COMMERCIAL CASE NO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT DAR-ES-SALAAM COMMERCIAL CASE NO.76 OF 2021 VIVO ENERGY TANZANIA LIMITED….......... PLAINTIFF VERSUS ALCHEMIST ENERGY TRADING DMCC………………………….1ST DEFENDANT NATIONAL BANK OF COMMERCE........2ND DEFENDANT ODDO BHF AKTIENGESELLSCHAFT….3RD DEFENDANT Date of the Last Order, 25/05/2023. Delivery of Judgement 26/07/2023. JUDGEMENT NANGELA, J: By way of a Plaint filed in this court on the 9th day of July 2021, the Plaintiff is seeking from this Court Judgment and Decree against the Defendants, jointly and severally, as follows: 1. A declaratory order that the 1st Defendant is in breach of the Shipping and Supply Contract dated 5th of January 2021, entered between PBPA (on behalf of several Oil Marketing Companies- The Plaintiff included) and the 1st Defendant, for the supply of Petroleum Products. 2. An order of cancellation of a Letter of Credit No.002LCNB210540001 dated 23rd day of February 2021- in respect of a sum of US$ 201,398.44- issued Page 1 of 66 by the Plaintiff in favour of the 1st Defendant. 3. An order for payment of general damages to the Plaintiff, as may be assessed by the Honourable Court. 4. An Order for payment of costs of this suit to the Plaintiff; and 5. Any other relief(s) as this Court shall deem fit and just to grant. While hearing this suit, the Plaintiff enjoyed the legal services of Mr. Josiah Noa Samuel, Learned Advocate. 1st and 3rd Defendants did not appear in Court despite being duly served by the Plaintiff. Consequently, this suit proceeded ex- parte against them. Upon being served, the 2nd Defendant, who enjoyed the services of Mr. Joseph Nuwamanya, Learned Advocate, filed her Written Statement of Defence. When the parties present convened for a final pre-trial conference, the following were issues agreed upon for determination: 1. Whether the 1st Defendant is in breach of the shipping and Supply Agreement dated 05th day of January 2021 between PBPA (on behalf of several Oil Marketing Companies – the Plaintiff being included in) and the 1st Defendant, for supply of Petroleum Products. 2. If the issue No.1 is in the affirmative, whether the Plaintiff is entitled to an Order of Cancellation of LC No.002LCNB2154001 dated Page 2 of 66 23rd of February 2021- in respect of a sum of US$ 201,398.44- issued by the Plaintiff in favour of the 1st Defendant. 3. Whether the refusal by the 1st and 3rd Defendants to cancel the LC aimed at defrauding the Plaintiff. 4. To what reliefs are the parties entitled to. At the date of hearing, the Plaintiff filed a witness statement in respect of only one witness, Ms. Monica John Waweru, who was thereafter summoned to testify in court. She indeed testified as Pw-1 and to prove the Plaintiff’s case she tendered in court ten (10) documents received as exhibits. On the other hand, the 2nd Defendant called one witness to establish the defence case. The witness, Mr. Zuberi Mussa, testified as Dw-1 and tendered in court three sets of documents received collectively as Exh.D-1 to Exh.D-3. As I stated herein earlier, the 1st and 3rd Defendants never appeared in court, and, hence, the court proceeded ex-parte against them. I will, therefore, briefly summarize their testimonies before I address the issues raised here above considering the applicable law and the evidence availed to the court. In her testimony, Pw-1 told this Court that she was employed by the Plaintiff as a Supply and Logistics Coordinator since 2014 and later promoted to the position of Supplies Manager. She told this Court further that, on the 22nd of September 2020, the Petroleum and Bulk Procurement Page 3 of 66 Agency (PBPA) executed with several Oil Marketing Companies (OMCs), which include the Plaintiff, a contract for importation of various quantities of petroleum products to OMCs. According to Pw-1, the importation contract was executed between the PBPA and the OMCs to meet statutory requirements of the Petroleum Act, No.21 of 2015 and the Petroleum (Bulk Procurement) Regulations, 2017, GN. No. 198 of 2017 as it requires all OMCs intending to procure petroleum products to do so through the PBPA. As such, Pw-1 testified that, after the execution of the agreement with the OMCs, the PBPA, acting as an agent of the OMCs- floated a Tender No. PBPA/CPP/PMS/C3-KOJI/02/2021 for the supply of various petroleum products to the OMCs. Pw-1 told this court that, the 1st Defendant won the tender and subsequently, a Shipping and Supply Contract dated 05th of January 2021 was executed between the PBPA and the 1st Defendant. She tendered the said agreement, and it was admitted in Court as Exh.P.2. According to Pw-1, based on the arrangements in place, the Plaintiff had ordered 375MT of petrol products (Mogas) from the 1st Defendant for local consumption valued at US$ 201,398.44. She testified that, as per the agreement, the agreed goods’ delivery dates were between the 27th of February 2021 and the 1st day of March 2021. However, Pw-1 testified that, the delivery dates were later changed days between the 3rd day of March to the 5th day Page 4 of 66 of March 2021 as per the Letter of Credit (LC). She tendered the “LC” and the same was admitted as Exh.P.3. According to Pw-1 the goods were to be delivered at the port of Dar-es- Salaam via MT. JAL UPASANA Vessel. Pw-1 testified further that, since payment arrangement was by way of “LC” it was a condition precedent that the Plaintiff issues a Letter of Credit through its banker- the 2nd Defendant, in favour of the 1st Defendant, to assure payment for the supply of the procured products/goods. It was her further testimony that, Exh.P-3 was issued from the issuing bank (the 2nd Defendant) in line with the Plaintiff’s request thereof for settlement of a sum of US$ 201,398.44 in favour of the 1st Defendant. According to Pw-1, the Exh.P-3 was prepared in consultation with the 1st Defendant and with the approvals of 2nd Defendant who issued it on the 23rd of February 2021. She stated that, Exh.P-3 was governed by the Uniform Customs and Practice for Documentary Credits “UCP-URR-Latest Version Rules” and was supposed to be encashed after 60 calendar days from the first day of delivery agreed laycan. Pw- 1 told this court that, by the mere act of creating the LC, the Plaintiff was deemed to have fulfilled her contractual obligations for the supply of petroleum products, hence, was entitled to anticipate the performance of the underlying Shipping and Supply Contract (Exh.P.2) on the agreed date. According to Pw-1, although the Plaintiff fulfilled her obligations by assuring payments to the 1st Defendant through Page 5 of 66 the LC, the 1st Defendant breached the terms and conditions of the agreement (Exh.P-2) by first, failing to submit the requisite documents as per Clause 14.1 (i) of Exh.P-2 to the Plaintiff and PBPA, despite the same being requested by the Plaintiff. Pw-1 tendered in Court various e-mail correspondences which were admitted as Exh.P-4 collectively. Under Clause 14.1(1) of Exh.P-2 it was a condition, upon issuance of the LC, the 1st Defendant would submit cargo documents to both the Plaintiff and PBPA by 10 calendar days before the first day of the delivery. Secondly, failure to supply the contracted goods to the Plaintiff on the agreed due dates, hence, a material breach. Pw- 1 told this court that, upon such breach by the 1st Defendant, PBPA, in collaboration with the Plaintiff and other OMCs made follow-ups with the 1st Defendant but the latter disclosed later to the PBPA that, its failure to supply was purportedly due to an even of force majeure. Pw-1 testified that, such purported event was neither timely communicated nor agreed by the PBPA for and on behalf of the Plaintiff and other OMCs. According to Pw-1, the parties did hold a meeting on the 29th of March 2021 which involved the 1st Defendant, the PBPA, and OMCs including the Plaintiff and the 1st Defendant undertook to remedy the situation by supplying the petroleum products between the 15th to 17th of May 2021. She tendered in court copies of letters dated 22nd of March 2021 and 12th of May 2021 and these were admitted as Exh.P5. She as well tendered in Court letters dated 20th of April 2021, 11th of May Page 6 of 66 2021 and 13th of May 2021 which were collectively admitted as Exh.P6. The minutes of the meeting held on the 29 th of March 2021 were also tendered and admitted as Exh.P.7. She told the Court that, all efforts by PBPA and the Plaintiff to have the supply effected have, to date, became futile and that, the Plaintiff moved to demand that the 1st Defendant cancel the LCs issued by the OMCs. It was Pw-1’s further testimony that, despite there being non-delivery of the petroleum products to the Plaintiff, the 1st Defendant initiated the processes of encashing the LC. Pw-1testified, however, that, under the terms of the LC, it was agreed, inter-alia, that; the 1st Defendant was to only be paid under the LC upon supplying of a Final or Provisional Invoice for the petroleum products ordered; a certificate of quality and quantity of the petroleum products, issued on arrival of the ship-tanker at the Port of Dar-es-Salaam, issued by an independent inspector; production of a certificate of origin of the products. She told tis court that, if the preceding documents are unavailable, the 1st Defendant could have encashed the LC upon submission of a final or a “Provisional Invoice” for the petroleum products to be supplied and a “Letter of Indemnity.” Pw-1 told the court further that, the 1st Defendant initiated the process of encashing the LC by supplying to the 2nd and 3rd Defendants some documents required for its side under the LC to wit: a Provisional Invoice and Letter of Page 7 of 66 Indemnity, both dated 3rd March 2021. According to Pw-1, the “Provisional Invoice” indicated that payments were due on the 30th of April 2021. She told this court that, the purported compliant documents were received by the 2nd and 3rd Defendants on the 12th of March 2021. She tendered the documents and a covering letter, and these were collectively admitted as Exh.P- 8 and testified further that, after there being receipt of the purported compliant documents from the 2nd Defendant, the Plaintiff wrote to the 1st Defendant inquiring about the rationale for initiating payments processes while there was no delivery of the petroleum products to the Plaintiff. Accordingly, and as per the emails receive in court as Exh.P-4, Pw-1’s asserted that, the 1st Defendant’s response remained unchanged, i.e., the documents had been presented before there being a declaration of force majeure. It was a further testimony of Pw-1 that, the primary factor which would have been taken into consideration by the 1 st Defendant before initiating any move to encash the LC was, firstly, the delivery of the petroleum products to the Plaintiff. Secondly, the documents presented to the 2nd and 3rd Defendants for encashment of the LC were presented in anticipation of delivery to the Plaintiff on the agreed dates, but the 1st Defendant failed to fulfil its obligations due to the purported event of force majeure. Thirdly, Pw-1 stated that, had the purported force majeure event really occurred before presentment of the alleged compliant documents, the 1 st Page 8 of 66 Defendant would not have supplied those documents to the 2nd and 3rd Defendants because it would have been in the 1 st Defendant’s knowledge that it will be impossible to supply on the agreed date, hence, the documents supplied are of no effect to the LC. Pw-1 told this Court that, there being conclusive proof that the 1st Defendant was not able to supply the petroleum products to the Plaintiff and other OMCs, the PBPA, via its letters/demand notices dated 20th April 2021 and 13th of May 2021 made formal demands to the 1st Defendant to