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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Banco Santander S A v Banque Paribas [2000] EWCA Civ 57 (25 February 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/57.html
Cite as: [2000] EWCA Civ 57

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Case No: QBCMF 1999/0673/A3

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Mr Justice Langley
Royal Courts of Justice
Strand, London, WC2A 2LL
Friday 25 February 2000

B e f o r e :
LORD JUSTICE MORRITT
LORD JUSTICE WALLER
and
LORD JUSTICE MUMMERY
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BANCO SANTANDER S A

Claimant/Appellant


- and -




BANQUE PARIBAS

3rd Defendant/
Respondent

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -

M Hapgood Esq QC, Mr R Masefield (instructed by Messrs Stephenson Harwood for the Appellant "Santander")
M Howard Esq QC, Ms H Davies (instructed by Messrs Norton Rose for the Respondent "Paribas")
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©


LORD JUSTICE WALLER:
This is an appeal from a judgment of Langley J dated 9th June 1999. He decided certain preliminary issues in favour of the third defendant Banque Paribas (Paribas). Those preliminary issues raised important questions in relation to the operation of a confirmed "deferred payment" letter of credit a creature of relatively new invention, and how the "fraud exception" operates in relation to such instruments. The questions arise on the assumption that the following was the sequence of events.
Paribas issued a deferred payment letter of credit on 5th June 1999 in favour of Bayfern Limited (Bayfern) requiring presentation of documents at the counters of Banco Santander (Santander) (the claimants) in London at any time until 15th September 1999; the deferred payment was promised at 180 days from Bill of Lading; the letter of credit was subject to The Uniform Customs and Practice for Documentary Credits (UCP) (1993 Revision); it expressly provided that Paribas undertook "at maturity. . . to cover Santander in accordance with their instructions".
Bayfern were advised of the letter of credit by Santander by advice dated 8th June 1999. Santander had been asked by Paribas to add their confirmation to the letter of credit and did so by the same advice. That advice also offered the possibility of discounting, and by letter dated 9th June 1998 Bayfern requested Santander to discount the full value at the rate offered by Santander.
By 15th June 1999 Bayfern had presented documents at the counters of Santander in London. Those documents were found on their face to comply with the terms of the letter of credit, and for the purpose of the preliminary issues it is to be assumed they were entitled so to find. That thus crystallised an obligation on the part of Paribas and Santander to pay Bayfern US$ 20,315,796.30 on 27th November 1998 pursuant to the letter of credit i.e. the date 180 days after the date of the Bills of Lading.
On 16th June Santander confirmed to Bayfern that they had discounted "amount of documents and credited the sum of USD 19,667,238.84 value 17th June 1998 into your account with Royal Bank of Scotland. . . ". They also asked for a letter from Bayfern "requesting discount and assignment of proceeds under the above mentioned Letter of Credit." Bayfern on 16th June produced that letter and requested the discounting of "your deferred payment/acceptance undertaking to us. . . .", and confirmed that "In consideration we hereby irrevocably and unconditionally assign to you our rights under this letter of credit".
No notice of the assignment was given to Paribas. But in the meanwhile the documents had been passed by Santander to Paribas.
On 24th June 1998 Paribas informed Santander that the documents presented and accepted by Santander included false or forged documents. It is to be assumed for the purpose of the preliminary issues that Bayfern had been guilty of fraud, that one or more documents were forged, and that thus prior to 27th November 1998 both Santander and Paribas had notice of "established fraud".
