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Standard Chartered Bank v Pakistan National Shipping Corp (No 2)

[2003] 1 AC 959

Case summary last updated at 18/01/2020 17:11 by the Oxbridge Notes in-house law team.

Judgement for the case Standard Chartered Bank v Pakistan National Shipping Corp (No 2)

D contracted to ship cargo for B and payment was to be made by a letter of credit from X bank to P bank. The conditions of the letter being issued were (1) all docs had to be present and issued by a certain time, and (2) all docs had to be delivered to P by a certain date. P was to pay D and the money was to be paid to P by X. D falsified docs to make it look like they had been issued on time and handed them into P late. P was unaware of the falsification (D said they were genuine and true), but was aware of them being handed in to it late. It lied to X, claiming they were handed in on time, but X realised about the falsification and refused to pay. This caused P loss, since it had negligently relied on the false belief that it could obtain reimbursement from X, which it could not. P sued D for tort of deceit when it became aware of the falsification, and D claimed contributory negligence on P’s part for relying on the negligent misunderstanding. HL held that P could claim for loss caused by a falsified bill of lading and this would NOT be reduced by contributory negligence. 

Lord Hoffmann: He endorses the dicta of Lord Hope in Reeves about the “two-limb” approach to fault. From the wording of s.1, he deduces that the aim of the act is “to relieve plaintiffs whose actions would previously have failed and not to reduce the damages which previously would have been awarded against defendants”. He also asserts that Edinton v Fitzmaurice (see last week) shows that “if a fraudulent representation is relied upon, in the sense that the claimant would not have parted with his money if he had known it was false, it does not matter that he also held some other negligent or irrational belief about another matter and, but for that belief, would not have parted with his money either.” Hence it is irrelevant that P was mistaken as to the ability to get reimbursement, since it was relying on the D’s fraudulent misrepresentation that the documents it presented were true (i.e. not falsified). 

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