cancel the LCs issued by the OMCs under Exh.P-3 but the 1st Defendant neglected and/or refused to honour the demands and fraudulently proceeded with the process to obtain encashment of the LC. Pw-1 testified further that, on the 19th of May 2021, the Plaintiff wrote to the 2nd Defendant requesting for cancellation of the LC because the consideration for which the said LC was issued has not been fulfilled by the 1 st Defendant, to wit, the 1st Defendant had failed to supply the petroleum products to the Plaintiff. According to Pw-1, the 2nd Defendant sent a SWIFT ADVICE to the 3rd Defendant requesting that the 1st Defendant’s consent be sought to cancel the LC. He told this court that, on the 25th of May 2021, the 3rd Defendant replied to the 2nd Defendant’s request by informing her that, neither is the 1st Defendant nor the 3rd Defendant agrees with the move to cancel the LC. Page 9 of 66 In court, Pw-1 tendered a letter dated 09th May 2021, the SWIFT ADVICE dated 19th of May 2021 issued by the 2nd Defendant to the 3rd Defendant and its reply issued by the 3rd Defendant to the 2nd Defendant, and all were collectively admitted as Exh.P-9. She testified that, the 1st Defendant had an ill-motive to defraud the Plaintiff as she materially breached the contract of shipping and supply of petroleum products and proceeded to fraudulently benefit from its own wrong by initiating a process to encash the LC. It was her further assertions that, the ill- motive of the 1st Defendant was also manifest when she presented documents purporting to be “the LC compliant documents” to the 3rd Defendant, which documents were later transmitted to the 2nd Defendant. She maintained that the 1st Defendant maliciously made presentations of the documents with an ill-motive to defraud the Plaintiff as the 1st Defendant was fully aware that no delivery had been or was soon expected to be made to the Plaintiff. Pw-1 rooted that, the process to encash the LC was tainted with fraud because the preconditions for it had not been met, i.e., due to the non-delivery of the petroleum products, which consequently made the 1st Defendant unable to present a Final Commercial Invoice. Pw-1 told this court, therefore, that, the documents received from the 3rd Defendant by the 2nd Defendant were not in compliance with the terms of the LC. She also told this court that, the Provisional Invoice relied upon was not sufficient for Page 10 of 66 the 2nd and 3rd Defendants to proceed with the process of encashing the LC, because the 1st Defendant was, under the LC, duty bound to produce to the 2nd Defendant, a final commercial invoice after delivering the petroleum products to the Plaintiff. In her testimony, Pw-1 stated that, the acts or omissions of the 1st Defendant have occasioned losses and damages to the Plaintiff. She testified, therefore, that, if the LC is to be encashed and there being no supply of the petroleum products, the Plaintiff will have to register a loss of US$ 201,398.44 and the associated costs of issuing the LC. She testified that, the Plaintiff is continuing to suffer loss of profit following the non-supply of the petroleum products from the 20th of February 2021 when delivery of the cargo was expected, loss of business/market share as well as other costs associated with following up the matter both administratively and through the court as well as other general losses and damages. Pw-1 did tell this court that, the Plaintiff made several efforts to mitigate the losses. The efforts include exercising her rights under the Shipping and Supply Contract (Exh.P2) pursuant to Clause 27.10 to sue the 1st Defendant following the Board resolution dated 02nd of July 2021. The Board resolution was tendered in court and admitted as Exh.P10. According to Pw-1, apart from filing this suit, the Plaintiff did also file Misc. Commercial Application No.94 of 2021 seeking for an order of temporary injunction restraining Page 11 of 66 the 1st Defendant from encashing the LC pending hearing and determination of this suit. Since the application was granted and the US$ 201,398.44 has not been debited from the Plaintiff’s account, Pw-1 asserted that the only permanent solution in the circumstance of the case is to have the LC cancelled. She, thus, pressed for the Judgement and Decree in favour of the Plaintiff, urging this court to grant all prayers sought in the Plaint. During her cross-examination, Pw-1 stated that, an LC is a contract between seller and the buyer which guarantees that the seller will be paid his proceeds of sale once an underlying transaction goes through. She told this court that, the issuing bank is the bank used by the buyer to issue the LC and in this case, it is the 2nd Defendant. Pw-1 asserted further that, apart from opening the LC, the issuing bank has a duty to process payments to the seller’s bank where the seller is supposed to make presentments of documents conforming to the LC terms. However, she did in principle admit, that, the issuing bank deals only with documentations and nothing else and, that, NBC (2nd Defendant) has been a banker to the Plaintiff for a long time now. Pw-1 told this court that, the 2nd Defendant was sued because the Plaintiff did send her request for cancellation of the LC through her banker because the Plaintiff never received the goods for which the LC was created, but the Seller (1st Defendant) refused cancellation. Pw-1 admitted as well that, the 3rd Defendant is the Seller’s bank. She told this court that, the US$ 201,398.44 is now regarded as a credit Page 12 of 66 facility to the Plaintiff. When asked, she admitted that it was ODDO (3rd Defendant) who refused cancellation of the LC. Pw-1 told this court, however, that, the Plaintiff expected the 2nd Defendant to cancel the LC because their agreement was that the Seller was to release the cargo and the buyer will upon receipt of the cargo was to pay for it, but that never happened as the cargo was never received. She also told the court that the LC is long expired and, the court’s order to stop all encashments still stands although the 3rd Defendant has already deducted the US$ 201,398.44 from the 2nd Defendant. She told this court further on being cross-examined that, given the way the LC transaction was, the Plaintiff expected that the 2nd Defendant being her banker would have assisted the Plaintiff to get what she deserves given that the buyer and the seller knows not each other except through their bankers. Pw-1 maintained that the 2nd Defendant ought to have continued to press for the cancellation of the LC given that no business was transacted as no commodity was traded. Even so, she did admit being aware of what an irrevocable LC is all about. She told this court that, if the documents are presented as per the LC, that LC becomes irrevocable meaning that it would not be possible to cancel or revoke it. Pw-1 stated, however, that, the Plaintiff’s call for revocation was to be upon agreement of all parties given that, the purpose for which it was issued was non-existent. She maintained therefore that, it being so, the LC was also Page 13 of 66 untenable and, that, the transaction was tainted with fraud given the history of the cargo supplier. According to her testimony, the cargo was unsupplied because of a court order from the country of origin of the cargo and, that, on the 25th of February 2021, the date when the cargo was to be transhipped to Tanzania, the supplier raised a force majeure and so the cargo could not be transhipped to the vessel destined to Tanzania. However, while the supplier was aware since 25th of February 2021, the report of the problem alleged to be encountered was availed to the Plaintiff on the 15 th of March 2021 when the supplier requested for the Plaintiff’s bank to amend the LC. Pw-1 told the court further that, the Plaintiff’s side noticed that, at the time, the 1st Defendant had already presented the documents to the bank for purposes of encashment while knowing that she had no actual ownership of the cargo according to the letter of indemnification. She told the court that, the documents which the 1st Defendant presented to the bank were a letter of indemnity and a Provisional Invoice. She told the court that, the 1st Defendant presentments were fraudulent since she knew that she had no ownership of the cargo and had no Bill of Lading. Further, she asserted that, to date the Plaintiff has never received the cargo she had ordered but the 1st Defendant went ahead to demand payments. Pw-1 maintained that, after submitting the documents, the Plaintiff did e-mail the 1st Defendant inquiring as to why she Page 14 of 66 had made presentments for encashment while the cargo was yet to be received only to receive a response that a 1st Defendant’s officer, in the name of Mr. “Franklin” had erroneously presented them. Pw-1 told this court that, the concerns which the Plaintiff had over the documents presented by the 1st Defendant are that the documents showed that she had sold the cargo to the Plaintiff by the time of presentments while it was not true, and the cargo has never been received. She stated that, the Plaintiff had no issue with the format of the documents. When she was re-examined by Mr. Josiah, Pw-1 told this court that, although she is aware that banks deals only with documents and not commodities, the documents must indeed establish that the commodity was indeed received by the buyer. She told this court that, the Plaintiff’s credit limit with the 2nd Defendant is now affected as she cannot open other LC’s due to insufficient credit limit and had to wait until the LC matures, a fact which cause more costs on the Plaintiff’s part. Pw-1 told this court that, the Plaintiff did communicate with Franklyn by e-mail dated 20th April 2021 and was told that the presentments of documents was made before declaration of force majeure event. She maintained, however, that, the cargo was never supplied and there had been a breach of the underlying contract with PBPA and the 1st Defendant. When asked by this court regarding which documents ought to have been presented by the 1st Defendant as per the LC, Pw-1 told the court that, as per the normal practice, the Page 15 of 66 supplier was to present a Letter of Indemnity, Commercial Invoice/Provisional Invoice, Certificate of Origin, Certification as to Quantity/Quality and a Bill of Lading (BL). She told the court that, in the Letter of Indemnity, the 1st Defendant stated that she was not able to submit those documents, but the 3rd Defendant collected the payment funds for the 1st Defendant for the supply made. She told the court that, the 3rd Defendant had to receive those documents from the 2nd Defendant and so the Plaintiff is unaware of what the 3rd Defendant received and confirmed to the extent of releasing the payments. When the 2nd Defendant’s case opened, the 2nd Defendant called one witness only, namely Mr. Zuberi Mussa who testified as Dw-1. In his testimony in chief received in court, Dw-1 admitted that the Plaintiff is a client of the 2nd Defendant for years now. He told the court that, the 1 st Defendant did win a tender from the PBPA for supply of petroleum products to various OMCs through the petroleum bulk procurement process. Dw-1 testified that, the Plaintiff’s share was MT 375 (+/-) of MOGAS, with several options as mode of payments of the orders, one of them being opening a Letter of Credit (LC), a mode preferred by the Plaintiff herein. He admitted that the Plaintiff did, on 16th February 2021, apply for LC from the 2nd Defendant in the value of US$ 201,398.44 with a view to secure the payment for the petroleum products, i.e., MT 375 +/- 5% of MOGAS. Page 16 of 66 Dw-1 told this court that, together with the application for LC, the Plaintiff did attach a draft Provisional Invoice and