Take Care When Dealing With Letters Of Credit - A Recent Case From Ontario

The Ontario Superior Court of Justice recently considered an application by Piaggio & C.S.p.A. ("Piaggio"), an Italian manufacturer of motorcycles and scooters, arising from a dispute in connection with a refusal of payment by the Bank of Nova Scotia (the "Bank") under three letters of credit (the "LCs"). The case (2011 ONSC 2567) is instructive of the care required when taking letters of credit and presenting them for payment.

The Bank's Refusal

The Bank's refusal to pay funds to Piaggio pursuant to the LC's was on the basis that the named beneficiary of the LC's did not conform to the name on the draw documents in a material respect. The Bank also refused to honour one of the LC's on the basis that Piaggio did not provide all of the original amendments to the first LC. Piaggio sought an order from the Court requiring the Bank to honour the LCs and pay the face amount of each with interest.