ASIF ALI RIASAT VS CRDB BANK PLC COMM CASE NO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT PAR ES SALAAM COMMERCIAL CASE NO. 134 OF 2023 ASIF ALI RIASAT trading as AHMED BUSINESS CENTER................................................. PLAINTIFF ' VERSUS CRDB BANK PLC........................................ ............... DEFENDANT JUDGMENT Date of last order: 25/06/2024 Dater of judgment: 19/07/2024 AGATHO, J.: The plaintiff ASIF ALI RIASAT t/a AHMED BUSINESS CENTRE sued the defendant claiming: (a) The defendant be ordered to handover the consignment of 24,000 reams of paper to the plaintiff and in alternative pay the plaintiff the sum of USD 49,092.20 being the presentation amount of the USD 48,000, correspondence bank charges of USD 974.20 and handling charges of USD 118. (b) Special damages to the tune of TZS 15,000,000 (c) General damages to the tune of TZS 20,000,000 (d) Interest on the decretal sum at the compound commercial rate of 18% per annum from the date the cause of action arose to i the date of judgment, and interest on the decretal sum at the compound court rate of 7% compounded per annum from the date of judgment to the date of final payment. (e) Costs of this suit (f) Any other relief this court may deem fit to grant. Upon being served with a copy of the plaint the defendant filed her written statement of defence (WSD), refuting all the claims of the plaintiff and invited the court to dismiss the suit with costs. That prompted the case to proceed to mediation, which failed, and ultimately a full trial ensued. In the conduct of the suit, the parties enjoyed legal services of learned counsel. Mr Tumaini Shija represented the plaintiff while Mr Mkama Magoti Kalebu appeared for the defendant. I am grateful for the work done by these learned counsel as evidenced by their final closing submissions. I will not repeat their submissions in verbatim, but I will refer them where necessary. That said, it suffices now to restate albeit briefly what constitutes the plaintiff's case. The plaintiff alleged that he entered contract with a company called PT Sampoerna Putera Mandala Indonesia (Sampoerna Group) for purchase of 24,000 reams of copy paper dubbed Paperline Gold at a Cost, Insurance and Freight (CIF) price of USD 48,000. To facilitate the above contractual transaction, he applied for a letter of credit (LC) designated as documentary credit from the defendant. The latter issued the LC with number CRDB231LC0537 in the plaintiff's favour as the applicant and Sampoerna Group as a beneficiary. Among the terms and conditions of the LC were that full set of Bill of Lading issued to the order of the defendant and marked FREIGHT COLLECT NOTIFY APPLICANT, insurance certificate issued to the defendant for the invoice 2 value plus 110 percent covering all risks. The defendant informed the plaintiff that she received a complying presentation and hence she effected payment to the beneficiary under the LC. However, despite paying the beneficiary the plaintiff has not received the goods. It is on this basis the plaintiff filed the case at hand claiming among others the defendant breached the LC terms and UCP 600, breached duty of care owed to the plaintiff and failed to seek indemnity under the insurance. On the other hand, the defendant denied the allegations levelled by the plaintiff against her. She briefly stated in her WSD that she received a complying presentation which is the condition for effecting the payment to the beneficiary under the LC. It was her further defence that the plaintiff chose payment at sight as mode of payment. She thus neither breached the LC and the UCP 600 nor did she breach duty of care. In the end she prayed the court to dismiss the suit with costs. Having in a nutshell sketched the parties' allegations, it is worthy to outline issues framed. The initial issues framed during the final PTC on 12th March 2024 were two: 1. Whether there was breach of terms of the letter of credit and UPC 600. 2. If the first issues is answered affirmatively, to what reliefs are the parties entitled to. And later on, 18th June 2024 when the plaintiff filed her final closing submissions the court noted two points, namely, 1. Whether the defendant acted negligently; 2. Whether the defendant had obligation to claim insurance. These points were raised for the court to consider in determining the dispute between the parties. Following that, on 25th June 2024, the court invited the parties to address the court on the 3 points, and consequently two additional issues were framed as per Order XIV Rule 5(1) and (2) of the Civil Procedure Code [Cap 33 R.E. 2019]. Therefrom the issues became four as follows: 1. Whether there was a breach of terms of the letter of credit and UCP 600. 2. Whether the defendant acted negligently. 3. Whether the defendant had obligation to claim insurance. 