Quiktrak Networks Pty Ltd v Housely Technology Ltd

[2007] NSWSC 4

CITATION:	Quiktrak Networks Pty Ltd v Housely Technology Ltd & Anor [2007] NSWSC 4
HEARING DATE(S):	3 January 2007
JURISDICTION:	Common Law
JUDGMENT OF:	Adams J at 1
EX TEMPORE JUDGMENT DATE:	3 January 2007
DECISION:	1. The Notice of Motion is returnable instanter; 2. The time for service of the summons and Notice of Motion is abridged to 10am on 4 January 2007 ; 3. Service of the summons and Notice of Motion may be effected by facsimile in Hong Kong on the first defendant and its solicitors Stevenson Wong & Co Solicitors, and notaries; 4. The second defendant is restrained until further order of the Court from making any payment pursuant to letter of credit number AI2006010362 issued by the second defendant, the National Australia Bank to BNP Paribas, or the first defendant, Housely Technology Limited, or any other person; 5. The summons and Notice of Motion are returnable at 10am on 29 January 2007 before the equity duty judge; 6. Costs are reserved; 7. Liberty is granted to the parties to apply on 3 days’ notice.
CASES CITED:	Inflatable Toy Company v State Bank of New South Wales (1994) 34 NSWLR 243 Pedna Pty Limited Trading As Zone Communications v Sitep Society Per Azioni & Ors (unreported) (1997) NSW SC 1032 United City Merchants (Investment) Limited v Royal Bank of Canada [1983] 1 AC 168
PARTIES:	Quiktrak Networtks Pty Limited - Plaintiff Housely Technology Limited - First defendant National Australia Bank Limited - Second defendant
FILE NUMBER(S):	SC 1009/2007
COUNSEL:	Mr E Cox - Plaintiff Defendants unrepresented
SOLICITORS:	Somerville & Co Pty Limited - Plaintiff

Ex tempore- checked

THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

ADAMS J

WEDNESDAY 3 JANUARY 2007

2007/01009 - QUIKTRAK NETWORKS PTY LIMITED v HOUSELY TECHNOLOGY LIMITED & ANOR

JUDGMENT

1 HIS HONOUR: This is an ex parte application to restrain the payment of money under a banker's letter of credit issued in respect of a contractual relationship between the plaintiff and defendant.

2 The plaintiff is a listed telecommunications company specializing in the provision of certain electrical equipment. Its business is extensive. It entered into a contract with the defendant which owns manufacturing facilities in the People’s Republic of China to provide equipment by delivery in Australia.

3 The defendant is the wholly owned subsidiary of a Hong Kong public company. Pursuant to the agreement for the supply by the defendant of a range of products a standby letter of credit in the amount of USD$500,000 was provided by the plaintiff as security for payment by it of any equipment ordered by it and supplied by the defendant from time to time. Under the agreement the supply and payment regime was, briefly, that goods to be supplied were tested to ensure compliance with specification, an invoice was issued when delivery was accepted, and payment under the letter of credit made upon delivery of the invoice to the paying bank, in this case the National Australia Bank Limited. The letter of credit itself required that drawings must represent, "Funds due and payable in connection with a certain invoice issued by [the defendant], which is past due and remains unpaid as of the date of this drawing".

4 The plaintiff became aware following an inquiry from the bank that the defendant had tendered an invoice in the sum of USD$223,131.76. Mark James Pallister, a director of Multitrak Pty Limited, which is a wholly owned subsidiary of the plaintiff, and its trading arm (Multitrak is responsible for the management of the transactions such as the present) deposes that there has been no notification from the defendant that any goods were available for delivery, nor had it requested the delivery of any goods, nor has it received any invoice from the defendant or any demand for moneys outstanding pursuant to the agreement. He also says that no moneys are currently outstanding by the plaintiff to the defendant.

5 Since, in the normal course, invoices for goods to be delivered are part of a transaction which I have briefly described above, it is troubling that the invoice to which I have referred appears without any of the transactional context which has hitherto accompanied the supply of product by the defendant. Furthermore, the invoice contains no shipping mark. These circumstances lead to the strong probability that the invoice does not evidence a genuine transaction.

6 In Inflatable Toy Company v State Bank of New South Wales (1994) 34 NSWLR 243, Young J considered the circumstances in which an injunction would be granted to prevent a bank making payment under a letter of credit, pointing out that such orders are exceptional. His Honour adopted (with the qualification that "the concept of fraud must not be narrowly constrained") the following passage from the speech of Lord Diplock in United City Merchants (Investment) Limited v Royal Bank of Canada [1983] 1 AC 168 at 183 –

“...there is one established exception: That is, where the seller, for the purpose of drawing on the credit, fraudulently present to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue.”

7 Young J observed at 251 –

“It is not merely a mechanical exercise of seeing whether the words and the documents are completely true or completely untrue to the knowledge of the seller; the question is really one of considering whether in all the circumstances the uttering of the documents involves actual fraud.”

8 Accepting the evidence of Mr Pallister as true, though of course it is not tested in the nature of the case, having regard to the terms of the letter of credit, and the form of the invoice itself, I am satisfied that in all probability the uttering of the invoice involves actual fraud. Accordingly, it seems to me appropriate that the injunction sought should be granted.

9 Having regard to the caution with which such orders are made it will often be more appropriate to injunct the disbursement of the funds by the receiving party rather than prevent the bank from honouring the letter of credit. In this case, however, the funds are to be transferred to New York. Furthermore, the defendant is entirely situated in Hong Kong and, it may be, elsewhere in the People’s Republic of China. It is clear that the enforcement of any orders in those circumstances must be regarded as fraught: see Pedna Pty Limited Trading As Zone Communications v Sitep Society Per Azioni & Ors (unreported) (1997) NSW SC 1032.

10 Accordingly, subject to the giving of the appropriate undertaking as to damages, I intend to make the orders sought.

11 I make the following orders:

1. The Notice of Motion is returnable instanter.
2. The time for service of the summons and Notice of Motion is abridged to 10am on 4 January 2007.
3. Service of the summons and Notice of Motion may be effected by facsimile in Hong Kong on the first defendant and its solicitors Stevenson Wong & Co Solicitors, and notaries.
4. The second defendant is restrained until further order of the Court from making any payment pursuant to letter of credit number AI2006010362 issued by the second defendant, the National Australia Bank to BNP Paribas, or the first defendant, Housely Technology Limited, or any other person.
5. The summons and Notice of Motion are returnable at 10am on 29 January 2007 before the equity duty judge.
6. Costs are reserved.
7. Liberty is granted to the parties to apply on 3 days’ notice.

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