Standard Chartered Bank v Pakistan National Shipping Corp (No 2) [2003] 1 AC 959

• Defendant contracted to ship cargo for B and payment was to be made by a letter of credit from X bank to Plaintiff 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 Plaintiff by a certain date.

• Plaintiff was to pay Defendant and the money was to be paid to Plaintiff by X. Defendant falsified docs to make it look like they had been issued on time and handed them into Plaintiff late. Plaintiff was unaware of the falsification (Defendant 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 Plaintiff loss, since it had negligently relied on the false belief that it could obtain reimbursement from X, which it could not.

• Plaintiff sued Defendant for tort of deceit when it became aware of the falsification, and Defendant claimed contributory negligence on Plaintiff’s part for relying on the negligent misunderstanding.

• HL held that Plaintiff 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 Edgington v Fitzmaurice 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 Plaintiff was mistaken as to the ability to get reimbursement, since it was relying on the Defendant’s fraudulent misrepresentation that the documents it presented were true (i.e. not falsified). 

RELATED CASES

• Reeves v Commissioner of Metropolitan Police

• Edgington v Fitzmaurice