a Letter of Indemnity issued by the 1st Defendant as well as a draft LC and list of acceptable confirming banks. It was his testimony that, subsequently, an Irrevocable LC No. 002LCNB210540001 which was to mature on the 16th of May 2021 was issued. He testified that, at the time of issuance of the LC, and pursuant to Article 13 of the Uniform Customs and Practice for Documentary Credits (UCP600) and Article 3 Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (URR 725) respectively, the 2nd Defendant issued, on the 23rd of February 2021, a non-revocable reimbursement authorization to Deutsch Bankers Trust Co. Americas (the reimbursing bank). This was tendered and admitted in court as Exh.D-2 collectively. He submitted that; the stated authorization could not be rescinded after the LC has been discounted. An affidavit of authenticity of electronic documents and a copy of UCP 600 and URR 725 were also admitted as Exh.D-1 and Exh.D-3 respectively. Dw-1 told the court that, based on that authorization, the 3rd Defendant confirmed the transaction on 24th of February 2021. He testified further that, according to field 47A (7) of the LC, the 2nd Defendant was authorized to discount the LC in favour of the 1st Defendant at the latter’s request and expense. He also told this court that, the Deutsch Bankers Trust Co. Americas (the reimbursing bank) was under obligation to pay Page 17 of 66 the amount due on the LC upon the 2nd Defendant receiving a signed commercial invoice, certificate of origin, certificate of quality and certificate of quantity. Dw-1 stated that, in the absence of the four documents, alternatively upon receipt of a Letter of Indemnity and signed Commercial Invoice, the amount on the LC could also have been made payable as per Field 47A8 of the LC. He told this court that, on the 05th of March 2021, the 3rd Defendant dispatched a couriered letter to the 2nd Defendant which included 2 copies of the Letter of Indemnity (I copy and 1- original) and a “Provisional Invoice”. He testified, as well, that, on the same date, the 3rd Defendant did send a SWIFT MESSAGE to the 2 nd Defendant regarding the fact that the documents had been couriered by DHL and, on the 09th of March 2021 the 2nd Defendant received the dispatched letter from the 3rd Defendant. The SWIFT MESSAGE was received as part of Exh.D-2. It was the testimony of Dw-1 that, upon scrutiny of the dispatched documentation, both the 2nd and 3rd Defendants found them to be compliant, both in form and in substance, to the LC. He told this court that, on 12th of March 2021, through email correspondences, the 2nd Defendant informed the Plaintiff of receipt of the couriered documents and proceeded to share them, i.e., the Letter of Indemnity and the “Provisional Invoice.” This court was also informed by Dw-1 that, the 2nd Defendant did inform the Plaintiff that in exercise of its Page 18 of 66 obligations under the UPC600, it had scrutinized the documents and had found them to be compliant. He stated that, the Plaintiff did not dispute them or allege any discrepancy between the documents and the requirements of the LC. Besides, Dw-1 did admit that, in the letter dated 19th of May 2021, the Plaintiff issued instructions to NBC requesting for cancellation of the LC on account that the 1 st Defendant failed to perform the underlying contract. He told this court that, on receipt of the request, the 2nd Defendant transmitted the request to the 3rd Defendant via SWIFT MESSAGE dated 19th of May 2021. Dw-1 testified that, on 25th May 2021, the 3rd Defendant responded to the 2nd Defendant’s SWIFT MESSAGE, rejecting the Plaintiff’s cancellation request on the ground that neither the 3rd Defendant nor the 1st Defendant agreed to the cancellation of the LC, and for no further reasons. Further still, it was Dw-1’s testimony that, on the 26th of May 2021 and upon request from the Plaintiff, the 2nd Defendant sent yet another SWIFT MESSAGE response to the 3rd Defendant stating the reasons for the earlier request for cancellation as being 1st Defendant’s breach of contract. The SWIFT MESSAGE was received as part of Exh.D-2 (collectively). Dw-1 testified that, on the 7th of June 2021, the 3rd Defendant still rejected the second request for cancellation of the LC the ground being that a Letter of Credit is by its nature a separate transaction from the contract on which it is based. According to Dw-1, due to the refusals to cancel the LC, on the Page 19 of 66 9th of July 2021, the Plaintiff instituted this suit seeking for among others, a declaration that the 1st Defendant was in breach of the terms of the Shipping and Supply Agreement and that the LC be cancelled. Further that, vide Commercial Application No.94 of 2021, the Plaintiff obtained, with costs, a Court order restraining Defendants from encashing the LC. Dw-1 stated that, despite the order of the court dated 09th of July 2021, on the 16th the July 2021 the 3rd Defendant debited an amount of Euros (€) 170,676.64 (counter value of the LC amount of US$ 201,398.44) from the Nostro Account which the 2nd Defendant (NBC Bank) maintains with the 3rd Defendant. A copy of SWIFT MESSAGE response to that effect was tendered and admitted in court collectively as part of Exh.D-2. He told this court that, so far, the 2nd Defendant has lost the amount of US$ 201,398.44 having been deducted from her Nostro Account and yet, the 2nd Defendant has been restrained from recovering it from the Plaintiff due to the order of this court dated 09th of July 2021. When Dw-1 was cross-examined he told the court that, where the confirming bank is the same maintaining the Nostro Account still one cannot cancel the reimbursement authorization. He told the court that the 3rd Defendant was the conforming bank while the NBC was the issuing bank. He stated further that after issuing the LC the 2nd Defendant did present documents the 3rd Defendant and the latter examined them as per the rules and procedures and were found to be compliant and dispatched them to the 2nd Defendant. Page 20 of 66 He stated, however, that, at the time of dispatch to the 2nd Defendant, the 1st Defendant had already presented to the 3rd Defendant a request of discounting the LC under Field 47A (7) of the LC. He told this court that the discounting option was so agreed between the parties. He noted that, given that discounting was allowed, and the documents were compliant, the 3rd Defendant proceeded to pay the 1st Defendant and dispatched the documents to the 2nd Defendant. He told this court that, the 2nd Defendant did find them to be compliant and did dispatch them to the Plaintiff within 5 days as per the rules. According to Dw-1, the 2nd Defendant never heard from the Plaintiff within the prescribed time of 5 days. He admitted, however, that, the laycan was up to March and so the Plaintiff was still in position to respond. According to Dw-1, the 2nd Defendant did not receive the first initial documents, i.e., the Commercial Invoice, the Certificate of Origin, Certificates as to Quality and Quantity but did receive a Letter of Indemnity and a Provisional Invoice. He reiterated his testimony that under Filed 48A8 in the absence of the Commercial Invoice, a Provisional Invoice could be relied upon. He admitted that no payment could be made in the absence of supporting/ conforming documents but that the parties had agreed to an alternative. He admitted that the 2 nd Defendant had a duty to protect its customer (the Plaintiff) but that, a Provisional Invoice was used in the absence of a Commercial Invoice because it was allowed to do so as per Page 21 of 66 Field 47A of the LC. He told this court that, Bill of Lading was not part of the LC documents. Dw-1 told this court that, by now the LC is long expired as time was up to the 13th day of July 2021 and now what holds the process is the court order which stands to date. He admitted that the payment date was 13th July 2021 when the LC was to mature. He noted, however, that, with presentation of documents and possibility to discount the LC payments were made expecting that reimbursement would be made on maturity date to reimburse the amount already paid to the 1 st Defendant in advance. He admitted that an irrevocable LC cannot be cancelled unless the parties agree first. While he admitted that where there is fraud, as this case seems to indicate, the situation could be different where it is reported earlier enough. He told the court that no information regarding fraud was communicated but that what was communicated was a message to extend the dates of delivery. He admitted that any bank cannot proceed with a fraudulent transaction but that, in this instant scenario the payments dates were extended to July 2021. On being re-examined, Dw-1 told this court that Filed 47A8 of the LC did authorise use of Provisional Invoice as one of the documents that could be presented and so the presentment was valid. He also told the court that, after receiving the cancellation message, the 2nd Defendant did communicate it to the 3rd Defendant insisting that there was breach of contract and the LC be cancelled. Further that, to Page 22 of 66 date, the 2nd Defendant has not debited the Plaintiff’s account. So far that was the case for the 2nd Defendant. Since the 1st and 3rd Defendants did not appear to defend their cases, this court proceeded ex parte and heard the matter against them. Considering the agreed issues for determination, I will now consider the testimonies and the documentary evidence presented before this court and see where the pendulum of justice should rest. However, before I do so, however, it is worth noting that, the duty to establish each alleged fact rests on that person who so alleges. One common axiom in establishing proof is that he who alleges, must prove. The case of The Registered Trustees of Joy in the Harvest vs. Hamza K. Sungura, Civil Appeal No.149 of 2017 (unreported) which are all alive to that settled legal position and cements what sections 110 -111 of the Evidence Act, Cap.6 R.E.2022 provide. When determining the four issues earlier agreed upon to guide it this court, I will also be guided by that principle and many others. Here below, and as part of my analysis and consideration, I will address each issue in the light of the available evidence and the testimonies received in court. The first agreed issue was: Whether the 1st Defendant is in breach of the shipping and Supply Agreement dated 05th day of January 2021 between PBPA (on behalf of several Oil Marketing Companies – the Plaintiff being included in) and the 1st Defendant, for supply of Petroleum Products. Page 23 of 66 In his submission, Mr. Nuwamanya contended that, at the look of things, this first issue can only be responded to by the 1st Defendant since it directly concerns her. I am in total agreement with his submission. That issue cannot involve the LC’s “issuing bank” (the 2nd Defendant) or even the “confirming bank” (the bank that serves as a source of funds payment to the beneficiary and, in this case the 3rd Defendant). The two are not bound by the underlying contract, and, therefore, the first issue is an issue to be responded to by the 1st Defendant alone. Legally speaking, a breach of contract results from a situation where a party to the contract fails to honour his/her obligations towards the other party as per the contract. According to section 37 (1) of the Law of Contract Act, Cap.345 R.E 2019, the law has made it clear, as a matter of principle, that: “the parties to a contract must perform their respective promises, unless such performance is dispensed with or excused under the provision of this Act or of any other laws.” The above stated principle was aptly stated albeit differently, by the Court of Appeal of Tanzania in the cases of Simon Kichele Chacha