1 K. B. KING'S BENCH DIVISION.

37

J. H. RAYNER AND COMPANY, LIMITED v. HAMBRO'S c. A.

BANK, LIMITED. I942
Oct. 22, 23.
Banker—Confirmed credit—Discrepancy between credit and documents
in description of goods—Duty of banker.
A bank received instructions from a customer to open a confirmed
credit in favour of the plaintiffs covering a cargo of "Coromandel
" groundnuts." The bank opened the credit and notified the
plaintiffs that it was available against invoice and bills of
lading for " Coromandel groundnuts." The plaintiffs presented
bills of lading for " machine-shelled groundnut kernels " accom-
panied by an invoice for " Coromandel groundnuts." The bank
refused payment, and the plaintiffs sued them for breach of the
undertaking in the letter of credit. Evidence was accepted by
Atkinson J. that " machine-shelled groundnut kernels" were,
and were universally understood in the trade to be, identical
with " Coromandel groundnuts." He gave judgment for the
plaintiffs, and the bank appealed :—
Held, reversing Atkinson J. that where the customer of a
bank instructs the bank to open a credit, the bank acts at its
peril if it departs from the precise terms of the mandate, and
that, therefore, the action failed.
English, Scottish and Australian Bank, Ld. v. Bank of South
Africa (1922) 13 LI. L. Rep. 21, and Equitable Trust Co. of New
York v. Dawson Partners, Ld. (1927) 27 LI. L. Rep. 49 applied.
Held, further, that a bank is under no duty to know the trade
customs and trade terms of its customers.

APPEAL from Atkinson J.

•On March 29, 1940, the defendants, Hambro's Bank, Ld.,
received a cable from correspondents in Denmark, which was
not then in enemy occupation, requesting them to open an
irrevocable sight credit expiring June 1, 1940, in favour of
J. H. Rayner & Co., the plaintiffs. The material words of the
mandate contained in this cable were: "account Aarhus
"Oliefabrik for about 16,975^. against invoice full set straight
"clean bills of lading to Aarhus Oliefabrik dated Madras
"during April, 1940, covering about 1400 tons Coromandel
"groundnuts in bags at 12I. 2s. 6d. per ton f.o.b. Madras
"shipment motorship Stensby to Aarhus." On April 1, the
defendants issued a letter of credit to the plaintiffs in these
terms : " Confirmed credit No. 14597. We beg to inform you
"that a confirmed credit has been opened with us in favour of
"yourselves for an amount of up to about 16,975^ account of
"Aarhus Oliefabrik available by drafts on this bank at sight
 KING S BENCH DIVISION. [1943]

C. A. "to be accompanied by the following documents—invoice,

1942 "clean on board bills of lading in complete set issued to order
" Aarhus Oliefabrik, dated Madras during April, 1940, covering
J. H.
RAYNER "a shipment of about 1400 tons Coromandel groundnuts in
&Co. "bags at 12I. 2s. 6d. per ton f.o.b. Madras per m.s. Stensby
V.
HAMBRO'S "to Aarhus. This credit is valid until June 1, 1940. All
BANK, LD. "drafts drawn hereagainst must contain the clause 'Drawn
"'under confirmed credit No. 14597.' We undertake to
"honour drafts on presentation, if drawn in conformity with
"the terms of this credit." On April 15, the plaintiffs
presented to the defendant bank a draft, accompanied by an
invoice of the same date for " 17,724 bags Coromandel ground-
"nuts. Bill of lading dated 2.4.40 " and three bills of lading,
differing only as to the number of bags, which totalled
17,724, in each of which the goods were described in these
terms: In the margin were the marks " O.T.C. C.R.S.
"Aarhus," and in the body of the bill ". . . . bags machine-
" shelled groundnut kernels, each bag said to weigh 177 lb.
"nett. Country of origin, British India. Country of final
"destination, Denmark. Goods are Danish property." Those
documents having been presented to the defendants, they
refused to accept the draft, on the ground that the terms of the
letter of credit called for an invoice and bill of lading both
covering a shipment of "Coromandel groundnuts" whereas
the bills of lading presented described the goods as "machine-
" shelled groundnut kernels. Country of origin, British
"India." The plaintiffs thereupon brought this action,
alleging that the defendants' refusal to honour their draft was
wrongful, and a breach of the undertaking in the letter of
credit. At the trial before Atkinson J. evidence was given
and accepted by him that "machine-shelled groundnut
"kernels " were the same commodity as "Coromandel ground-
"nuts " and would be universally understood to be so in the
trade in London, and, further, that the marginal mark "C.R.S."
was short for "Coros" or " Coromandels " and would be so
understood in the trade. Atkinson J. gave judgment for the
plaintiffs, and the defendants appealed.