Santander obtained freezing orders on Bayfern's account at the Royal Bank of Scotland, freezing some $14 million. We have not been told precisely what demand was made by Santander on 27th November 1998, but whatever the demand Paribas refused to pay on the basis that Santander could have no greater right to payment than Bayfern.
In the absence of fraud it would appear to be common ground that the position would have been as follows:-
(1) Santander would have had no claim to be paid by Paribas anything until 27th November 1998;
(2) On 27th November 1998 they would have been paid the sum of US$ 20,315,796.30.
The latter is conceded by Mr Howard QC, and was conceded before the judge. The basis of the concession, and indeed the basis in law for either (1) or (2) above being an accurate reflection of the parties' legal rights or obligations, is something to which I will return.
As is by now apparent, the real issue between the parties is whether Paribas was entitled to refuse payment to Santander because fraud on the part of Bayfern could be established prior to 27th November 1998.
The resolution of that issue depends in my view on seeking answers to the following questions.
(1) Was the claim that Santander made as at 27th November 1998 made as assignee of Bayfern? If so, is there any reason why Paribas do not have the same defence to that claim as they would have had against Bayfern?;
and/or
(2) Was the claim made by Santander made as confirming bank for "cover" (as per the express terms of the letter of credit) or "reimbursement" under one or other of the articles of the UCP? It is not suggested by either side that the word "cover" in the letter of credit as opposed to "reimbursement" has any significance, and thus it is the terms of the UCP which are relevant. If it is a claim under the UCP, is Paribas entitled to say you had no obligation to pay Bayfern until 27th November 1998, by that date you would have had a defence to making any payment, and you thus have no right to reimbursement?
Mr Hapgood QC for Santander and Mr Howard QC for Paribas approached the matter from different perspectives both unsurprisingly seeking to fight the battle on what they conceived to be their strongest grounds. Indeed their approaches indicated that they were at one as to which ground suited their respective cases best. So Mr Hapgood wished to take as his first point that the effect of the discounting by Santander was not an assignment, but a discharge of Santander's obligation to Bayfern, and thus he argued his client's claim was simply to reimbursement under Article 14 a i of the UCP. He submitted there was nothing in the authority granted to his clients to forbid early payment, and he submitted that provided his clients did not look for reimbursement until 27th November 1998, they were entitled to succeed.
It was very much as a fall back that he argued in the alternative that if the effect of the discounting was to assign Bayfern's rights under the letter of credit, he was still entitled to succeed either because on the authority of Stoddart v Union Trust Limited [1912] 1 KB 181 neither Paribas nor Santander would have a defence against a claim by an assignee who took the debt without knowledge of Bayfern's fraud, or because, as he ultimately boldly submitted in reply, this court should hold that equity would not allow Paribas to raise the defence of fraud which would have been available as against the assignor, against a bona fide assignee for value.
Mr Howard for his part appreciated that if Santander was claiming simply as an assignee of the debt due to Bayfern, the argument that Paribas should be entitled to raise any defence that might have been raised against Bayfern was a powerful one. Thus his first argument was that the documents entered into between Santander and Bayfern were consistent with and only consistent with an assignment; there was no discharge of either banks' obligations to Bayfern; and there was no basis for departing from the normal rule that defences of the banks available as against the assignor Bayfern, were available against the assignee Santander.