vs. Aveline M. Kilawe, Civil Appeal No.160 of 2018 (unreported) and Abualy Alibhai Azizi v Bhatia Brothers [2000] T.L.R. 288. In those cited cases, the Court was of the view that: "the principle of sanctity of contract is consistently reluctant to admit Page 24 of 66 excuses for non-performance where there is no fraud (actual or constructive) or misrepresentation and no principle of public policy prohibiting enforcement." Commenting on those principles observed by the Court of Appeal in the above cited authorities, this court did conclude in the case of FABEC Investment Ltd vs. MES International Financial Services (PTY) Ltd and Another, Comm. Case No.07 of 2022 (unreported), that: “The above noteworthy observation is what brings comfort to contracting parties and, thus, gives credence to the law of contract which, generally, coupled with enforcement powers vested on the Court, serves to alleviate mistrust in the world of uncertainty. A failure by any of the parties to an agreement to honour any of their agreed terms or conditions constitutes a departure from the agreement which amounts to an outright breach of that contract.” From the above stated principles, therefore, one immediate question to ask, and which resonates with the issue under consideration, is whether the facts and the evidence availed to the court do indicate that there was breach of the supply agreement (Exh.P-2). As it may be noted from the testimony of Pw-1 and the facts of this suit, there is no dispute that the 1st Defendant, concluded a contract of supply of, Page 25 of 66 among others, 375MT of petrol products (Mogas), the recipient of this consignment being the Plaintiff herein. It is also not disputed that, as a condition for the supply of the 375MT of petrol products (Mogas) to the Plaintiff, the latter was to open a Letter of Credit, this being a mode of payment and the Plaintiff fulfilled that condition to assure payment by applying for and there was issued in that regard, a LC No.002LCNB210530001 dated 23rd February 2021 (received in court as Exh.P-3) and which could only be encashed after 60 calendar days from the first day of delivery agreed laycan. As correctly submitted by Mr. Josiah, by issuing the LC, the Plaintiff fulfilled her contractual obligation for the supply of the375MT of petrol products (Mogas) she had ordered. The ball was now in the 1st Defendant’s court demanding performance of her obligation to supply the required products. However, despite several delays, Pw-1 testified before this court, that, to date the 1st Defendant has never supplied a single drop of the 375MT of petrol products (Mogas) which she was required to supply. In her testimony, Pw-1 told this court that, various efforts by the PBPA, the Plaintiff and other OMCs to make follow-ups never yielded a positive result and, that, on the 15th of March 2021, the 1st Defendant communicated to the PBPA alleging force majeure. Although PBPA rejected such a defence, and of course no one would have accepted it as the initial expected delivery was between 27th February and 1st Page 26 of 66 March 2021 (and later changed to the dates between 3 rd March and 5th March 2021 (as per Exh.P-3), nothing was delivered on those dates. As the testimony and documents availed to this court reveals, several efforts were made to remedy the breaches including meetings evinced by Exh.P-5 wherein the 1st Defendant (though still citing force majeure) assured the PBPA no rights were waived as to performance of the contract of supply and proposed for a new supply (delivery) window between 15th to 17th May 2021. Exh.P5 was signed by one Tareq Abdullah M. Alkhulawi, as Managing Director (Commercial) of the 1st Defendant. As if putting matters in their right perspective, the 1st Defendant and the Plaintiff negotiated and agreed for the amendment of the LC (Exh.P3) as Exh.P4 reveals, extending its maturity date from 30th of April 2021 to 13th of July 2021. However, Exh.P6 reveals that while responding to a letter from PBPA dated 11th May 2021 inquiring about the delivery of the cargo on the agreed dates of 15th to 17th May 2021 as no documentations were ever received by the Plaintiff/ PBPA (which letter forms part of Exh.P6)), the 1st Defendant did acknowledge (in her letter dated 12th May 2021 and which forms part of Exh.P6), the agreed new delivery dates. However, he shifted the goals posts to yet another dates, between 20th June and 21stJune 2021 on the grounds that “circumstances remain prohibiting delivery”, hence “no obligation ..to make delivery on 15th to 17th May 2021.” Page 27 of 66 The letter from the 1st Defendant did not bother to narrate which are those “circumstances prohibiting delivery” but rather rudely and, indeed, out of sheer business courtesy, disclaimed obligation to deliver on such earlier agreed dates and demanded a confirmation of the unilaterally set dates by 13th day of May 2021. Essentially, her failure to deliver on the agreed dates constituted an act of breach once again of the agreement which she had entered in respect of the new delivery dates. In her testimony, Pw-1 testified that, even on the 20th to 21st May 2021 and up to the 13th day of July 2021 and to date, nothing was or has been supplied, not even a single drop. Besides, the 1st Defendant failed to avail to the PBPA, as per Clause 14.1(i) of the Supply Contract (Exh.P2) the agreed documentation in respect of the cargo, these being: a copy of the Bill of Lading, Load Port Certificate of Quality and Certificate of Origin. As Exh.P4 indicates, in her email dated 11th May 2021, the Plaintiff (through Pw-1) requested for such documents but to no avail. But what is even more disgusting is that, while well-aware that no delivery has been made to the Plaintiff, the 1st Defendant went ahead to encash the LC as if she had supplied that consignment to the Plaintiff. This, in its common legal parlance, amounted to a fraudulent act. Besides, as Exh.P4 and P8 indicate, the processes to encash the LC were initiated even before the purported force majeure act alleged by the 1st Defendant took place. A such Page 28 of 66 acts reveal the sinister motive which the 1st Defendant had, while on other ends, pretending to be willing to honour her obligations. In the totality of all that, therefore, I do agree with the submission of the Learned Counsel for the Plaintiff, Mr. Josiah Noah, that, the first issue calls for an affirmative response. The 1st Defendant did materially breach the Shipping and Supply Contract since the Plaintiff’s expectation when concluding such a contract was for her to be supplied with the petroleum products by the 1st Defendant, which supply has never been made to date. The principle has been stated in China Henan International Co-operation Group Co. Ltd vs. Salvand K.A. Rwegasira, Civil Appeal No.57 of 2011, CAT (unreported), to the effect that, there cannot be a wrong without a remedy. When a contract is breached, there must be a remedy which is payment of damages. Section 73 (1) of the Law of Contract Act, Cap.345 R.E 2019 is even instructive on payment of damages. It provides that: “73.-(1) Where a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the Page 29 of 66 contract, to be likely to result from the breach of it.” In this suit, the Plaintiff has suffered damages because of the 1st Defendant’s breach. I note that, the Plaintiff in this case pleaded for an award of general damages. In view of the inconvenience so far suffered, I do agree that the Plaintiff is entitled to general damages. In view of that fact, as the Court of Appeal of Tanzania in the case of Saidi Kibwana and General Tyre E.A. Ltd vs. Rose Jumbe [1993] TLR 175: “The Court, in granting general damages will determine the amount which will give the injured party reparation for the wrongful act and for all the direct and unnatural consequences of the wrongful act. In the circumstances of this case and considering the evidence and the inconvenience suffered by the Plaintiff due to the 1st Defendant’s breach, an award of US$ 300,000 as general damages to the Plaintiff will be warranted. I thus award such amount. The first issue is thus concluded. That conclusion brings me to the second issue which is dependent upon the first issue being responded to in the affirmative, and which is indeed the case. As I look at the 2nd issue, however, I also find that it can and indeed should be tackled together with the 3rd issue as I shall demonstrated here below as they do have some interdependence or relational effects. The two issues read as follow: 2nd Issue: “If the issue No.1 is in the affirmative whether the Plaintiff is Page 30 of 66 entitled to an Order of Cancellation of LC No.002LCNB2154001 dated 23rd of February 2021- in respect of a sum of US$ 201,398.44- issued by the Plaintiff in favour of the 1st Defendant.” 3rd Issue: “Whether the refusal by the 1st and 3rd Defendants to cancel the LC aimed at defrauding the Plaintiff.” As the 2nd and the 3rd issues indicate hereabove, they are primarily centred on cancellation of an LC. In his submissions, Mr. Nuwamanya, the Learned Counsel for the 2nd Defendant has submitted that, a mere breach of contract (as what has been observed in respect to the 1st issue herein above) cannot warrant giving heed to a call for cancellation of a Letter of Credit. His submitted that, a Letter of Credit is a contract under which a bank agrees to pay the seller, in connection with export of specific goods, against which the presentation of documents by the seller entitling her to receive payments as agreed in in the LC. Mr. Nuwamanya relied on Article 2 of the UCP600. The respective Article 2 provides that: “a credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation”. Relying on the above as well as Article 3 of the UCP600, the Learned Counsel for the 2nd Defendant submitted that, the rules governing LC are such that the same is not revocable or cancellable save only for the provided Page 31 of 66 circumstances. Referring to Article 10 of the UCP600, he submitted that, if the LC is to be cancelled or amended, that can only happen upon consent of both parties involved, i.e., the issuing bank, the confirming bank if any, and the beneficiary. To that end, he submitted that, as per Exh.D2 (collectively), the confirming bank (3rd Defendant) and the beneficiary (1st Defendant) refused to the LC cancellation. Besides, Mr. Nuwamanya relied on the English case of Edward Owen Engineering Ltd vs. Barclays Bank International Limited [1978] Q.B. 159. He advanced an argument, therefore, that, breach of underlying contract alone cannot warrant the cancellation of the LC. To bolster his position, he relied further on the case of United City Merchants (Investments) Ltd vs. Royal Bank of Canada (The American Accord) [1983] 1. A.C 168. In that case, it was stated that: “The letters of credit are characterised by the principle of autonomy that, in Hamzeh Malas and Sons vs. British Imex Industries Ltd [1985] 2QB 127, Jenkins, LJ, said, “…the opening of a confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes upon the banker an absolute obligation to pay, irrespective of any dispute there may be between the parties as to whether the goods are up to a contract or not…That system of financing these operations would Page 32 of 66 break down completely if a dispute as between the vendor and the purchaser was to have the effect of “freezing” the sum in respect of which the letter of credit was opened…”. According to Jenkins LJ, a letter of credit has autonomy and does not affect the obligations of the bank in respect of such letter. If an issue arises as to the description of the delivered goods, then the buyer can sue the seller, not stop payment by the bank.” In his submission, Mr. Nuwamanya contended that, an exception to the above principle