4. To what reliefs are the parties entitled to. The trial was conducted on 10th and 11th June 2024. The plaintiff brought one witness, Mr Asif Ali Riasat (PW1) to testify. PW1 affirmed and tendered his witness statement, which was received and recorded as his testimony in chief. It was the testimony of PW1 that the plaintiff entered into contract with the PT Sampoerna Putera Mandala Indonesia (Sampoerna Group) for purchase of 24,000 reams of copy paper dubbed Paperline Gold at a Cost, Insurance and Freight (CIF) price of USD 48,000. He went on testifying that in order to facilitate the above contractual transaction, the plaintiff applied for a letter of credit (LC) designated as documentary credit from the defendant, which was set to expire on 24th August 2023. The defendant on 26th May 2023 issued the LC with number CRDB231LC0537 in the plaintiff's favour as the applicant and the PT Sampoerna Putera Mandal Indonesia as a beneficiary. Amongst the terms and conditions of the LC were that full set of Bill of Lading issued to the order of the defendant and marked FREIGHT COLLECT NOTIFY APPLICANT, insurance certificate issued to the defendant for the invoice value plus 110 percent covering all risks, the paying bank to claim reimbursement three working days from the date of receiving authenticated swift advice to the defendant and the advice through bank to be Citibank, N.A. 4 PW1 testified further that the plaintiff saw the swift message (LC) dated 26th May 2023 for the first time on 26th June 2023 following his inquiry on the LC and noted deviations from the previously agreed terms of the LC on the marking of the bill of lading and advice through bank. It was his testimony that being a layman in banking terms and being assured by Diana Mhenga, defendant's employee that the seller will receive payment and the buyer (the plaintiff) will receive the goods he did not follow through on the discrepancies. PW1 testified that in issuing the LC and paying the beneficiary thereof, the defendant charged the plaintiff USD 974.20 being correspondence bank charges, USD 118 being handling charges. It was PWl's testimony that on 5th July 2023 he as plaintiff collected a letter dated 4th July 2023 from Kemmy Katto, an employee of the defendant informing him that the defendant had received a complying presentation of documents under the LC CRDB231LC0537. She effected payment to the beneficiary and debited the plaintiff's account number 025072636600 with the presentation amount and charges and enclosed with the said letter the alleged complying presentation documents comprising of commercial invoice, bill of lading, packaging list, certificate of origin and insurance certificate. According to PW1, after receiving the alleged complying presentation documents, on 6th July 2023 the plaintiff contacted a shipping and forwarding agent mentioned in the bill of lading and the shipping line CMA-CGM both of whom informed him that they had no record of the alleged complying presentation documents. He continued to testify that on 7th July 2023 being a public holiday followed by a weekend the plaintiff waited until 10th July 2023 to visit the defendant's 5 Trade and Finance Department to report his finding to Kemmi Katto who refused to see him (plaintiff). Following that incident PW1 testified that he opted to visit the defendant's Oysterbay branch and met Diana Mhenga another officer of the defendant who had processed the LC. PW1 told the court that he explained his finding to Ms. Mhenga, Thereafter, he left the alleged complying presentation documents with her. She received them after the intervention of the branch manager, Clementine Kinabo. Further testimony of the PW1 was that on the same day the plaintiff emailed Diana Mhenga and Kemmi Katto to inform them of his findings. PW1 also testified that he returned the alleged complying documents to Diana Mhenga who stamped copies retained by the plaintiff with a receipt stamp of Sunday 9th July 2023 instead of Monday, 10th July 2023. As for the exhibits, PW1 tendered eight of them, which are: Pl(a) - TIN number certificate; Pl(b) - business licence; Pl(c) -VAT certificate; Pl(d) - certificate of registration of Business Name; Pl(e)- extract from BRELA register; Pl(f) - extract from BRELA register; Pl(g) - BRELA certificate of registration of change; Pl(h) - lease agreement; P2(a) - a letter for request for bank account statements; P2(b) - account statement (TZS account); P2(c) - account statement (USD account); P2(d) - cheque number 1726236600; P3(a) - email dated 19/05/2023; P3(b) - proforma invoice; P3(c) - email dated 21/05/2023; P3(d) - email dated 25/05/2023; P3(e) - WhatsApp messages; P4(a) - print out of emails dated 23rd May 2023, 24th May 2023, 26th May 2023, 5th June 2023, 19th June 2023, 20th June 2023, 26th June 2023; P4(b) - letter of credit, documentary credit CRDB 1231LC0537; P5 - a letter from CRDB dated 4th July 2023; P6 - email dated 10th July 2023; P7(a) - 6 email printout dated 11th, and 14th June 2023; P7(b) - a letter dated 26th May 2023; and P8 - CRDB webpage print out. Thereafter followed his cross examination in which he told the court that he conducted due diligence before entering contract with Sampoerna Group. He did online search. He was communicating with Ahmad Johan of Sampoerna Group. He admitted that he did not know the directors or shareholders of Sampoerna Group. He also said he chose payment upon delivery of goods. However, he admitted that he does not know payment at sight. He said he is not a trade and finance expert. After the closure of the. Plaintiff's case the Defendant paraded her two witnesses. The first witness was DW1 - Diana Mhenga, who took oath, and tendered her witness statement which was received and recorded as her testimony in chief. It was her testimony that she is a relationship officer of the defendant. She testified that on 22nd May 2023 she received a letter requesting to open LC from the plaintiff in favour of suppliers Sampoerna Group. The