Paull K.C. and Scott Cairns for the defendant bank. The
judge appears to have been unduly influenced by the fact
that the shipment was in fact Coromandel groundnuts. That
fact is immaterial, because what the banker has to pay against
is the documents specified by the letter of credit. In the
1 K. B. KING S BENCH DIVISION. 39
words of Bowen L.J. in Sanders v. Maclean (i), the bill of lading c. A.
" is a key which in the hands of a rightful owner is intended to I942
"unlock the door of the warehouse, floating or fixed, in which
"the goods may chance to be." The bank knows nothing RAYNER
officially of the transaction between consignor and consignee-: & Co-
see per Warrington L. J., in Stein v. Hambro's Bank of Northern HAMBRO'S
Commerce (2). There is nothing in the present case to show BANK, LD.
that the bank had knowledge of the particular trade. There
was a clear discrepancy between the invoice and the bill of
lading and the bank was entitled to refuse payment. [They
also relied on Hansson v. Hamel & Horley, Ld. (3); Guaranty
Trust of New York v. Van denBerghs, Ld. (4); and distinguished
Sociiti Metallurgique v. British Bank for Foreign Trade (5).]
Sir Robert Aske K.C. and Valentine Holmes for the plaintiffs.
If documents are presented in the form customary in the ship-
ping trade, namely, between the buyer and seller and the
ship, and containing material customary in the trade, they are
good and sufficient tender under a letter of credit. After all,
the bill of lading is the contract of the shipowner for the
carriage of the goods, and in it the shipowner accepts no
responsibility for any of the detailed characteristics of the
goods. If it be the practice of the trade on shipment of
goods to describe those goods as so many bags of merchandise,
that would be a perfectly good description, so far as the bill
of lading is concerned, for tender under a letter of credit. If,
for instance, the terms of a letter of credit called for the
presentation of invoice and bill of lading covering a shipment
of so many bags of Demerara sugar, and if it were the custom
of the trade to ship sugar under the designation of so many
bags of merchandise, then, if there is tendered an invoice for
so many tons of Demerara sugar at a contract price, and bills
of lading for so many bags of merchandise, that would be a
good tender under the letter of credit. Otherwise it would
be exceedingly difficult to deal with banker's credits. All
that is required is documents in the customary form, and in the
present case these documents did in fact cover 1400 tons of
Coromandel groundnuts. If the bank wants a particular
description it must stipulate for it.

MACKINNON L.J. The legal result of a banker issuing a

(1) (1883) n Q. B. D. 327, 341. (4) (1925) 22 LI. L. Rep. 446, 454.
(2) (1922) 10 LI. L. Rep. 529, 531. (5) (1922) 11 LI. L. Rep. 168, 169.
(3) [1922] 2 A. C. 36, 46.
4f> KING'S BENCH DIVISION. [1943]