is fraud. To back up his submission, he cited the English case of Discount Records vs. Barclays Bank Ltd [1975] 1Lloyd’s Rep.444, one of the first cases which dealt with fraud regarding commercial credits. In that case, the court observed that: “In such a situation, where the seller’s fraud has been called to the bank’s attention before the drafts and documents have been presented for payment, the principle of independence of the bank’s obligation under the letter of credit should not be extended to protect the unscrupulous seller.” From that context, it was Mr. Nuwamanya’s submission that, whereas breach cannot alone warrant the cancellation of the LC, it is however, clear that, fraud can warrant such a cancellation. He pointed out, however, that, it is not easy to Page 33 of 66 prove existence of fraud. From his submission, though he submitted on each issue separately, the conclusion which can be garnered therefrom is that he is urging this court to respond to the 2nd and 3rd issues herein in the negative. For his part, however, Mr. Josiah Noah, the Learned Counsel for the Plaintiff, had a contrary view. In his submission, though he as well argued the 2nd and 3rd issues separately, in totality he has urged this court to give them an affirmative response and proceed to order that the LC be cancelled. In defence of his position, Mr. Noah contended that, as a matter of fact and as Pw-1 testified, despite the 1st Defendant’s non-delivery of the cargo to the Plaintiff, still the 1st Defendant initiated the process of encashing the LC. He submitted that, it was a pre-condition under the LC’s terms that, the 1st Defendant would only be paid in terms of the LC upon presentation of complying documents in terms of a Final/ Provisional Invoice for the petroleum products ordered; a certificate of quality and a certificate of quantity of petroleum products, issued upon arrival of the ship-tanker at the Port of Dar-es-Salaam, issued by an independent inspector; as well as the production of certificate of origin of the petroleum products. Mr. Josiah admitted, however, that, alternatively, where such documentation is unavailable, the 1st Defendant could have encashed the LC upon presentation of a Final/ Provisional Invoice and a Letter of Indemnity. Essentially, Page 34 of 66 there is no controversy that, the 1st Defendant initiated the process of encashing the LC by availing to the 2nd and 3rd Defendants two documents: a “Provisional Invoice” and a “Letter of Indemnity” which were submitted on the 3rd of March 2021. In my view, however, the controversy surrounding them is whether they were compliant documents and if not whether they should have been refused. In this court, the documents were collectively admitted into evidence without objection and marked Exh.P8. As per Exh.P8 and Pw-1’s testimony, the 2nd Defendant received the documents from the 3rd Defendant and made them available to the Plaintiff on the 12th of March 2021 purporting to be compliant documents. According to Pw-1, upon receipt of Exh.P8, the Plaintiff did inquire from the 1st Defendant why a presentation was made while the consignment ordered had not been delivered only to be told (as per Exh.P4 shows) that, they were presented prior to an event alleged to be constituting a “force majeure”. From the above submission, it will be clear that, the submission or presentation of the documents was made before the delivery of the consignment. Mr. Josiah submitted, however, that, in principle such documents were to be presented after delivery or where there was a valid anticipation that the 1st Defendant was about to or would on the agreed dates, deliver to the Plaintiff. He argued that, as per Exh.P6 (collectively), when it was clear that the 1st Defendant was not going to deliver, the Plaintiff made a formal demand to the 1st Page 35 of 66 Defendant to cancel all LCs issued by OMCs under Exh.P2, including the LC issued by the Plaintiff. He argued that the same effort was done via Exh.P9, which include a letter by the Plaintiff dated 19th of May 2021 to the 2nd Defendant requesting for cancellation of the LC because the consideration or subject matter for which the LC was issued had not been fulfilled by the 1st Defendant. In essence, there is no dispute that a request for cancellation of the LC was made and supported by the 2nd Defendant. It is clear from the testimonies of Pw-1 and Dw-1 that on the same date (19/5/2021) the 2nd Defendant sent a SWIFT Message to the 3rd Defendant (see Exh.P9 and Exh.D2 (collectively)) requesting for cancellation of the LC but the response received from the 3rd Defendant was that, neither the 3rd Defendant nor the 1st Defendant were ready to cancel the LC. As a matter of fact, Dw-1 asserted that the 2nd Defendant had no complaints regarding the cancellation, but the challenge was that cancellation must involve the 3rd and 1st Defendants who did not consent to that. From that premise and admissions, Mr. Noah has contended that, an order of this court will force these two to collaborate with the 2nd Defendant to cancel the LC. This means he is urging this court to respond to the 2nd issue in the affirmative. In his further submission, Mr. Noah has argued that, if this court will not issue the order sought by the Plaintiff, the Plaintiff is at loss, since, as Dw-1 testified, the 3rd Defendant Page 36 of 66 has proceeded to deduct the LC amount (equal to US$ 201,398.44) from the 2nd Defendant’s Nostro Account which fact means that, in turn, save for the interim order which this court issued earlier, the 2nd Defendant will proceed to debt an equal amount from the Plaintiff’s account. He surmised, therefore, that, since the consideration for which the LC was issued has not been fulfilled by the 1st Defendant, the LC ought to be cancelled and a cancellation order needs to be issued. Concerning the 3rd issue, based on his earlier submission that the 1st Defendant had breached the contract of supply but still fraudulently sought to benefit from his own wrongdoing by initiating the process to encash the LC, Mr. Noah is also urging this court to respond to the 3rd issue affirmatively. I have assessed the arguments made by the Learned Counsel for both parties. In my view, the real matter constituting my first concern would be an analysis of: whether the 1st Defendant acted fraudulently. The second concern would be: was this a matter brought to the knowledge of the 2nd and 3rd Defendants and if so, what would be the effect? As regards the first concern, I find that, Mr. Noah, the Learned Counsel for the Plaintiff, premised his arguments on at least four grounds regarding why this court should find that the 1st Defendant acted fraudulently. The first, is that the 1st Defendant presented to the 3rd and 2nd Defendants documents “purporting to be compliant” and, did so maliciously with intent to defraud the Plaintiff. In Page 37 of 66 other words, he is arguing that the documents presented were not “compliant documents”. (I will afterwards comment on the status of the documents presented by the 1st Defendant). Second, is that the 1st Defendant’s intent to defraud was notable from the very early stage when, on the 25th of February 2021, the 1st Defendant purported to raise a “false flag” of “force majeure event”. However, that “false flag” was raised just six (6) days before presentments of the alleged compliant documents and, the 1st Defendant did not even relay it to the attention of the PBPA, until the 15th of March 2021. Third, on the date of notification of the purported “force majeure event” i.e., the 15th of March 2021, already the 1st Defendant has presented the purported compliant documents to the 2nd and 3rd Defendants, which documents, as per the testimony of Pw-1, were availed on the 3rd of March 2021. In fact, one may ask: if there be a force majeure event and if acting in bona fides, why proceeding to make presentments of the document to process encashment? I think that is a sound argument. Fourth, is that a further 12 days lapsed, post the presentiments of the documents purported to be compliant, before the 1st Defendant divulged the alleged force majeure event to the PBPA (and so indirectly to the Plaintiff). The question to ask as well is: why wait for 12days after presentments of the documents to now relay information regarding the force majeure event to the PBPA (impliedly to the Plaintiff?) Page 38 of 66 In essence, it is my view and findings that, the scenario played out hereabove, does present evidence, both documentary and circumstantial that, the 1st Defendant acted fraudulently. Indeed, and as I stated earlier when responding to the 1st issue, the look of things does present a clear picture that the 1st Defendant was bent to defraud the Plaintiff. Intrinsically, therefore, I fully subscribe to the arguments and the reasoning of the learned counsel for the Plaintiff as summed up in the four grounds above, that, the 1st Defendant had intent and ill- motive to defraud the Plaintiff by ensuring that she first makes presentments to the 3rd Defendant and gained from the LC at the cost of the Plaintiff. But now the more pressing issue is whether based on such fraud, cancellation of the LC which the Plaintiff is seeking is a doable thing. I am aware that, before the lapse of time when the LC should have been encashed, i.e., the 13th of July 2021 (following the agreed extension) this Court, vide the Misc. Commercial Application No.94 of 2021, granted an order of temporary injunction restraining the Defendants from encashing the LC pending hearing and determination of this suit. The order of this court was communicated to all banks even though the 3rd Respondent seems to have proceeded to encash the LC and deduct from the Nostro Account of the 2nd Defendant. That fact aside, looking at the submissions and considering the 2nd and 3rd issues registered by this court as earlier depicted hereabove, the overriding question that needs Page 39 of 66 to be responded to is whether the LC is cancellable and/or should, in the circumstance, be cancelled. As noted earlier herein, the opening of a Letter of Credit (LC) to secure the exporter (1st Defendant) was the agreed mode of effecting payment for the supply of the petroleum products ordered by the Plaintiff through the PBPA arrangements under the contract of supply (Exh.P2), the 2nd Defendant being the issuing bank and the 3rd Defendant being the confirming bank. Under such an arrangement, however, one need to note, as a matter of principle, that, by its nature, although LCs are based on underlying contracts, a credit is regarded as a separate transaction from the sale or other contract on which it may be based. That is a fact, and well understood in the context of the “autonomy of a Letter of Credit”. As such, normally, a bank will have no concern with or be bound by such contract, even if any reference whatsoever to it is included in the credit. In view of the above, according to Article 4 of the UCP600 banks’ undertaking to honour, to negotiate or to fulfil any other obligation under the credit is not subject to claims or defences by the LC’s Applicant resulting from her relationships with the issuing bank or the beneficiary. It is also worth noting, and as correctly argued by Mr. Nuwamanya, that, generally an Irrevocable Letter of Credit signifies a sense of non-cancellability. The case of Edward Owen Engineering Ltd (supra) set out that clear and accepted legal position. In that case, Lord Denning stated that: Page 40 of 66 “Under the irrevocable credit the buyer cannot cancel the credit without the authority of both the seller and the bank, even though the credit is initially open as per the buyer’s instructions.” However, every general principle does have exceptions, or an escape latitude. As the above cited