request was attached with proforma invoice number 00488/05/PI/2023 dated 19th May 2023 from PT. Sampoerna Group and the application for commercial documentary credit (LC). DW1 testified that the payment terms described in the proforma invoice was 100% irrevocable confirm LC at sight. She continued to testify that the good described by the plaintiff in the said form includes HS CODE 48025690, copy paper "Paper Line Gold". Indonesia origin by Asia pulp and paper, 500 sheet/reams with inspection certificate COC/SGS order, quantity, 3 X 20 feet containers = 4,800 boxes = 24,000 reams@500 sheets. Whereas the port of loading was Surabaya Port, Indonesia and a port of discharge and final destination was in Dar es salaam. As per DW1, in the application letter the plaintiff indicated the following as a complying presentation of 7 documents: signed commercial invoice in English 3 originals and copies; goods are as per proforma invoice/order/contract No. 00488/05/PI/2023 dated 19th May 2023; full set of bill of lading issued to the order of CRDB Bank Pic, marked freight prepaid notify applicant; packing list in 2 originals and 2 copies; certificate of origin in 1 original and 3 copies issued by the chamber of commerce showing goods are of Indonesia Origin; certificate of conformity (COC) (Inspection Certificate for Finished Goods); insurance certificate issued to CRDB Bank (defendant) for the CIF invoice value plus 110 plus percent covering all risks. DW1 went on testifying that the plaintiff chose payment on sight. It was the testimony of DW1 that after the plaintiff complied with the requirements of the application, she forwarded it to CRDB Bank Headquarters for issuance of LC and further procedures. DW1 tendered exhibits: DI - Plaintiff's application form for LC. Second witness of the Defendant was DW2 - Mr Mathias Marthias Mushi., who took oath, and tendered his witness statement which was received and recorded as his testimony in chief. It was his testimony that he is a Principal officer of the defendant. It was Mr Mathias' testimony that upon receipt of the plaintiff's application for LC, on behalf of the defendant he issued a draft LC whereby the plaintiff confirmed, signed and sealed it. DW2 went on testifying that on 26th June 2023 he issued the LC in favour of beneficiary namely, PT SAMPOERNA PUTERA MANDALA INDONESIA of address JALAN RUNGKUT INDUSTRUES RAYA NO. 18 SURABAYA INDONESIA 60293. DW2 went on testifying that as per the LC, the plaintiff and the defendant agreed on irrevocable LC where the defendant guaranteed payment of USD 48,000 to be made to the beneficiary according to the terms of the LC. It was he testimony that since the LC is irrevocable it 8 cannot be amended without the agreement of the issuing bank, the confirming bank and the beneficiary. He continued to the testify that the documents required to initiate payment per the LC are: (a) signed commercial invoice in English 3 originals and 3 copies, goods are as per Proforma invoice/order/contract NO. 00488/05/PI/2023 dated 19th May 2023; (b) full set of bill of lading issued to the order of CRDB Bank Pic, Marked Freight prepaid notify applicant; (c) packing list in 2 originals and 2 copies; (d) certificate of origin in 1 original and 3 copies, issued by the chamber of commerce showing goods are of Indonesia origin; (e) certificate of conformity (COC) (Inspection Certificate for Finished Goods); (f) insurance certificate issued to CRDB Bank Ltd for CIF invoice value plus 110 percent covering all risk. It was the testimony of DW2 that on 30th June 2023 he received all the documents hereinabove mentioned for payment from CITIBANK N.A. Singapore Branch (confirming bank) certifying the amount of drawing to has been endorsed on the reverse of the LC and acknowledging to have negotiated the documents in full compliance with the terms and conditions of the LC. The witness testified that from 30th June 2023 to 3rd July 2023 he examined the presented documents to determine if they comply with the terms and conditions of the LC and UCP 600. He found the presented documents comply and he honoured payment on 4th July 2023 and forwarded the documents to the plaintiff. DW2 told the court that the defendant received an email acknowledging receipt of the original documents by the plaintiff but indicating that untraceable shipment. He testified that upon receiving the emails from the defendant he contacted the confirming bank, 9 CITIBANK, N.A. Singapore, which confirmed transmission of the original documents and the copies. DW2 testified further that the plaintiff confirmed payment at sight as in the application form for commercial documentary credit (LC). Further to that DW2 testified that he complied with the obligation under the terms and conditions of the presented documents as per the LC and all documents needed to initiate payment were available and confirming. He added to his testimony that the defendant being a bank deals with documents and not with goods, services or performance to which the documents may relate. DW2 tendered exhibits: D2 - a draft letter of credit bearing the plaintiff's stamp and signature; and D3 collectively - a copy of swift message to CITIBANK, N.A. Singapore dated 14th July 2023, and swift message from CITIBANK N.A. Singapore to the defendant dated 27th July 2023. During cross examination DW2 confirmed that he handled Asif Alli Riasat application for LC as supervisor and