LIABILITY ON LETTERS OF CREDIT

New Zealand Mail, 20 August 1902, Page 21

LIABILITY ON LETTERS OF CREDIT

price BROS. AND THE BANK OF PRIt NEW ZEALAND.

(From Our Special Correspondent) * LONDON. July 10th. 'At tho end of last week Mr Justice Kennedy iu the King's Bench Division had before him the action of Puce Bios., wool merchants, against the Bank of Now Zealand, and gave a decision of some importance to banks and wool ■ merchants. Price Bros., the plaintiffs, a London firm, sold wool which Messrs a \y McDonald and Co., m line din, pxnorted. The plaintiffs gave a letter of credit requesting the Bank of New 7piland in London to authorise the Link in Dunedin to negotiate McDonald's drafts when he was making shipments to the extent of £SOOO for a ueriod of six months, afterwards raising it to £7OOO. In the letter of credit the plaintiffs undertook to accept the drafts on presentation and to pay them in London on or before maturity. Drafts were drawn to the full extent of the letter of credit, and the claim m the action arose in regard to the losses which had como upon plaintiffs to the extent of about £3,050, by reason, they alleged, either of a breach of contract or an actionable want of reasonable care and skill on the part of the defendants- in advancing more than they ought to have advanced. The latter part of the letter of credit ran: “You are not to bo responsible in the event of any misrepresentation as to quality, quantity, or value of shipments." The value of the produce consigned in respect of which the letter of credit was used by McDonald in New Zealand, represented, said Mr Justice Kennedy, a value much less than was sufficient to justify the negotiation of the drafts at the rate provided for by the letter of credit — vi'4» CO per cent, value. The detaiis of the plaintiffs’ claim, which represented the damage they had suffered when they came to realise the consignments, amounted altogether to £8,050. McDonald and Co. acted fraudulently in regard to the consignments in question, by inserting values in the invoices greatly in excess of the real value, and so they got 6u per cent, value dishonestly put upon these goods. The bank would only be justified iu negotiating McDonald’s drafts if those drafts were accompanied by shipping documents as there specified, viz., bills of lading, invoices and insurance policies. In the invoices of the goods in question there was an all-round price put upon the wool shipped, viz., 11-jd per lb. It could not be said that the document was not an invoice in the mercantile meaning, and he could not see why this invoice value was not to bo treated as a proper invoice value. Those were goods being consigned for sale in London by the owners in Now Zealand. Instead of giving a calculation based on the various lots, it was said, “We are satisfied with our experience in placing an all-round figuro of lljd as a fair value where there is a willing seller and a willing buyer.” Of course it was dishonestly done. But that did not make the document less an invoico because that which was a legitimate expression of value had been abused by a dishonest man. He oould not seo any reason for saying that me invoice was not an invoice because it had not got ah invoice value. . . There had been misrepresentation as to value, but there was no suggestion against the good faith of the bank or the bank’s servants at Dunedin. They were misled in good faith. The plaintiff who had given his evidence in an admirable manner, bad shown himself sceptical as to the value, tf course he had been injured and had suffered. But liis lordship could) not say on the evidence that business men opigut to have examined more fully into that invoice on the question of value, or as to whether or not there was a special agreement justifying an all-round value or that there was ground of actionable negligence, because they-; did not inquire more into the- matter. The bank was entitled to presume that the cDonald firm was an honourable firm, nd the plaintiffs had requested the defendants so to treat them by entering into business relations with them, and taking the risk which, of course, was mvo.veu in giving a letter of credit ot the description m question. The real Dn'nnlr| tIOU ° f 1 - t ! 10 0(180 was that McDonald was dishonest. His lordship S J there was an invoice and an invoice costs’ aUC dlsimssed action, with