BANK OF CHINA v STANDARD CHARTERED BANK AUSTRALIA LIMITED [1991] NSWCA 20

BANK OF CHINA v STANDARD CHARTERED BANK AUSTRALIA LIMITED

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MAHONEY, PRIESTLEY and CLARKE JJA 2, 3 July 1991, 16 July 1991 [1991] NSWCA 20

LETTER OF CREDIT — FORGED VERIFICATION Appeal from Commercial Division — Letter of Credit from Bank of China, Hong Kong Branch — Letter of Credit forged — Presented by Standard Chartered Bank Australia Limited to Sydney Branch of Bank of China for verification of signatures on Letter of Credit — Stamped "Verified" — Presenting Bank sued Bank of China on estoppel as to validity of the Letter of Credit Held: Estoppel not established.

Mahoney JA A customer of Standard Chartered Bank Australia Limited (the plaintiff) arranged for the plaintiff to receive a document purporting to be a letter of credit issued by Bank of China (the defendant) for $US1.7 million. The document was a forgery: no such letter of credit had been issued.

The plaintiff thought the document was genuine and advanced some $A1.7 million on the faith of it. It subsequently claimed payment from the defendant in reliance on the document. That payment was refused. The plaintiff thereupon sued the defendant for the amount in question and interest.

The plaintiff's claim, as it is now pressed, accepts that the document was forged and was not a valid letter of credit. It therefore sues the defendant upon two alternative bases: it claims that the defendant is estopped by its conduct from denying that the letter of credit was valid; and it contends that the defendant is liable in damages because its conduct constituted contraventions of s52 of the Trade Practices Act 1974 (as amended) and s42 of the Fair Trading Act 1987 (as amended). The plaintiff claimed initially in negligence against the defendant but that claim is not now pursued separately or, if and insofar as it is, it is not necessary to deal separately with it.