Mr Howard's secondary submission was that if Santander must be treated as having paid Bayfern, and having discharged its obligation to Bayfern, there was no right to reimbursement under the UCP because in paying when they did, Santander were doing something outside the authority granted to them by Paribas. He submitted that the term of their mandate was to pay only on maturity i.e. 27th November 1998, and he submitted that if that term had been complied with, Santander would have had a defence to the claim which they would have been bound to take.
It is convenient to deal with the assignee point first.
Were Santander assignees?
The documents produced as between Santander and Bayfern at the instigation of Santander, certainly envisaged that Santander would be assignees of Bayfern's "rights under the letter of credit". Those are the express words used, and although it is probably immaterial as an aid to construction, it accorded with the instructions in Santander's Operational Procedures Manual (see page 74 paragraph 6). What is more, it seems to me that Santander did intend to keep the rights available to the beneficiary under the letter of credit alive. The most obvious reason why they so intended is that whereas they had paid out a figure of $19,667,238.84 on 17th June 1998, they wished to be reimbursed not for that figure at that time or at all, but for $20,315,796.30 on 27th November so that they could earn their charge for the discounting. Mr Hapgood argued that because the "assignment" involved Santander purchasing Bayfern's rights against Santander, it was plainly intended to extinguish all Bayfern's rights under the letter of credit against both banks. Thus, he argued, Bayfern had nothing to assign. I do not think it is plain at all that it was intended to extinguish all rights for the reasons I have given. I accept that there may be situations in which if a creditor unconditionally assigns the benefit of a debt to a debtor, he will thereby extinguish the debt. Mr Hapgood gets support for that proposition from the judgment of Millett J in In re Charge Card Services Limited [1987] 150 at 175 C-D where he says that "a charge in favour of a debtor of his own indebtedness to the chargor is conceptually impossible". I also accept that if there is joint and several liability under a contract performance by one discharges all (See Chitty 28th Edition paragraph 18-003). I further accept that the liability of Santander and Paribas under the letter of credit was joint and several (see the same paragraph). But it does not follow where as in the instant case there is a joint and several liability, and it is the intention of the parties to the assignment to keep alive the obligation which is joint and several, that that cannot be achieved by an assignment by the obligee (in this case Bayfern) to one of the joint and several contractors, of his rights against both joint and several contractors.
In my view the judge was right in concluding that Bayfern assigned its rights under the letter of credit.
Although before the judge the matter may have developed rather differently, on analysis it seems to me that the above conclusion leads to the following further conclusions.
1. Santander could not on 27th November 1998 be claiming as against Paribas as a confirming Bank which has paid, until it, as assignee of Bayfern, has notionally made the claim against itself at maturity date.
2. In so far as any claim were made by Santander as assignee from Bayfern, against Santander as Confirming Bank, the same question arises as arises in relation to the claim that Santander makes as assignee directly against Paribas.
In other words, unless Santander can make good its claim as assignee of Bayfern, the terms of the UCP are irrelevant and cannot assist Santander.


