HEYTEX BRAMSCHE GMBH v UNITY TRADE CAPITAL LIMITED

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.

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.

1. The petition succeeded. There was no real or substantial dispute as to the debt. Unity was the issuer and the correct respondent.

2. 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.

3. 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.

4. 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.

5. 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.