Malayan Banking Bhd v Barclays Bank PLC [2019] SGHC(I) 04
SUPREME COURT OF SINGAPORE
12 April
2019
Case summary
Malayan Banking
Bhd v Barclays Bank PLC [2019]
SGHC(I) 04
Originating Summons No 1 of 2018
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Decision of Jeremy Lionel Cooke IJ:
Outcome: The SICC holds that the
defendant, Barclays, is liable to reimburse the plaintiff, Maybank, for
transferring a sum of US$871,085.61 to a third party pursuant to a payment
instruction which Barclays sent Maybank via the SWIFT (Society for Worldwide
Interbank Financial Telecommunication) system but which Barclays subsequently
sought to cancel.
Background
1 The plaintiff, Malayan Banking Berhad (“Maybank”), applied for declarations vis-à-vis the defendant, Barclays Bank PLC
(“Barclays”), that:
(a) an
implied contract arose between the parties by Barclays sending to Maybank and
Maybank accepting and acting upon the payment instruction contained in a Society for Worldwide Interbank Financial
Telecommunication (“SWIFT”) “MT 103 STP”;
(b) pursuant
to such an implied contract, Barclays was obliged to initiate a sequence of
transfers that would have ultimately led to Maybank being paid the funds in
relation to the MT 103 STP; and
(c) Barclays
breached such an implied contract by failing to initiate the said sequence of
transfers.
Maybank
further sought an order that Barclays pay Maybank the sum of US$871,085.61,
being the equivalent of the interbank settlement amount specified in the
MT 103 STP.
2 Barclays did not initiate the said
sequence of transfers set out in para 1(b) because, after sending the MT 103 STP, Barclays received information that the funds to be transferred had been
received by its customer in “questionable circumstances”. Barclays thus
cancelled the “MT 202 COV” instruction it had initially sent, where the
MT 202 COV instruction was supposed to provide the cover payment for
Maybank in relation to the MT 103 STP.
3 Maybank’s case, which was founded on principles of contract law and banking law
relating to entitlement to reimbursement for fulfilment of instructions from
other banks, was that an implied contract arose between the parties upon
Barclays sending the MT 103 STP to Maybank and Maybank acting upon it.
4 Barclays’ case was that Maybank was
not entitled to treat the MT 103 STP as irrevocable because it could be
cancelled and was so cancelled by Barclays when it sent another SWIFT message upon
the discovery of a potential fraud. Barclays also submitted that Maybank acted
in a manner inconsistent with market practice by effecting the credit transfer
without having first received the cover payment and that this was an internal
credit risk decision which Maybank took and for which it should bear the
consequences.
5 The
originating summons took the form of proceedings with oral evidence and cross-examination.
The
Court’s ground of decision
6 The
SICC found the conduct of both Barclays and Maybank explicable only on the
basis, as supported by the SWIFT documentation, of an implied contract
requiring Barclays to reimburse Maybank for payment made on Barclays’ express
instructions (at [23]). The SICC
held that in the context of the SWIFT system, the sending of the MT 103
STP carried within it an implied promise on the part of the “Sending Bank” (ie, the bank issuing the MT 103
STP, which in this case was Barclays) to issue an MT 202 COV and to make
the necessary payment to cover the payment which the “Receiving Bank” (which,
in this case, was Maybank) was instructed to make (at [52]). Contrary to Barclays’ case, the MT 103 STP was not merely a document setting out information
as to the identity of the beneficiary and the amount to be paid, but an
instruction to pay, which – when acted upon – gives rise to an obligation on
the part of the Sending Bank to pay the covering sum to the Receiving Bank (at [56]).
7 The SICC also rejected Barclays’
alternative arguments. It found that Barclays could not show that there was an
established banking practice that Receiving Banks did not pay on MT 103
STPs until a cover payment had been received, let alone that Receiving Banks
which had paid sums pursuant to MT 103 STPs before receipt of a cover
payment were not entitled to be reimbursed (at [89]). It also rejected Barclays’ submission that to make payment
at the material time or after investigation would fall foul of para 5.5 of the
SWIFT General Terms and Conditions, because Barclays could have made payment
without breaching industry practice or relevant laws, regulations or third-party
rights (at [110]).
8 Thus, the SICC held that Maybank was entitled
to the declarations sought and to judgment in the sum of US$871,085.61 (at [111]).
This summary is provided to assist in
the understanding of the Court’s grounds of decision. It is not intended to be
a substitute for the reasons of the Court. All numbers in bold font and square
brackets refer to the corresponding paragraph numbers in the Court’s grounds of
decision.