case of Edward Owen Engineering Ltd (supra) indicates, there are instances where a Letter of Credit may be cancelled, one situation being where both the seller and bank grant such authority. The second exceptional grounds which may necessitate a cancellation to take effect is where fraud and illegality are observed. In United City Merchants vs. Royal Bank of Canada [1983] 1 AC 168 at 183, Lord Diplock had the following formulation regarding the fraud exception: - "To this general statement of principle as to the contractual obligations of the confirming bank to the seller, there is one established exception: that is, where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue. Although there does not appear among the English authorities any case in which this exception has been Page 41 of 66 applied, it is well established in the American cases of which the leading or “landmark” case is Sztejn v J. Henry Schroder Banking Corporation (1941) 31 N.Y.S. 2d 631. This judgment of the New York Court of Appeals was referred to with approval by the English Court of Appeal in Edward Owen Engineering Ltd. V Barclays Bank International Ltd. [1978] Q.B. 159, though this was actually a case about a performance bond under which a bank assumes obligations to a buyer analogous to those assumed by a confirming bank to the seller under a documentary credit. The exception for fraud on the part of the beneficiary seeking to avail himself of the credit is a clear application of the maxim ex turpi causa non oritur actio or, if plain English is to be preferred, “fraud unravels all.” The courts will not allow their process to be used by a dishonest person to carry out a fraud." (Italics and underline supplied this court for emphasis). From the foregoing, the general principle is, therefore, that, a compliant payment demand must be honoured by the issuer of the credit subject only to the fraud exception (and, where applicable, to the doctrine of illegality). Understandably, in the international business terrain where buyers and sellers may be far apart and never meeting face-to-face but rather Page 42 of 66 relying entirely on intermediaries, such as banks who facilitate settlement of their transaction, so many painful eventualities have been experienced. At times, for instance, unscrupulous sellers, with their bad intentions or ill-motives, have manipulated letters of credit system in many ways for their advantage. As custodian of justice and business decency, therefore, courts in many jurisdictions, have recognized the fraud exception rule and have, at times, intervened to protect the parties and the entire line of international business. However, for a court to apply such exceptional grounds, there are some conditions which must be met, one being the bank’s knowledge and demonstrable evidence of such fraud. This is what Denning, L.J., pressed for in Edward Owen Engineering Ltd (supra) at page 171, stating that, the fraud exception is applicable if “there is a clear fraud of which the bank has notice”. Put differently, the fraud exception requires the existence of two factors: (a) evidence of clear fraud; and (b) the bank’s knowledge of such (evidence of) fraud. It follows, therefore, that, where the bank issuing a letter of credit honours the beneficiary’s payment demand when aware that the payment demand is fraudulent, the bank may well be exposed (at least on a contractual basis) to liability to the party for whose account the letter of credit was issued (the “L/C applicant”). A similar position may essentially apply to the confirming bank (as a relevant paying bank rather than the Page 43 of 66 issuing bank) and it may as well be exposed to liability if it complies with the payment demand while well-aware that the payment demand is fraudulent. Such correspondent bank might be exposed to liability to the L/C applicant. But even where it is established that it is the beneficiary himself who commits the fraud or has knowledge of the fraud, still the fraud exception rule will apply. See Standard Chartered Bank vs. Pakistan National Shipping Corp (No 1) [1998] 1 Lloyd’s Rep 684. As I stated earlier hereabove, the fraud exception rule permits an issuer or a court to view the facts behind the face of complying documents and to halt the payment of a letter of credit when fraud is involved. The necessity to do so, as Buckley & Gao, puts it in their Article: The Development of the Fraud Rule in Letter of Credit Law: The Journey so Far and the Road Ahead, (2002) 23(4) U. Pa. J. Int'l Economic Law, pp.663-712, at, 664, hinges on the need to, firstly, plug the existing loophole in the law, as the UCP600 does not address it; secondly, uphold the public policy of limiting fraud; and finally, maintain the commercial utility of letters of credit. In the present suit at hand, the Plaintiff is, inter alia, seeking that this Court make an order that the LC be cancelled and, a finding be made to the effect that, the 1st and 3rd Defendants’ refusal to cancel the LC was/is aimed at defrauding the Plaintiff. As noted herein, cancellation can only be possible where consent is obtained from the parties to the LC and/or where an argument for cancellation of LC is pegged on fraud exceptions. Page 44 of 66 In our scenario herein, I did make a finding that, at the look of things, the evidence and testimony of Pw-1 do point to the conclusion that the 1st Defendant had an ill-motive and intention to defraud the Plaintiff and did defraud her as she falsely submitted documents to the 3rd Defendant and obtained money based on the LC while in full knowledge that nothing had been shipped and the documents presented were so presented to perpetrate a fraud, hence, not fully compliant. I shall explain further on this later. What is to be noted, therefore, is that, as clearly stated by Lord Diplock in the United City Merchants’ case (supra), there will be fraud: “…where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue.” However, the more pressing question which follows immediately is whether there was knowledge on the part of the issuing and the confirming banks since, the banks involved must have notice of it. Was there such knowledge to the banks regarding such fraud? In my view, apart from the fact that the banks involved in the LC transaction were alerted about the conduct of the 1st Defendant in relation to the Plaintiff, the banks ought to have noted the impending fraud which was being committed by the 1st Defendant. Such fraud perpetrated Page 45 of 66 by the 1st Defendant ought to have noted when presentation of the documents purporting to be “compliant” was made. I hold that view because, first, as per the SWIFT Message MT.799 processed on the 16th of April 2021 at 21:47:21, the 3rd Defendant was aware of the amendments done to the LC whereby the laycan date was to read 15th to 17th May 2021 and expiry date of the LC being the 13th day of July 2021. These changes as per the e-mail dated 14th April 2021 from Mr. Franklin Vicencio (an officer of the 1st Defendant) were communicated to the Plaintiff as well. I do understand that one may be tempted to argue that by this time already payments were done as of 05th day of March 2021 as Exh.D-2 (MT754 & MT799) reveals. Well, that is a fact, but one may also ask: was it proper to have effected payments without adhering to the terms of the LC which required compliant documentation? In my view it was not proper to have realized the LC without first being assured of compliance with its terms and conditions as I shall demonstrate later. What should now be taken on board is that the 1st Defendant was acting fraudulently, and 2nd and 3rd Defendants failed to act in line with the LC itself, hence, enabling the 1st Defendant’s fraudulent scheme to sail through. Second, Pw-1 revealed in her testimony that, as of the 19th day of May 2021, the 2nd Defendant, on Plaintiff’s request, put across a notice of cancellation of the LC to the 3 rd Defendant and the 1st Defendant and the reasons for that. See Exh.P9 (SWIFT Message MT799 processed on 19th May 2021) Page 46 of 66 which reveals what and how things were communicated. However, while the 2nd Defendant was ready to effect a cancellation, the 3rd Defendant, though as per Exh.D2 was made aware of that fact and its underlying reasons, did together with the 1st Defendant refuse to consent to the cancellation of the LC. Essentially, from a general principle underlying LCs, the rationale offered by the 3rd Defendant and the 1st Defendant as ground for their refusal to cancellation of the LC was a sound one. The LC transaction was a separate transaction from the underlying contract and could therefore not be cancelled because of breach of the underlying contract. But in the circumstances surrounding this suit, there was more than a mere breach of that underlying contract. There was fraud and, as Lord Diplock observed in United City Merchants’ case (supra), “fraud unravels all”. It follows, therefore, that, while it sounds correct as per Article 4 of the UCP 600 and as rightly argued by Mr. Nuwamanya, that, 3rd and 1st Defendant’s refusal argument was premised a sound legal argument, that argument is subject to the accepted exceptional circumstances. In other words, things ought to have been escalated further considering that, in the case of Discount Records Ltd (supra) it was stated that “a bank’s knowledge of the fraud must emerge from the bank itself and not from any other party.” Moreover, this will also apply when one considers the kind of documents which the bank received and whether they Page 47 of 66 were indeed and fully compliant with the LC’s terms and conditions as alleged. If the documents were not compliant and the banks failed to act properly thereby facilitating the 1st Defendant’s fraudulent scheme, then they should bear their own liability for their negligent conduct. But it is also worth noting that, where an external party e.g., the LC’s Applicant, is the one who becomes cognisant of the fraud and evidence is so availed, then, as it was stated in Alternative Power Solution Ltd vs. Central Electricity Board [2014] UKPC 31; [2015] 1 W.L.R. 697, one may seek for an injunction from the court to block the payment. In this present case, that is exactly what the Plaintiff, did through the Misc. Commercial Application No.94 of 2021, and obtained a restraint order. However, as things stands to be, the order seems not to have been honoured by the 3rd Defendant, who also never showed up in this suit. But that cannot be blamed on the Plaintiff either since the arrangement between the 2 nd Defendant and the 3rd Defendant does not concern the Plaintiff. As a matter of principle, a confirming bank will owe a duty of care only to its customer-the issuing bank-and not to the ultimate customer, hence, the LC Applicant has nothing to do with the agreement between the two. In Seed Co. vs. Hong Kong & Shanghai Banking Corp., 216 A.D. 495, 498, 215 N.Y.S. 525, 529, (1926), aff'd, 245 N.Y. 377, 157 N.E. 272 (1927), it was stated that, a customer's contract with its bank for the issuance of a letter of Page 48 of 66 credit is entirely separate and distinct from the issuer's contract with the confirming bank. As such, the confirming bank performs its services solely at the request of the issuer. It deals exclusively with the issuing bank in honouring the beneficiary's draft and looks to that bank for reimbursement. That fact notwithstanding, as I stated earlier hereabove, the point of escalation, if not the fraudulent conduct of the 1st Defendant which ought to have been noticed when the presentments were made before the 3rd Defendant, should, in my view, be the documents themselves which were presented as being “compliant”. That will also auger well with what was stated in Discount Records Ltd.’s (supra) that, “a