The Federal Court held that based on the provision of art. 10(a)(iv) of the UCP 400, upon the presentation of an irrevocable letter of credit to the issuing bank (TBB), it is a mandatory requirement that payment is to be effected upon sight of the said document by the issuing bank. The contract pursuant to the said letter of credit is considered by then to have been fully realised. The issuing bank had no right to seek the return of the monies it had paid to the appellant as payment was upon sight of the documents. The issuing bank was estopped from seeking the return of the monies that it had lawfully remitted to the respondent through the appellant as the negotiating bank. The right of recourse did not arise in the present case because TBB as the issuing bank did honour the letter of credit at the first instance. Further, the issuing bank is estopped from demanding the return of the payment made on the grounds of alleged defects or discrepancies. There must be certainty, promptness and finality of payment which a letter of credit served to provide to the transacting parties. The court would also not lightly interfere with the bank’s obligations to make payments under a letter of credit. A letter of indemnity was relied upon by the appellant to support the argument that the transaction was carried out under the UCP 400 which provides for a right of recourse. However, the argument made by the appellant was unnecessary for if there was an indemnity, the appellant’s recourse to the respondent was upon the indemnity and not the UCP 400. Further, the indemnity herein was suspect as to its authenticity and applicability to the said letter of credit’s transaction. The High Court had accepted the evidence of the respondent and held that the letter of indemnity was suspicious because the date had been blanked over and it was executed for other purposes. That was a finding of fact made by the trial judge and this court as an appellate court should not disturb such a finding. There was no payment by mistake to the respondent because the payment made was in fact due to the respondent under the letter of credit. There was no equitable ground to hold that the money had been paid by mistake. There was also no fraud on the part of the respondent during her receipt of the payment. The appellant had in fact represented to the respondent that the respondent was entitled to the payment. By doing so, the appellant was estopped from seeking a refund. Datuk Ganesan acted for the Respondent.
Garnesan & Irmohizam Advocates and Solicitors