tutor for LC. He dealt with the application after they received it at their branch. He testified that he is the one who received the application at the branch. He also said he was involved in the preparation and in the final stage of issuing the LC. After the plaintiff confirming that the LC is correct, DW2 finally approved the LC and then sent it to CITIBANK Singapore. DW2 admitted that exhibit D2 is a LC - final draft. That is the LC (draft) the defendant agreed with the plaintiff. As for clause 46A.2 of the LC (exhibit D2) it is written "MARKED FREIGHT COLLECT NOTIFY APPLICANT." DW2 testified that the discrepancy here was on draft LC and issued LC on clause 46A.2. Reading clause 46A.2 of the LC (exhibit P4(b)) "full set of bill lading issue to the order of CRDB PLC marked freight pre-paid notify applicant." He confessed that that is not what the io defendant agreed with the client (plaintiff) as per clause 46A.2 of the exhibit D2 which reads "full set of bill lading issued to the order of CRDB Bank Pic, Marked Freight Collect Notify Applicant." DW2 was also asked during cross examination to read clause 57A of the draft LC (exhibit D2) loudly. It read that ADVISE THROUGH BANK CITIBANK, N.A. Singapore. The witness was asked to read exhibit P4(b) on clause 57 A where "advise through bank party identifier code is BM RIIDJXXX Bank Mandiri (Persero) PT Jakarta ID." He conceded that this was not what the defendant agreed with the Asif Alli Riasat (plaintiff). But as it will unfold later this is non-issue because exhibit D2 was endorsed by the plaintiff with signature and stamp while exhibit P4(b) was not. DW2 further testified that in the exhibit D3 which is swift messages between the defendant and the CITIBANK N.A. Singapore there is no reference to code BM RIIDJXXX Bank Mandiri (Persero) PT Jakarta ID. He went on testifying that the exhibit P4(b) was issued by the plaintiff, and on the side of the bank was issued by KKATO. DW2 admitted that in exhibit P4(b) his details especially his name is not there. The court noted the variation between exhibit P4(b) and exhibit D3. Further to that DW2 conceded that there are variations between exhibit P4(b) and exhibit D2. In D2 no name of the operator and outlook of documents are different. Lastly, exhibit D2 is stamped and signed by the plaintiff while P4(b) is not stamped and signed by the plaintiff. In the Court's view this point could have been crucial because the plaintiff alleged the variation which could have amounted to breach of LC. But that cannot be the case as advise through bank CITIBANK N.A. was approved by the plaintiff as visible under exhibit D2 bearing plaintiff stamp and signature. Another difference in P4(b) it says where it come 11 from that is sender to the recipient. And the dates in exhibit D2 there is no date while in exhibit P4(b) date is indicated. Regarding differences on "advise through bank" between the two (exhibit P4(b) and D2), DW2 explained that advise through bank in exhibit D2 is a CITIBANK which is CRDB's corresponding bank. In exhibit P4(b) advise through bank is the supplier's bank (Bank Mandiri). Referring to paragraph 3 of DW2's witness statement, the witness mentioned exhibit D2 as to be what the defendant agreed with the plaintiff. To defend themselves, DW2 testified that they could not write CITIBANK Singapore in exhibit P4(b) because that is the defendant's corresponding bank and not the supplier's bank. DW2 claimed that these changes were agreed with the plaintiff as per the documents he brought to the defendant (CRDB bank). But the court noted that is the truth because exhibit P4(b) was not signed and stamped by PW1. Thus, the addition of Bank Mandiri therein cannot be fatal because that is the supplier's bank indicated in the proforma invoice, exhibit P3(b). Asked whether he has brought the documents showing that the changes were agreed by the plaintiff, DW2 rightly stated that he has brought these documents in court, namely an application form for LC and proforma invoice. That is exhibit DI, the LC application form containing the details of supplier's bank account and bank's name: Bank Mandiri, Indonesia. Similar details are found in the proforma invoice, exhibit P3(b). On existence of duty of care which the defendant owed the plaintiff that could have been manifested through communication between the defendant and the supplier's bank to inquire on the transaction. Although DW2 failed to admit that the defendant (CRDB) 12 did not communicate with the bank (Bank Mandiri) stated in exhibit P4(b), he did not tender any document in this court showing that CRDB communicated with Bank Mandiri. He added that there is a document that shows that CRDB Bank through her corresponding bank CITINBANK Singapore communicated with Bank Mandiri. But the swift messages exchange between the defendant and CITIBANK, exhibit D3 only referred to complying presentation. Therefore, there is no proof that the defendant communicated with the supplier's bank. This in the court's view is a breach of duty of care. As with regards to marine cargo insurance, DW2 testified that the name of assured is CRDB Bank Limited (the defendant). This does not mention any other beneficiary than CRDB because the documents were requested in CRDB name on behalf of the customer (the plaintiff). He admitted that these words are not found in exhibit P5. But these words are found in exhibit P4(b). During cross