bank’s knowledge of the fraud must emerge from the bank itself and not from any other party.” Besides, it will be in line with the view that, a bank deals only with documents (Article 5 of the UCP600) and, more importantly, by virtue of the autonomy principle (Article 4 of the UCP600). If so, then, the question will be: were the presented documents compliant? To me, addressing the current quagmire in which the parties find themselves in by examining compliance of the documents to the dictates of the LC itself is an approach necessitated by the fact that, ordinarily, beneficiaries demanding payment under LCs do not have to show that they have properly performed their duties under the underlying transaction; they need only produce conforming documents. Page 49 of 66 That being the tricky part of the LC-based transactions, whatever documents the beneficiaries present to the confirming/the issuing banks, the latter have a duty to carefully examine such documents and be fully satisfied that they are compliant and agrees with the terms and conditions in the LC. That is indeed a duty acknowledged under Article 14(a) of the UCP600. Put differently, the bank must carefully examine the documents presented by the LC Beneficiary and decide whether it should honour the credit or not, and more so when fraud comes to the light during the examination must refuse to honour. In principle, Article 16 of the UCP600 does permit the bank to refuse to honour or negotiate. I will look at it later, but it is worth noting that, the bank may honour or dishonour a presentation, if it acts so with a view to uphold its duty to act in good faith. But it has also been an argument that, the most revealing point in time at which to assess a bank’s knowledge of fraud on the part of the beneficiary, is the time for payment (rather than the time of the presentation of the payment demand). Be that as it may, what one needs to know is: what does the state of things hold in this suit? In his submissions, Mr. Noah argued that the process of encashment of the LC was tainted with fraud right from its initiation because the pre-conditions for encashment were not met. I do agree with his submission, and I shall demonstrate why. Page 50 of 66 First, in her testimony, Pw-1 told this court, that, the documents received from the 3rd Defendant by the 2nd Defendant were not compliant with the terms of the LC. As earlier stated in the United City Merchants’ case (supra) “fraud unravels all” and there will be fraud “where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue.” In this suit, no supply of the petroleum products ordered by the Plaintiff was ever made, although the 1st Defendant, while well knowledgeable about this fact, fraudulently went ahead to make presentments as if she had delivered the ordered cargo. Moreover, the nature of the documents themselves, in terms of their being compliant with the terms of the LC is questionable. While the 1st Defendant presented such documents with a view to show that they were compliant, deep within the 1 st Defendant’s mind was settled fact that the goods for which the LC was meant to secure were non-existent and had never arrived at their port of destination. Arrival of goods, as I shall demonstrate later, was a requirement under the LC. The argument fronted before this court, therefore, has been that the documents were not compliant, and I agree with it as I shall explain later herein. Taken together, therefore, one may consider these two incidences as constituting “fraud in the documents” and “fraud Page 51 of 66 in the underlying transaction” (as it was never fulfilled). That is to say, the presented documents did not represent the actual goods shipped as “literally nothing was supplied”. In that regard, who then can pay for “nothing”? As I shall demonstrate later, that was the essence of requiring presentments after arrival of the vessel, if one looks at Field 47A8 which I shall examine later below. In essence, to be able to explore more on all such surrounding arguments, one must examine the LC’s fields and see what condition precedent were laid down in it in relation to the kind of documentation to be presented and when they were to be presented. Basically, under the LC, there were two ways for which payments could be made in utilization of the LC. Field 46A of the LC (Exh.P3), was one of the possible scenarios. Under that Field 46A of the LC, payments could have been made at the time of utilization of the LC if there were LC complying presentiments to the 2nd and 3rd Defendants of the following: (i) a final /provisional invoice (ii) Certificate of Quality issued on arrival on Ships Tank Composite Quality at DSM port issued by an Independent Inspector. (iii) Certificate of Quantity, and (iv) Certificate of Origin. However, as per the same Field 46A of Exh.P3, in the event the above four documents are unavailable at the time of Page 52 of 66 L/C utilization, then, payments could be made possible against presentation of: (a) Final/Provisional Invoice, and (b) Seller’s Letter of Indemnity (issued by the Beneficiary in the agreed format). Moreover, according to Field 47A.7 of the LC (Exh.P3) documents under the LC could be discounted at beneficiary’s request and expense. As it turned out in this suit, the 1st Defendant utilized the optional route of discounting the LC while also not strictly complying with the need to submit the initial four documents stated in Field 46A but rather submitted a Provisional Invoice and a Letter of Indemnity, these being an alternative in case the initial documents are unavailable. In my view, the non- availability of the first set of documents stated in Field 46A can be well understood because such initial documents could only be submitted after delivery of the consignment at the Port of destination (Dar-es-Salaam port) a fact which was not the case when presentment of documents for purposes of utilization of the L/C was made. Moreover, such initial documents were not used because the 1st Defendant had nothing to delivery to the Plaintiff to warrant her getting a final invoice, certificate of origin, certificate of quality and the like. That would not have perfected her mischievous scheme of defrauding the Plaintiff. As such, a resort was made to the alternative which was still available under Field 46A of the LC, and which involved the use of “Provisional Invoice” and “Letter of Indemnity”. Page 53 of 66 The second scenario under which payments could be premised (and applicable only when “Provisional Invoice” and “Letter of Indemnity” are presented), is under Field 47A.8 of the LC (Exh.P3). However, Field 47A.8 attached conditions which ought to have been fully observed and adhered to when encashment under the L/C is sought. That respective field under the L/C provided as follows: “8. IN CASE ARRIVAL QUANTITY AND/OR PRICE IS NOT KNOWN AT THE TIME OF LC UTILIZATION, BENEFICIARY IS ALLOWED TO PRESENT A PROVISIONAL INVOICE UNDER THIS LC WITH PROVISIONAL PRICE AND PROVISIONAL QUANTITY. IN THE EVENT A PROVISIONAL INVOICE IS RAISED, THE LETTER OF CREDIT SHOULD BE AVAILABLE AT TWO STAGES, I.E. PROVISIONAL PAYMENT AT 60 CALENDER DAYS FROM THE FIRST DAY OF DELIVERY LAYCAN (FIRST DAY OF DELIVERY LAYCAN TO COUNT AS DAY ONE) BASED ON PROVISIONAL INVOICE AND DIFFERENTIAL PAYMENT AGAINST FINAL INVOICE SHALL BE MADE ON THE FIFTH BANK WORKING DAY AFTER PRESENTATION OF FINAL COMMERCIAL INVOICE AT THE NOMINATED BANK WITHIN THE LC. IN CASE OF ANY AMOUNT IN FAVOUR OF THE APPLICANT, SUCH AMOUNT Page 54 of 66 WILL BE SETTLED OUTSIDE OF THE LC.” (Emphasis added). Considering the above quoted Field 47A.8, the immediate question that follows is whether the documents so presented by the 1st Defendant were indeed compliant. This was the same question I asked earlier, and this is the ripe time to consider it at its breadth. According to Article 2 of the UCP 600 (Exh.D3), the term “complying presentation” means: “a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard procedures.” (Emphasis added). It is also worth noting that, under Article 16(a) of UCP600, (Exh.3), it is made clear that: “When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank determines that a presentation does not comply, it may refuse to honour or negotiate.” (Emphasis added). In response to the question whether the presentation was compliant, my response will be in the negative and the banks involved should have noticed that fact. First, although the 1st Defendant relied on and presented a “Provisional Invoice” and a “Letter of Indemnity” the banks involved (i.e., the 2nd Defendant and the 3rd Defendant) did not carefully read the LC’s terms and act in line with the conditions set out in Field 47A.8. Page 55 of 66 According to Article 14(a) of the UCP600, both the issuing bank and the confirming bank have a duty to carefully examine the documents so presented and based on such documents alone draw a conclusion as to whether they constitute a complying presentation or not. This will entail measuring up the documents against the terms and conditions under which the LC was to be utilized since, effecting payments without adhering to the terms of the LC, does constitute an act of breach of the terms of the LC. In our case scenario, the “Provisional Invoice” and the “Letter of Indemnity” so presented did not constitute a “complying presentation” in the sense of what “complying presentation” means under Article 2 of the UCP600. First, they must have satisfied the conditions and terms of the LC and second, they must have met the international standards procedures applicable to LC transactions. In my view, one of the standards in international LC transactions is that the documents must be free from fraud failure of which the fraud exceptions will set in. As I look at the “Letter of Indemnity” the 1st Defendant has asserted that she had “marketable title to the goods and, that”, had “the full right and authority to transfer such title” to the Plaintiff and “effect delivery of the said cargo.” But this was purely a fraud since she had no such marketable goods even up to the time of presentation (and even up to this date of this judgement) and had no right and authority to transfer such title (since you cannot transfer title in respect of goods which Page 56 of 66 you do not have in the first place and so you cannot deliver that which you do not have). In fact, the maxim “no one gives what they do not have”, sometimes referred to as the “nemo dat” rule or principle will set in to reveal the 1st Defendant’s fraudulent scheme. There being fraud on the documents, they cannot be said to have constituted a “complying presentation”. As a matter of principle, the independence principle assures the seller-beneficiary that once the goods have been shipped, he will be paid. Nothing was shipped to date but strangely the beneficiary was paid! Secondly, according to Field 47A.8, the use of “provisional invoice” was conditional. It was for use “in case arrival price and quantity is not known at the time of LC utilization”. In the case of Total Tanzania Ltd vs. Citibank Tanzania Ltd, Commercial Case No.108 of 2021 (unreported), this Court, (Magoiga, J.) ruled, that, under Field 47A.8 of the LC, the beneficiary could not have utilized the L/C unless and until the goods arrived at the port of destination. The learned judge observed as follows: “The wording of Field 47A8 starts with the words: “in case arrival quantity and/or price is not known” which means the beneficiary cannot enjoy the benefit of the Letter of Credit unless and until first lay canned (sic) goods arrive at the destination port. In my strong view, this is the import of allowing discounting of the L/C by using provisional invoice in Page 57 of 66 the utilization of the Letter of Credit comes in and, in that way the