Are defences which would have been available against Bayfern available as against the assignee Santander?


I do not think that Stoddart v Union Trust Ltd [1912] 1 KB 181 assists Mr Hapgood. That authority has been the subject of criticism (see Chitty 28th Edition paragraph 20-069) which suggests that it may be explicable on a procedural point. At best from Mr Hapgood's point of view, all that can be said of the case is that it recognises that there may be circumstances where there would have been no defence available as against an assignor but simply a personal counterclaim, where the court does not allow the counterclaim to be raised against the assignee. That does not deal with the situation where there would have been a defence available as against the assignor. In the present case, if Bayfern had sought payment under the letter of credit as at 27th November 1998, Santander and Paribas would have had a complete defence. This, I do not think was disputed by Mr Hapgood, since it follows from Lord Diplock's formulation of the fraud exception in United City Merchants v Royal Bank of Canada [1983] 1 AC 168 at 183 in the following terms:-
"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 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."
The real question is whether the court should boldly, as Mr Hapgood submits, hold that equity should not allow Paribas or Santander to raise the fraud defence against an assignee for value without notice. He accepts the normal rule as expressed in Chitty paragraph 20-068, and Halsbury's Laws of England 4th Edition Vol 6 paragraphs 23 and 67, that assignments normally take effect subject to equities. But Mr Hapgood submitted that the normal rule should not apply where a promise made under a letter of credit is the subject of an assignment. The submission that the court should so hold is really founded on what Mr Howard describes as an "in terrorem" argument which Mr Hapgood deployed with great skill.
The argument can be put rather less elegantly than Mr Hapgood put it, in this way.
There are two types of letter of credit which contemplate presentation of documents and an acceptance of an obligation to pay in the future. There is the "acceptance credit" used for many years which involves the Confirming Bank accepting a draft in favour of the beneficiary; and there is the newer instrument the "deferred payment" letter of credit which involves the bank promising payment at a future date, as in this case. It seems that this latter kind of letter of credit may have come into use because if drafts were produced the result was that in many countries stamp duty had to be paid. But drafts did have this advantage. A negotiable instrument was produced which could be discounted or sold in the forfait market. To such drafts section 38 of the Bills of Exchange Act 1882 applies. That section provides as follows:-
"38 Rights of the holder
The rights and powers of the holder of a bill are as follows:
(1) He may sue on the bill in his own name:
(2) Where he is a holder in due course, he holds the bill free from any defect of title of prior parties, as well as from mere personal defences available to prior parties among themselves, and may enforce payment against all parties liable on the bill:
(3) Where his title is defective (a) if he negotiates the bill to a holder in due course, that holder obtains a good and complete title to the bill, and (b) if he obtains payment of the bill the person who pays him in due course gets a valid discharge for the bill."
Thus holders in due course can sue on the drafts even if fraud is discovered prior to the maturity date of the draft. Furthermore, if a Confirming Bank who has accepted a bill becomes the holder and holds the bill at maturity, the bill is discharged by virtue of section 61 of the Bills of Exchange Act. Although the matter was not explored in argument, I understood it to be common ground between Mr Howard and Mr Hapgood that since that discharge is by law automatic, the fraud would not provide an answer, and that thus the Confirming Bank is in as good a position as a holder in due course, even if it purchases drafts accepted by it.
So the argument runs, with the deferred payment letters of credit there has grown up a practice of discounting the promise in the forfait market. It will curtail the beneficial use of the deferred payment letter of credit if something equivalent to section 38 is not put in place to protect innocent assignees. Reference in this regard was made to an article in Insight (1999 Volume 5, No.4 pages 14-15 -Tab 19 in the authorities bundle). This article followed Langley J's decision in this case, and suggested that it was now "difficult to see the future for the deferred payment L/C at least in this jurisdiction."
We were told that in another jurisdiction, France, in a case to which Santander were a party, a blow similar to that apparently dealt by Langley J had been dealt to "deferred payment" letters of credit (see the decision of Paris Court of Appeal dated 28th May 1985 at tab 21 in the authorities bundle) so the reference to "this jurisdiction" alone may be a little harsh, and indeed Mr Howard submitted that since their use apparently continued following the Court of Appeal in Paris' decision, the prediction may be somewhat exaggerated.
But whether exaggerated or not, I have to say that I have felt some anxiety about this point. I can see how it can be said with force that a promise by a bank under a letter of credit made once documents have been accepted should be capable of being acted on by other bankers without inquiries as to the bona fides of the beneficiary. The difficulty is that Santander tried to establish a market custom to the effect that this was how such promises were treated in the market, but failed.