examination, DW2 conceded that the defendant (CRBD) has never been indemnified through the exhibit P5 (marine cargo insurance). Nor has he brought any document before this court to show that the defendant has claimed indemnity under exhibit P5. The witness told the court that the defendant has not tendered any document before this court showing that the insurance company has refused for any reason to indemnify her. DW2 said the defendant did not claim the indemnity because under the UCP 600 articles 4, 5 and 14 execution of contract the bank is not responsible for the customer's consignment except documentation. The articles of UCP 600 stated here in above are not related with insurance. Regarding marine insurance (part of exhibit P5 collectively), it came in the name of defendant and not the plaintiff, that is because 13 CRDB is involved on behalf of her client to call for documents. DW2 claimed in re-examination that the parties agreed that the defendant will transfer ownership of the marine insurance policy to her customer. He went on testifying that they did that through bill of lading which they endorsed. The terms were CIF. The court has looked at the bill of lading (part of exhibit P5 collectively) and noted that there is nowhere it is shown that there is endorsement that the marine cardo insurance is transferred from the defendant to the plaintiff. Having briefly depicted the facts and evidence adduced by the parties, we now turn to the issues framed and proceed to determine one after the other while analysing the evidence and relevant laws. The issues were: 1. Whether there was a breach of terms of the letter of credit and UCP 600. 2. Whether the defendant acted negligently. 3. Whether the defendant had obligation to claim insurance. 4. To what reliefs are the parties entitled to. To begin with the first issue: whether there was a breach of terms of the letter of credit and UCP 600. In cross examination, PW1 confirmed that he searched online and entered contract with Sampoerna Group from Indonesia for supply of gold copy paper. PW1 during cross examination stated that he did due diligence by checking online details of the company. In cross examination again PW1 told the court that he does not know any director or shareholder of the supplier company. The court noted that PW1 did not know the management of the supplier company. This shows that PW1 did not do serious due diligence. PW1 did not verify whether the supplier is a registered company in Indonesia. 14 And this was crucial because it was the first time the plaintiff is doing business with this supplier, Sampoerna Group from Indonesia. A critical question, is what is the use of letter of credit as a payment mode, is it used as a shield against fraudulent supplier? However, it is trite that a letter of credit is not intended to protect a party who is negligent. In my view it cannot protect a party who has failed to conduct thorough due diligence on his or her counterpart. On the function of LC, it was held by the New York court in Williams Ice Cream Co. v. Chase National Bank, 205 N. Y. S. 447. 210 App. Div. 179 (1924). "The sole obligation of a bank which issues a letter of credit is to see that the payments are made in accordance with the terms thereof, and subject to certain exceptions, it has no concern with any controversy between buyer and seller." In the case at hand, it was the plaintiff who presented proforma invoice from the supplier to the defendant for opening of the letter of credit. He testified that the document included in the application for a letter of credit was a proforma invoice. And MDW1, Diana Mhenga, an employee of the defendant processed the letter of credit application. The plaintiff who is also PW1 went to the defendant personally at Oysterbay branch. Then Diana Mhenga gave him the letter of credit application form. He filled it out. And Ms. Mhenga did the rest of the procedures. According to PW1, the payment mode that was chosen by the plaintiff was payment on receipt or delivery of goods. He testified that he mentioned that in the form he filled out at the defendant's branch. That is exhibit P4(b). The court noted that as per page 4 of the letter of 15 credit which is exhibit P4(b), payment is on receipt of complying presentation. That is payments at the sight, which is seen also on exhibit DI plaintiff's application form for commercial documentary credit (LC). This is contrary to PWl's testimony that payment is upon the delivery of goods. Parole evidence rule is clear that what is stated in a document cannot be varied orally. Sections 100 and 101 of the Law of Evidence Act [Cap 6 R.E. 2019] provide that a written contract cannot be varied or corrected orally. Moreover, in Ashraf Akber Khan v Ravji Govind Varsan [2019] T.L.R. 59 (CA) it was held that a document cannot be corrected by oral evidence. See also the case of Nicholaus Mwaipyana v The Registered Trustees of Little Sisters of Jesus Tanzania, Civil Appeal No. 276 of 2020 CAT at Mwanza. This court observed further that, if the plaintiff chose payment upon delivery of goods, that is not found in the LC application form, exhibit DI. The payment modes stated therein are payment at sight, differed payment, acceptance of draft, negotiation, or mixed payment. There is no option called payment after delivery of goods. PW1 further confirmed that she gave instructions to Diana Mhenga. But he was quick to defend himself