purchaser is equally protected …” A similar approach was taken by her Ladyship Maruma, J, in the case of Gapco Tanzania Limited vs Citi Bank Tanzania Limited [2022] TZHCComD 273. I do associate myself to their findings and the similarities in these cases would attract that same treatment. Thirdly, and more imperatively is that, even if one was to accept an argument that the use of the “Provisional Invoice” and the “Letter of Indemnity” was a proper and complying presentation, still that will be wanting because under Field 47A.8, the L/C utilization ought to have been made on a staged manner: first, by way of a provisional payment at 60 calendar days from the first day of delivery lay can (first day of delivery laycan to count as day one) based on provisional invoice and, second, differential payment against final invoice shall be made on the fifth bank working day after presentation of final commercial invoice at the nominated bank within the L/C. Even so, and strange as it may seem to be, although the beneficiary presented a “Provisional Invoice”, the 3rd Defendant proceeded to act contrary to the LC terms and encashed the LC payment in its full amount, i.e., US$ 201,398.44. This was utterly in contravention of the LC terms expressed under Field 47A.8. As I stated hereabove, that Field 47A.8 of the L/C provides for the two stages of payments wherein the first provisional payment was to be at 60 calendars days from the first day of delivery and the differential Page 58 of 66 payment be made against final invoice after presentation of final commercial invoice at the nominated bank within the LC. The above findings will again confirm the earlier conclusions that, in no way the respective banks could have encashed the LC before the arrival of the cargo at its port of destination. Any payment made prior to was made not in conformity with the terms and conditions of the LC and so were made against a non-compliant presentation. That stands to be the position irrespective of the fact that the LC had allowed discounting of the documents at the beneficiary’s request and expense. The banks ought to have strictly adhered to all terms and conditions of the LC. More so, the banks ought to have as well noted from the documents themselves as presented, that, the beneficiary was perpetrating a fraud and, hence, act in line with Article 16(a) of the UCP600. Taking all such matters into account, and noting that, the payments (be it provisional or final) ought to have been made within the laycan period (on delivery period), one would wonder why, despite there being no delivery by 05th March 2021, the respective banks (2nd and 3rd Defendants) went ahead to authorise the encashment of the LC and, more so without satisfying themselves as to the compliance with the requirements under Field 47A8. Moreover, one would also wonder as to why the 1 st Defendant made presentments of documents which he knew were not compliant and later, when, together with the 3rd Defendant, were asked to consent to cancellation of the LC Page 59 of 66 declined. With all that in mind, who then can argue that it will be unfair to hold, in the circumstance of the case and considering Article 16(a) of UCP 600, that, a refusal to honour or negotiate was warranted had the banks acted more diligently? Who will also deny that all such matters would have necessitated a refusal and cancellation of the LC transaction? In my humble view, and, considering the totality of all such considerations coupled with the fact that there were made requests by the Plaintiff for cancellation of the LC due to non- delivery of the consignment for which the LC was opened, which fact was clear evidence that the 1st Defendant was acting fraudulently and considering the fraud on the documents as discussed hereabove, I find that, cancellation of the LC was fully warranted. The demand for payment was fraudulent and both the paying and issuing banks ought to have noted that fact and refuse payment. I find that to be the necessary route which ought to have been taken because, as Le Dain, J., stated in the case of Bank of Nova Scotia vs. Angelica-Whitewear Ltd & Angelica Corporation, [1987]1R.C.S ,59, at 77, citing the case of Rockwell International Systems, Inc. vs. Citibank, N.A., 719F2d 583 (2d Cir.1983), in a transaction tainted with fraud, the court must look to the circumstances surrounding the transaction to determine whether there had been “outright fraudulent practices.” In that case Le Dian, J had the following to say, that: Page 60 of 66 “It is said that it [is] fraud for a beneficiary of a credit who has acted in such a manner to prevent the performance of the underlying contract to attempt to reap benefit of the credit.” The above quoted view does as well fit in this suit where the 1st Defendant acting fraudulently sought to reap from the credit and he did indeed succeed as the banks involved failed to act within the terms of the credit and hence enabling the 1st Defendant to reap where he had never sown. That being the case and, since “fraud unravels all”, the banks ought to have refused to honour or negotiate. From the foregoing considerations, therefore, I am of a settled view that the 2nd and 3rd issues raised herein should be responded to in the affirmative. That allows me to proceed to the final issue: to what relief(s) are the parties entitled. In their submissions, the Learned Counsel for the parties herein have had diverging views. While the Plaintiff’s Advocate urges this court to proceed and grant the reliefs asked for, the Learned Counsel for the 2nd Defendant urges this court to make a finding that all matters regarding fraud have nothing to do with the 2nd Defendant and this court should not issue any adverse order affecting the 2nd Defendant. He contended that if a cancellation order is granted there will be ramifications on the part of the 2 nd Defendant since, as per Article 13 and Article 3 of the UCP 600 and URR 725 respectively, the 2nd Defendant is required, at the time of issuance of the LC, to complete and issue a reimbursement Page 61 of 66 authorization to Deustche Bankers Trust Co. Americas as the reimbursing bank (see: Field 53D and 78 of the LC). But as I read Field 78 of the LC, the issue is that the confirming swift message must have been premised on “compliant documents with L/C terms and conditions.” As this court stated and established herein, there was no such compliant presentation as the documents so presented were tainted with fraud and did not comply with the requirements and conditions set out in Field 47A8 of the L/C. As I stated herein above, had carefulness in the reading and adhering to the terms and conditions of the LC taken place, the reimbursement authorization could also have been cancelled by both the 2nd Defendant and the 3rd Defendant upon consensus as per Article 9(i) I of the URR 725and, indeed, there were ample reasons to do so. In particular, the reasons include the fraudulent circumstances discussed herein and the fact that the documents presented to the 3rd Defendant did not meet a compliant presentation as the term would mean under Article 2 of the UCP600. Moreover, the presentation did not match the terms and conditions set out in Field 47A8 of the LC. As such, a refusal to honour could have been set in motion and, hence, putting a halt to all other processes. In his argument Mr. Nuwamanya has contended that, if this court is to order a cancellation of the LC what will happen to the reimbursement authorization? He has relied on not only Article 9(i)I of the URR725 and Article 8b of the URR725 as Page 62 of 66 well as Article 2 and Article 7(c) UCP600. Reliance was also placed on the case of Deustche Bank AG vs. CIMB Bank Berhad Queen’s Division (Commercial Court) [2017] EWHC 1264. In that case it was held that: “Pursuant to articles 2 and 7(c) of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce 600 (2007 revision), the obligation on an issuing bank under a letter of credit arrangement subject to UCP 600 to make any reimbursement to the confirming bank only arose where the confirming bank had in fact honoured a complying presentation by making payment under the credit…” That is indeed a correct view. However, it is not without qualification if read closely considering the facts and circumstances in this present suit. I hold it to be so because, that position would apply where everything went as required, meaning that, the presentation was a complying presentation. If the confirming bank honoured a non-complying presentation, I do not see that rule applying. Mr. Nuwamanya has therefore asked whether the 2nd Defendant had any obligation towards the 3rd Defendant given the holding in Deustche Bank case (supra). In my view, given that the confirming bank acted on a non-complying presentation, the issuing bank cannot be bound by the what the holding in Deutsche Bank AG’s case (supra) requires. Page 63 of 66 In fact, the on the part of the confirming bank there is a breached a duty to act in good faith and the issuing bank may rightfully demand reimbursement of her funds deducted from the Nostro Account. That, however, is not for me to decided but I leave it to the two banks to sort out on their own. Finally, it is trite that, a party who succeeds to prove the case to the required standards is the one who carries the day and will be entitled to reliefs. In this case, the balance of probabilities lies in favour of the Plaintiff as against the Defendants. In other words, the Plaintiff has been able to discharge his burden and has proved her case to the required standards. In the upshot, the Plaintiff is entitled to the reliefs prayed. For that matter, this court enters Judgement and Decree in favour of the Plaintiff and orders as follows: (i) That, the 1st Defendant is in breach of the Shipping and Supply Contract dated 5th of January 2021, entered between PBPA (on behalf of several Oil Marketing Companies- The Plaintiff included) and the 1st Defendant, for the supply of Petroleum Products. (ii) That in the circumstances as addressed herein this Court make an order for cancellation of a Letter of Credit No.002LCNB210540001 dated 23rd day of February 2021- in respect of a sum of US$ 201,398.44- issued Page 64 of 66 by the Plaintiff in favour of the 1st Defendant. (iii) That, the 1st Defendant is hereby ordered to pay the Plaintiff USD 300,000.00 as general damages resulting from the breach of the Shipping and Supply Contract dated 5th of January 2021, entered between PBPA (on behalf of several Oil Marketing Companies- The Plaintiff included) and the 1st Defendant, for the supply of Petroleum Products. (iv) That, the 1st Defendant is to pay the Plaintiff interest on the above sum stated in No.(iii) above at a court rate of 7% per annum from the date of this judgement till full payment thereof. (v) That the Defendants are to pay costs of this suit to the Plaintiff; and (vi) That, since the 2nd Defendant complied with the orders of this court issued in Misc. Commercial Application No.94 of 2021 and the sum of US$ 201,398.44 which was to be debited from the Plaintiff’s Account was not debited, the same should not be debited since the 2nd Defendant and 3rd Defendant failed to adhere to the terms and conditions of the LC regarding compliant presentation hence facilitating the 1st Defendant’s fraudulent utilization of the LC. Page 65 of 66 (vii) That, the amount equal to US$ 201,398.44 deducted by the 3rd Defendant from the 2nd Defendant’s Nostro Account was erroneously deducted since the 3rd Defendant acted on a non-compliant presentation which she ought to have refused to honour. It is so ordered. DATED AT DAR-ES-SALAAM ON THIS 26TH DAY OF JULY 2023 ................................... DEO JOHN NANGELA JUDGE Right of Appeal is hereby Explained. Page 66 of 66