c. A. letter of credit has been considered in various cases to which

ig42 I do not think it is necessary to refer, but two passages which
T T4
have been mentioned by Goddard L.J., seem to me to sum
RAYNKR up the position in general terms with the greatest accuracy.
&Co. i n English, Scottish and Australian Bank, Ld. v. Bank of
HAMBRO'S South Africa (i), Bailhache J. said: " I t is elementary to say
BANK, LD. "that a person who ships in reliance on a letter of credit must
MacKinnon L.j. " do so in exact compliance with its terms. It is also elemen-
"tary to say that a bank is not bound or indeed entitled to
"honour drafts presented to it under a letter of credit unless
"those drafts with the accompanying documents are in strict
"accord with the credit as opened." And Lord Sumner in
Equitable Trust Co. of New York v. Dawson Partners, Ld. (2)
said: " I t is both common ground and common sense that in
"such a transaction the accepting bank can only claim
"indemnity if the conditions on which it is authorized to accept
"are in the matter of the accompanying documents strictly
"observed. There is no room for documents which are almost
"the same, or which will do just as well. Business could not
"proceed securely on any other lines. The bank's branch
"abroad, which knows nothing officially of the details of the
"transaction thus financed, cannot take upon itself to decide
"what will do well enough and what will not. If it does as
"it is told, it is safe ; if it declines to do anything else, it is
"safe ; if it departs from the conditions laid down, it acts at
"its own risk." The defendant bank were told by their
Danish principals to issue a letter of credit under which they
were to accept documents—an invoice and bills of lading—
covering "Coromandel groundnuts in bags." They were
offered bills of lading covering "machine-shelled groundnut
"kernels." The country of origin was stated to be British
India. The words in that bill of lading clearly are not the
same as those required by the letter of credit. The whole
case of the plaintiffs is, in the words of Lord Sumner, that
"they are almost the same, or they will do just as well." The
bank, if they had accepted that proposition, would have done
so at their own risk. I think on pure principle that the bank
were entitled to refuse to accept this sight draft on the ground
that the documents tendered, the bill of lading in particular,
did not comply precisely with the terms of the letter of credit
which they had issued.
Atkinson J., however, in his judgment says: "A sale of
(1) (1922) 13 Ll. L. Rep. 21, 24. (2) (1927) 27 LI. L. Rep. 49, 52.
1K. B. KING'S BENCH DIVISION. 41

"Coromandel groundnuts is universely understood to be a c. A.

"sale of machine-shelled kernels, that is, dry decorticated, IQ42
" and there is a standard form of contract, No. 37, used in the
"trade. The marking C.R.S. is short for ' Coros,' which is RAVNER
"itself an abbreviation for ' Coromandels.' If a bag of kernels &Co.
"is marked ' C.R.S.,' it means that it is a bag of Coromandel HAMBRO'S
"groundnuts." That is stating the effect of evidence given BANK,I.D.
by persons who deal in groundnuts in Mincing Lane, and when MacKi^ L.J.
Atkinson J. says that it is "universally understood," he means
that these gentlemen from Mincing Lane have told him :
"We dealers in Mincing Lane all understand these things.
" We understand that ' Coromandel groundnuts ' are macbine-
" shelled groundnut kernels, and we understand when we see
" ' C.R.S,' that that means ' Coromandels.' " It is suggested
that as a consequence the bank, when this bill of lading for
machine-shelled groundnut kernels with C.R.S. in the margin
was brought to them, ought to be affected with this special
knowledge of those witnesses who deal in these things on
contracts in Mincing Lane. I think that is a perfectly
impossible suggestion. To begin with, this case does not
concern any transaction in Mincing Lane. It is a transaction
with Denmark, and for aught I know, and for aught the
evidence proved, the people in Denmark know nothing about •
this business usage of Mincing Lane. Moreover, quite apart
from that special application of the relevant considerations,
it is quite impossible to suggest that a banker is to be affected
with knowledge of the customs and customary terms of every
one of the thousands of trades for whose dealings he may issue
letters of credit. A homely illustration is suggested by the
books in front of me. If a banker were ordered to issue a
letter of credit with respect to the shipment of so many copies
of the "1942 Annual Practice" and were handed a bill of
lading for so many copies of the " 1942 White Book," it would
be entirely beside the mark to call a lawyer to say that all
lawyers know that the "1942 White Book " means the "1942
"Annual Practice." It would be quite impossible for business
to be carried on, and for bankers to be in any way protected
in such matters, if it were said that they must be affected by a
knowledge of all the details of the way in which particular
traders, carry on their business. [His Lordship dealt with
certain other contentions of the plaintiffs which do not call
for a report.] For these reasons, I think that this appeal
succeeds, that the judgment in favour of the plaintiffs must be
 KING'S BENCH DIVISION. [1943]