that he does not know technicalities of letter credit. And he is not a student of finance or trade and finance. He added that he did not enter that business of studying trade and finance. PW1 seems not to know the meaning of payment at sight. He testified that for him payment at sight means after delivery of the goods. But for a letter of credit, payment at sight means after receiving complying presentation of documents. PW1 admitted that he received a final draft of the letter of credit which he accepted. He received it on 26th May 2023. The payment was effected on the 26th June 2023 after 16 receiving complying presentation. PW1 admitted that there was lapse of one month from 26th May 2023 when he received swift message that is draft letter of credit to 26th June 2023. PW1 after receiving the e-mail with the swift message on 26th May 2023 he replied that the defendant may proceed. He approved the final letter of credit. Up to this point the allegation that the defendant breached the LC terms and UCP 600 is without merit. In lieu of the foregoing and without hesitation the first issue is answered in the negative. The second issue is whether the defendant acted negligently. According to law of negligence as propounded by Donoghue v Stevenson [1932] AC 562, a tort of negligence requires a claimant to prove existence of duty of care and that duty of care has been breached and as a result a claimant suffered damage. On this issue, and during cross examination, PW1 when asked if the bank acted with due care, he rejected it. But this contradicts what he said earlier that the bank sent him the draft letter of credit which he approved, and he has not tendered any other letter of credit to contradict the one he approved which is exhibit P4(b). Even exhibit DI application form and exhibit exhibit D2 cements that he approved the LC. As noted earlier the variation in exhibit P4(b) and exhibit D2 are reconciled with what is stated in proforma invoice - exhibit P3(b) and LC application form - exhibit DI. PW1 conceded that they agreed on the paragraph four of exhibit P4(b), the applicable rule to be the UCP latest version. And Article 5 of the UCP 600 says banks deal with the documents. This is in line with the case of Continental National Bank v. National City Bank, 169 F (2d) 812 (1934) where the United States Circuit Court of Appeals (Ninth Circuit) held that the letter of credit is a payment against documents. The court added that: 17 "..the chief function of a letter of credit being to substitute bank credit for buyer's credit and to insure to the seller immediate payment for goods shipped regardless of the claims of the buyer that the goods are defective." I would add here that under the LC the payment is effected upon a complying presentation regardless of whether the goods are delivered or not. It is for this reason marine cargo insurance is taken to cover the loss or damage of goods. Therefore, up to this juncture there is no breach of LC terms and UCP 600, nor negligence is imputed on the defendant in as far as LC is concerned. Another controversy was on the letter of credit (exhibit P4(b)) reference number. It is not clear whether it is 231LC0537 or 23ILC0537. It is not clear whether it is 1 or I. PW1 started that the one on the letter of credit had clerical errors. He said there was a typing error. This could possibly be a reason why the goods were not delivered. But, looking at exhibit P4(b), the LC number is CRDB23ILC0537 and not CRDB231LC0537. But then again, the error cannot be a cause of failure of goods to be delivered because PW1 testified that in tracking the shipment he used the bill of lading and not the letter of credit reference number. According to PW1 a letter of credit means supplier to get his payment and they importer to get his goods. Asked about documents required to effect payment PW1 mentioned them to be bill of lading, insurance, commercial invoice, said thicket of origin, insurance certificate, SGS, COC three sets commercial invoice 3 portions, one set of three packaging list, and marine insurance. The letter of credit is complying presentation is found on the exhibit P4(b) under F46 section, documents are 1st signed commercial invoice in 18 English, 3 originals, 3 copies; proforma invoice 00488/05/PI/2023; 2nd bill of lading issued to the order of the defendant marked freight prepaid notify applicant; 3rd document is packing list in 2 originals and 2 copies. The 4th document is certificate of origin issued by the Chamber of Commerce showing goods of Indonesia origin. The 5th document is that certificate of conformity (COC) Inspection certificate for finished goods, SGS, and lastly, insurance certificate issued to the defendant that is CIF invoice value plus 110 percent covering al risk. PW1 admitted that the letter credit was issued in conformity with the proforma invoice issued by the supplier. PW1 also testified during cross examination that there was not any document that was missing that could hinder the defendant to make payment. The court noted that there was neither breach of the terms of the letter of credit nor was there any negligence on the defendant's side with regards to the LC. PW1 testified that proforma invoice is exhibit P3(b). Its reference number is 00488/05/PI/2023. This document came from Ahmad Johan of some Sampoerna Group Indonesia. PW1 testified that he was dealing with Ahmad Johan. But he did not clarify in