Letter of Credit: Classic Judgement in 1957

就四页的判决，没几句话，但句句中point。

HAMZEH MALAS & SONS v. BRITISH IMEX INDUSTRIES LTD.

1957 Dec. 10.

[1958] 2 Q.B. 127

JENKINS L.J.
It appears that when the first consignment of steel rods arrived they were, according to the plaintiffs, by no means up to contract quality and many criticisms were made on that score. That is a matter in issue between the parties. In the meantime the plaintiffs wish to secure themselves in respect of any damages they may be found to be entitled to when this dispute is ultimately tried out, by preventing the defendants from dealing with this outstanding letter of credit. Mr. Gardiner, in effect, treats this as no more than part of the price, a sum earmarked to pay for the goods bought under the contract, which the plaintiffs have become entitled to repudiate; and he says that the defendants ought, accordingly, to be restrained from dealing with the amount of this letter of credit. He points out that he is not seeking any order against the bank, but merely against the defendants.

We have been referred to a number of authorities, and it seems to be plain enough that the opening of a confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes upon the banker an absolute obligation to pay, irrespective of any dispute there may be between the parties as to whether the goods are up to contract or not. An elaborate commercial system has been built up on the footing that bankers' confirmed credits are of that character, and, in my judgment, it would be wrong for this court in the present case to interfere with that established practice.

There is this to be remembered, too. A vendor of goods selling against a confirmed letter of credit is selling under the assurance that nothing will prevent him from receiving the price. That is of no mean advantage when goods manufactured in one country are being sold in another. It is, furthermore, to be observed that vendors are often reselling, goods bought from third parties. When they are doing that, and when they are being paid by a confirmed letter of credit, their practice is - and I think it was followed by the defendants in this case - to finance the payments necessary to be made to their suppliers against the letter of credit. That system of financing these operations, as I see it, would break down completely if a dispute as between the vendor and the purchaser was to have the effect of "freezing," if I may use that expression, the sum in respect of which the letter of credit was opened.

I agree with Mr. Gardiner that this is not a case where it can be said that the court has no jurisdiction to interfere.

The court's jurisdiction to grant injunctions is wide, but, in my judgment, this is not a case in which the court ought, in the exercise of its discretion, to grant an injunction. Accordingly, I think this application should be refused.

SELLERS L.J.
I agree, but I would repeat what my Lord has said on jurisdiction. I would not like it to be taken that I accept, or that the court accepts, the submission if it was made, as I think it was, that the court has no jurisdiction. There may well be cases where the court would exercise jurisdiction as in a case where there is a fraudulent transaction.

PEARCE L.J.
I agree.