C. A. set aside, and judgment entered for the defendants with costs,
1942 here and below.
j
RAYNER
GODDARD L.J. I agree. It seems to me that Atkinson J.
&Co. has based his judgment on the consideration that the bank was
V.
HAMBRO'S affected in some way by this custom of the trade, and, secondly,
BANK, LD. that he has considered whether what the bank required was
reasonable or unreasonable. I protest against the view that
a bank is to be deemed affected by knowledge of the trade of
its various customers, but, quite apart from that, even if
the bank did know of this trade practice by which " Coromandel
"groundnuts " can be described as "machine-shelled groundnut
"kernels," I do not think that would be conclusive of the case.
There are three parties concerned in a banker's credit—
the person who requests the bank to establish the credit, the
bank which establishes it, and the beneficiary who can draw
on it. The person who requests the bank to establish the
credit can impose what terms he likes. If he says to the
bank : " I want a bill of lading in a particular form," he is
entitled to it. If the bank accepts the mandate which its
customer gives it, it must do so on the terms which he
imposes. The bank, as between itself and the beneficiary can
impose extra terms if it likes. For instance, in this case,
the bank imposes a term: "All drafts drawn hereagainst
"must contain the clause: 'Drawn under confirmed credit
" ' No. 14597.' " The bank can say to the beneficiary : "These
" are the terms on which the bank will pay," and if it has only
been authorized by its customer to pay on certain terms it
must see that those terms are included in the notification
which it gives to the beneficiary, and it must not pay on any
other terms. If it does pay on any other terms, it runs the
risk of its customer refusing to reimburse it. It does not matter
whether the terms imposed by the person who requires the
bank to open the credit seem reasonable or unreasonable.
The bank is not concerned with that. If it accepts the mandate
to open the credit, it must do exactly what its customer requires
it to do. If the customer says : " I require a bill of lading
"for Coromandel groundnuts," the bank is not justified, in
my judgment, in paying against a bill of lading for anything
except Coromandel groundnuts, and it is no answer to say:
"You know perfectly well that 'machine-shelled groundnut
" ' kernels are the same as Coromandel groundnuts.' " For all
the bank knows, its customer may have a particular reason for
1 K. B. KING S BENCH DIVISION. 43

wanting "Coromandel groundnuts " in the bill of lading. At C. A.

any rate, that is the instruction which the customer has given 1942
to the bank, and if the bank wants to be reimbursed and
J.H.
remunerated by its customer, it must show that it has performed RAYNER
his mandate. If I employ someone at a remuneration to pay &Co.
11.
money for me on getting a receipt in a particular form and he HAMBRO'S
pays the money without getting the receipt in that form, he BANK, L D .

has not carried out the duty which I imposed on him. It Goddard L.J.
would be no answer for him to say: "Well, I got a receipt
"which in fact gives you all reasonable protection." My
answer to that would be : "You are not concerned with the
"protection which you have given me. You are concerned to
"carry out the orders which I gave you, and you have not
"done it."
In my opinion, in this case, whether the bank knew or
did not know that there was this trade practice to treat
"Coromandel groundnuts" and "machine-shelled groundnut
"kernels" as interchangeable terms, is nothing to the point.
They were told to establish a credit, and to pay against a bill
of lading describing particular goods, and the beneficiary
under that credit presented a bill of lading which was not
what they had promised to pay against. Therefore, it seems
to me, whether it is reasonable or unreasonable for their
principals to say that they want a bill of lading for " Coromandel
"groundnuts," or whether the bank had or had not knowledge
of some of the trade practices which are referred to, is not the
question. The question is "What was the promise which the
"bank made to the beneficiary under the credit, and did the
"beneficiary avail himself of that promise ? " In my opinion,
in the present case, he did not, and, therefore, I think that
the bank was justified in refusing to pay. The other matters
are, in my opinion, quite irrelevant, though the judge seems
to have paid particular attention to them. I agree that this
appeal should be allowed.
Appeal allowed.

Solicitors for bank : Slaughter & May.

Solicitors for plaintiffs : Jaques & Co.
J. W. H.