isthisal Endustri A.S. v Sometal S.A.L. [2010] EWHC 29 (Comm)
- Re A Company No.006685 [1997] BCC 830
- In re a Company (No 0012209 of 1991) [1992] 1 WLR 351
- Forestal Mimosa Ltd v Oriental Credit Ltd [1986] 1 WLR 631
- Bolivinter Oil SA v Chase Manhattan Bank NA (Practice Note) [1984] 1 WLR 392
- Mann v Goldstein [1968] 1 WLR 1091
- SOPROMA S.p.A. v. MARINE & ANIMAL BY-PRODUCTS CORPORATION [1966] 1 Lloyd's Rep 367
- Olley v Marlboraugh Court Ltd [1949] 1 KB 532
- Thompson v London, Midland and Scottish Railway Co [1930] 1 KB 41
- EQUITABLE TRUST COMPANY OF NEW YORK v. DAWSON PARTNERS, LTD. (1927) 27 Ll L Rep 49
- Parker v The South Eastern Railway Co. (1877) 2 CPD 416
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Cases citing this case
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