HEYTEX BRAMSCHE GMBH v UNITY TRADE CAPITAL LIMITED

The court determined a winding up petition presented by Heytex against Unity Trade Capital Limited (UTC). Key legal principles applied were the autonomy and irrevocability of documentary credits under the UCP 600, the strict compliance requirement for documentary presentations, and the limited circumstances in which bank liability under Article 16 may be avoided. The judge held (i) UTC was the issuer of the credit; (ii) the documents presented were compliant with the credit as the phrase "all sides of LC" properly read required signatures of seller and buyer (Heytex and Jibran) and not the issuer or advising bank; and (iii) the claimant’s alternative case that UTC had failed to give sufficient notice to incorporate UTC's own "Credit Norms" into the credit succeeded: the Credit Norms were not incorporated so as to displace UCP 600. Because UTC released documents to the applicant without validly avoiding liability under Article 16, the petition debt was not substantially disputed and the petition succeeded.

This was the final hearing of a winding up petition by Heytex Bramsche GmbH (a German seller) against Unity Trade Capital Limited (an English company) founded on an alleged unpaid documentary credit for €200,707.50 issued on 26 August 2020. Heytex sought to wind up UTC for non-payment after presentation of stipulated documents on 9 November 2020 and subsequent refused or discrepant notices from UTC. The petition followed a statutory demand and relied on insolvency under sections 122(1)(f) and 123 of the Insolvency Act 1986.

The principal factual and legal issues framed by the court were:

• Who was the issuer of the letter of credit (UTC or Unity Trade Bank Limited (UTB))?
• What did the express requirement that documents be signed by "all sides of LC" mean and were the presented documents discrepant?
• Were UTC's internal "Credit Norms" incorporated into the credit and, if so, did they modify Article 16 of the UCP 600 so as to avoid UTC's liability when documents were released to the applicant?

The court reviewed documentary evidence (MT700/710 SWIFT messages, witness statements and the Credit Norms), applied commercial principles governing interpretation of documentary credits (including the autonomy principle, UCP 600 Article 1, strict compliance and the limited options under Article 16), and the ordinary contractual tests for incorporation of terms (notice and the degree of prominence required for onerous or unusual terms).

Reasoning in brief: the MT700 was sent by UTC and the advising bank’s MT710 identified UTC as issuer, and the court accepted UTC was the issuer. The phrase "all sides of LC" was construed in context and consistent with international practice and the UCP 600 to require the signatures of buyer and seller (Jibran and Heytex) and so the presentation was compliant. The Credit Norms, which would have constituted a significant departure from the UCP regime if they had the effect contended for (permitting release of discrepant documents to the applicant while discharging the issuer), were not sufficiently brought to the beneficiary’s or advising bank's attention, were in any event directed to the issuer/applicant relationship and to the "Facility" rather than the credit itself, and therefore were not incorporated to displace the UCP 600. The court concluded that UTC, having released documents following the applicant's waiver, could not rely on alleged discrepancies or the Credit Norms to avoid liability. The petition debt was not substantially disputed and the petition succeeded.

This was a first instance determination. The petition succeeded. The judge held that UTC was the issuer of the credit, the presented documents complied with the credit ("all sides of LC" meant seller and buyer), the Credit Norms had not been incorporated so as to modify the UCP 600, and UTC could not rely on alleged discrepancies or the Credit Norms to avoid liability. Accordingly there was no substantial bona fide dispute to defeat the winding up petition.