In bringing this new type of instrument into operation, it seems it has not been thought necessary to make express provision in the UCP to cover the situation, or to make express provision in the letters of credit themselves. So far as the UCP is concerned that seems to be true even following the decision of Langley J in this case as we were informed by Mr Howard, who produced a Banking Commission Statement on the Future of UCP 500 revision produced by the International Chamber of Commerce. How far all this material was admissible must be in considerable doubt, but it was all produced without protest, and is helpful in seeking an overall view.
I have ultimately concluded that if parties agree for whatever reason that they will not provide a negotiable instrument, and do not provide by terms of the trade or even by the express terms of the instrument itself the protection for assignees that a negotiable instrument would provide, they must live with the consequences.
I thus do not think it is open to the court simply to make an exception to what would otherwise be the clear rule that a defence which would have been available as against the assignor should be available against the assignee.
If I am right so far, that (as Mr Howard submitted) is in fact the end of this appeal. Santander's claim is as assignee, and they are defeated by the defence that would have been available as against Bayfern.
However, in case I be wrong in my conclusion so far, and because the matter was fully argued, I turn to the terms of the UCP.
Terms of the UCP
These terms would apply if Santander had paid Bayfern on 17th June 1998 the $19,667,238.84 in discharge of the obligations of Paribas and Santander under the letter of credit. The letter of credit was subject to the UCP and the relevant Articles seem to me to be as follows.
"Article 2
Meaning of Credit
For the purposes of these Articles, the expressions "Documentary Credit(s)" and "Standby Letter(s) of Credit" (hereinafter referred to as "Credit(s)", mean any arrangement, however named or described, whereby a bank (the "Issuing Bank") acting at the request and on the instructions of a customer (the "Applicant") or on its own behalf,
i. . . .
or
ii, authorises another bank to effect such payment, or to accept and pay such bills of exchange (Draft(s)),
or
iii. . . .
against stipulated document(s), provided that the terms and conditions of the Credit are complied with.
Article 9
Liability of issuing and Confirming Banks
(a) An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with.
i. . . .
ii. if the Credit provides for deferred payment - to pay on the maturity date(s) determinable in accordance with the stipulations of the Credit.
iii. If the Credit provides for acceptance:
a. By the Issuing Bank - to accept Draft(s) drawn by the Beneficiary on the Issuing Bank and pay them at maturity,
or
b. By another drawee bank - to accept and pay at maturity Draft(s) drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity.
iv. if the Credit provides for negotiation - to pay without recourse to drawers and/or bona fide holders. Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A credit should not be issued available by Draft(s) on the Applicant. If the .Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s).
b. A confirmation of an irrevocable Credit by another bank (the "Confirming Bank") upon the authorisation or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with.
[The sub-articles mirror a i, ii, iii and iv].
Article 10
Types of Credit
a All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation.
b. i. Unless the Credit stipulates that it is available only with the Issuing Bank, all Credits must nominate the bank (the "Nominated Bank") which is authorised to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate. In a freely negotiable Credit, any bank is a Nominated Bank.
Presentation of documents must be made to the Issuing Bank or the Confirming Bank, if any, or any other Nominated Bank.
. . .
d By nominating another bank, or by allowing for negotiation by any bank, or by authorising or requesting another bank to add its confirmation, the Issuing Bank authorises such bank to pay, accept Draft(s) or negotiate as the case may be, against documents which appear on their face to be in compliance with the terms and conditions of the Credit and undertakes to reimburse such bank in accordance with the provisions of these Articles.
Article 13
Standard for Examination of Documents
a Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the Credit. Compliance of the stipulated documents on their face with the terms and conditions of the Credit, shall be determined by international standard banking practice as reflected in these Articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the Credit.
. . . .
Article 14
Discrepant Documents and Notice
a When the Issuing Bank authorises another bank to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the Issuing Bank and the Confirming Bank, if any, are bound:
i. To reimburse the Nominated Bank which was paid, incurred a deferred payment undertaking, accepted Draft(s), or negotiated,
ii to take up the documents."
It is Mr Hapgood's case
(1) that a claim for reimbursement could not be made prior to 27th November 1998; and (2) that the claim would be for the full $20,315,796.30. That, as it seems to me, already has this rather odd feature. It is not in fact reimbursement for the sum paid out which is being claimed, and nor as one would tend to think it should be if reimbursement flows from payment, is reimbursement available at the moment when the payment has been made.
