Bank of China v Standard Chartered Bank Australia Limited

The Court of Appeal of New South Wales considered a dispute between the Bank of China and Standard Chartered Bank Australia Limited concerning a letter of credit. The Bank of China, as the applicant, sought to appeal a decision of the Commercial Division of the Supreme Court of New South Wales.

The central legal issue before the Court of Appeal was whether the Bank of China was entitled to an injunction to restrain Standard Chartered Bank from paying out under a letter of credit. This involved determining whether the circumstances of the case met the stringent requirements for granting such an injunction, particularly in the context of international trade and the autonomy of letters of credit.

The Court of Appeal affirmed the principles governing letters of credit, emphasizing their independence from the underlying contract between the buyer and seller. It held that an injunction to restrain payment would only be granted in exceptional circumstances, such as clear fraud in which the issuing bank has notice. In this instance, the Court found that the evidence presented by the Bank of China did not establish the necessary degree of fraud or impropriety to justify interfering with the contractual obligations of Standard Chartered Bank under the letter of credit. The Court concluded that the appeal should be dismissed.