what capacity Mr. Johan was acting. Nor did he tell the court whether he verified the identity of Mr. Juhan. This shows the poor due diligence done by the PW1. PW1 contended that there was variation or rather differences between the document that was presented from the one which is written in the letter of credit. What PW1 read in the cross examination was the proforma invoice and they are not commercial invoice which is exhibit P5 while proforma invoice is exhibit P3(b). When PW1 was asked during re-examination, he testified that exhibit P4(b) is not the form he used to apply for the letter of credit. He said it is different. He claimed that the letter of credit terms on the 19 payment is different from what he agreed with the bank. He agreed with that payment upon delivery of goods. But the exhibit P4(b) shows that payment on sight that is on receipt of complying presentation of documents. PW1 testified that the letter of credit application form is with the bank that is CRBD Oysterbay branch. In my view this is unconvincing because PW1 is the one who tendered exhibit P4(b), and he has not tendered the alleged form. Notably, exhibit DI is the plaintiff's LC application form, payment mode chosen was payment at sight. That is contrary to PWl's allegation that payment upon delivery of goods. Therefore, PWl's testimony that the letter of credit terms is different from what he filled in the application form for letter of credit is incredible. PW1 admitted having received on 26 May 2023 final draft of the letter of credit which he approved. Now he cannot come back and disown that approval. The defendant through DW1 tendered a exhibit DI. And this is compatible with the contents of the letter of credit. The court noted that contrary to exhibit DI content of exhibit DI was never challenged by PW1 or his advocate. In fact, PW1 recognized that form and he said that he does not dispute its content. It is noted that the issue of errors or wrong LC number may not be relevant in tracking of the shipment because PW1 testified that he used the bill of lading to track the shipment. Back to the issue whether the defendant breached duty of care she owed to the plaintiff analyze the evidence adduced once more. In cross examination DW2 testified that he tendered a letter of credit application form which is exhibit DI and the proforma invoice which shows that the plaintiff agreed with the changes. Surprisingly, when asked whether defendant communicated with the supplier's bank, DW2 admitted that the defendant never communicated directly with the 20 supplier's bank. But 'he said the defendant communicated through Citibank NA Singapore with which communicated with the supplier's bank as per exhibit D3 - swift messages. Looking at the exhibit D3 there is nothing in there showing that the defendant or CITIBANK NA Singapore contacted supplier's bank. This in my view constitutes a breach of duty of care the defendant owed to the plaintiff. Since the plaintiff has reported to the plaintiff that his consignment has not been delivered, it was expected any reasonable banker will inquire to the supplier's bank. The defendant owed the plaintiff duty of care, she breached it and the plaintiff sustained financial loss. These falls squarely with the principle enunciated in Donoghue v Stevenson (supra). It is my observation that even if the letter of credit terms were not breached the defendant was negligent, which contributed to the plaintiff's loss of the shipment. The second issue is partially answered in the affirmative. The third issue was whether the defendant had obligation to claim insurance. The marine cargo insurance is part of exhibit P5 collectively. It is on record that DW2 conceded in cross examination that the exhibit P5 marine cargo insurance is in the name of the defendant. She is the assured. DW2 also stated that the defendant has never been indemnified or claimed insurance. Nor has the said defendant brought any document to the court to show that she has attempted to seek indemnity and the insurance company refused. Under insurance law the assured is the one with insurable interest. Therefore, the defendant had an obligation to claim indemnity. It was the parties arrangement that under banker and customer relationship that in case the goods for which the LC was taken are not delivered, lost or damaged the assured to claim indemnity that would have put the plaintiff to his original position before the loss. It should be noted that the contract of marine cargo 21 insurance was between the defendant and the insurer L& G Insurance Broker and Sanlam General Insurance not a party to this case. However, the defendant was not precluded from issuing third party notice to the insurer. From the foregoing analysis it is conspicuous that the defendant had an obligation to claim indemnity under the insurance policy which could indirectly compensate the plaintiff. But she failed to do so for no apparent reason. DW2 again in re-examination said they did not bring any evidence to show that the defendant claimed the insurance or indemnity. He also said under UCP 600 Article 4, 5 and 14 in executing contracts of the letter of credits the bank is not responsible for customer's consignment except documentation. The court noted that much as this may be true that is limited to the letter of credit contract and does not extend to insurance contract, as well as issues of negligence. These latter