On the other hand Mr Howard accepts that if there had been no fraud, the fact is that Paribas would have paid on 27th November 1998 the $20,315,796.30. The basis for that concession is set out in the judge's judgment in the following terms:-
"In my judgment Mr Howard is right in his submissions that:
(i) where the Confirming Bank discounts its own obligation, at maturity either it is to be deemed to make payment at that date or it is entitled to claim as assignee of the claims of the Beneficiary.
(ii) where a forfaiter discounts the Credit it is entitled to claim as assignee."
Both sides, as it seems to me, thus approach the question of reimbursement on the basis that the mandate of Santander is to pay $20,315,796.30 on 27th November 1998, and in the one case as per Mr Hapgood, Santander must be treated as having done that by an early payment on 17th June 1998 whether or not there would have been a liability to pay on 27th November 1998, and as per Mr Howard, for Paribas, Santander is either deemed to be an assignee (with the result as per the first section of this judgment), or possibly can be treated as having paid on 27th November 1998 provided there would have been a liability to pay as at that date.
There was some debate before the judge and before us as to whether the obligation to reimburse the Confirming Bank arose under Article 10 d, or whether because of the words at the conclusion of that Article "undertakes to reimburse such bank in accordance with the provisions of these Articles", that took one to Article 14, and in particular Article 14 a i. I am not sure that it makes any great difference to the strength or weakness of the arguments which Article applies. As it seems to me Article 14 a i does not set out fully the conditions which must be fulfilled in order for the obligation to reimburse to arise. Whether one is considering a "deferred payment undertaking", "accepted drafts" or "negotiation", reimbursement would only arise on payment although the word payment does not appear in Article 14 a i. Reimburse means repay a person who has expended money, and it is simply meaningless to suggest that there can be an obligation to reimburse a "deferred payment undertaking".
Ultimately the question to be asked is what precisely the Issuing Bank has requested the Confirming Bank to do, and what the Issuing Bank has promised to do if the Confirming Bank does what is requested of it. The answer, as it seems to me, is that the Issuing Bank has requested the Confirming Bank to give its own undertaking to pay on 27 th November 1998, in addition to that of the Issuing Bank, and has promised to reimburse the Confirming Bank when it pays on that deferred payment undertaking i.e. pays $20,315,796.30 on 27th November 1998. There is no request from Paribas that Santander should discount or give any value for the documents prior to 27th November 1998, and albeit it may not be a breach of mandate for Santander to do so, it is up to Santander whether it does so or not.
Mr Hapgood submits, (as the judge also found), that since it was not a breach of mandate for Santander to discount it follows that Santander are entitled to be reimbursed as agents under the UPC and consistently with the principles in Bowstead 16th Edition, Article 64, which is in the following terms:-
"Subject to the provisions of Article 65, every agent has a right against his principal to be reimbursed all expenses and to be indemnified against all losses and liabilities incurred by him in the execution of his authority: and where the agent is sued for money due to his principal, he has a right to set off the amount of any such expenses, losses or liabilities unless the money due to the principal is held on trust."
In my view Mr Hapgood cannot argue simply from the fact that to do something is not a breach of mandate to the position that what was done was authorised by the principal so as to produce a right of reimbursement. An agent may be entitled to go off and do something on his own account without being in breach of his mandate from the principal, but it does not follow that when he does do something on his own account, because he is not in breach of the mandate, the principal must indemnify him in relation to that which he has done. In my view the position is that Santander had no authority to negotiate from Paribas to discount, and did not seek it. It was something they were entitled to do on their own account. If they had not chosen to discount and had waited until 27 th November, they would have had a defence, and it is in those circumstances not open to them to claim reimbursement from Paribas.
If a Confirming Bank in the position of Santander wishes to be free to give value for documents when it accepts the documents, it can do so either by insisting on the use of an acceptance credit or by insisting on obtaining authority to negotiate and confirmation of reimbursement if it does. European Asian Bank v Punjab & Sind Bank (No 2) [1983] 1 WLR 642 seems to me to demonstrate how, if Santander had informed Paribas that it had discounted, and had received confirmation from Paribas that Paribas would still reimburse on 27th November 1998, Paribas would not be able to raise the fraud exception because they would be estopped from disputing Santander's authority to discount.
Conclusion
For reasons which differ very little from those of the judge, I would dismiss this appeal.
LORD JUSTICE MUMMERY: I agree.
LORD JUSTICE MORRITT: I also agree.

Order: Appeal dismissed.
(Order does not form part of the approved Judgment)

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