issues are not covered by the LC terms and UCP 600. Besides that, it is my view that if a banker wishes to rely on protection under the LC and UCP 600 her dealings throughout must be in good faith without any grain of negligence. While I have held there was no breach of the LC terms and UCP 600 it is unclear why the bank did not proceed to claim indemnity under the marine insurance the moment she was notified that the plaintiff has not received the goods. That would have mounted investigation of the insurance claim and uncovered the whereabouts of the plaintiff's consignment. It is understood that marine insurance was a separate contract from the LC contract. It was a contract between the defendant and the insurer. Whether the defendant had insurable interest that is non-issue in this case. Truly, under the marine cargo insurance policy the defendant was the assured. Moreover, the marine insurance certificate 22 was among documents for complying presentation to effecting payment to the beneficiary. Since the defendant was the assured and hence ought to have claimed indemnity or rather, she could have assigned the insurance policy to the plaintiff. DW2 claimed that the defendant assigned the insurance policy to the plaintiff through the bill of lading. This testimony proved to be untrue as the bill of lading did not state so. Since exhibit D3 confirms that the plaintiff reported to the defendant that she has not received the goods, and since the defendant did neither assign the insurance policy to the plaintiff nor claimed indemnity from the insurer, it may be concluded that she had obligation to claim indemnity she did not do so and hence she was negligent. She breached the duty of care owed to the plaintiff which led to the latter to sustain financial loss as the shipment of reams of paper from Sampoerna Group of Surabaya Indonesia was never received. The defendant, as a prudent banker, was negligent. The fourth issue is thus answered in the affirmative that the defendant has obligation to claim indemnity under marine cargo insurance which she did not do. But there are other points that cannot be overlooked: when did the plaintiff inform the defendant about the non-delivery of goods? It is clear that the plaintiff notified the defendant about non-delivery of goods after payment to the supplier has been effected under the LC following a complying presentation. Moreover, whether payment to the beneficiary bank is effected upon receipt of complying presentation? As per LC terms payment is indeed upon receipt of complying presentation. As stated earlier, under the insurance policy the defendant was the assured. Sanlam was the insurer while L&G Surabaya Indonesia was the insurance broker. The sum insured is USD 52, 800. The insurance covered all risk. It was aimed at protecting the buyer (the plaintiff). The 23 insurance policy is clear that in case of loss or damages the assured ought to have applied for survey or investigation of the loss or non­ delivery of goods which she did not do. It is undisputed that the defendant's claim of indemnity was vital to the plaintiff. Since the defendant never claimed indemnity or notified the broker or the insurer, that amounts to negligence. Even though the defendant contacted the corresponding bank, that is CITIBANK NA Singapore, there is no evidence that the latter contacted the supplier's bank. To what reliefs are the parties entitled was the last issue for determination. While I reject the defendant invitation to dismiss the case with costs due to lack of merit. I partially grant the plaintiff's claims as following: (a) The prayer that the defendant be ordered to handover the consignment of 24,000 reams of paper to the plaintiff and in alternative pay the plaintiff the sum of USD 49,092.20 being the presentation amount of the USD 48,000, correspondence bank charges of USD 974.20 and handling charges of USD 118 cannot be granted because the defendant breached neither the terms of LC nor UCP 600. (b) Special damages to the tune of TZS 15,000,000 is refused for the LC was not breached. It will thus be illusory to award special damages. (c) While the plaintiff claimed general damages to the tune of TZS 20,000,000, I award him USD 50,000 as general damages. Despite there being no breach of the LC terms and UCP 600, the defendant was negligent and failed to claim indemnity under the marine cargo insurance. The awarded amount will 24 put the plaintiff to her original position before sustaining the loss of the consignment. (d) The plaintiff is also awarded interest on general damages awarded in (c) above at the court rate of 7% from the date of judgment to the date of final payment. (e) Costs of this suit shall be borne by the defendant. Briefly, the court declares, and orders as follows: (a) The defendant breached duty of care she owed to the plaintiff that led to the latter's loss of the goods. (b) The defendant shall pay the plaintiff general damages of USD 50,000 due to negligence and for failure to claim indemnity under the marine cargo insurance. (c) Interest on general damages in (b) above at court rate of 7% per annum from the date of judgment to the date of final payment. (d) The defendant shall bear costs of this suit Order accordingly. DATED at PAR ES SALAAM this 19th Day of July 2024 25 Court: Judgment to bedelivered today 19/07/2024 by Hon. Franco Kiswaga Deputy Registrar in the presence of the parties. 26