The court held that the evidence did not support a finding that the alleged fraud respecting the invoice price was sufficiently established to the knowledge of the bank before payment of the draft, therefore the fraud exception to the autonomy of a documentary credit was not proved. The Supreme Court of Canada dismissed the appeal. The court did not deal with Whitewear's claim that there was documentary noncompliance with the terms and conditions of the letter of credit. The court upheld Whitewear's claim that payment of the draft was improper where the bank had prior knowledge of the fraud. The Quebec Court of Appeal, in a judgment reported C.A. Whitewear appealed the dismissal of its cross-demand respecting the amount of $19,045.57 for the alleged inflation of price in invoice 0014. The Quebec Superior Court allowed the bank's action and dismissed Whitewear's cross-demand. Whitewear claimed the bank improperly paid the drafts where it had knowledge of the fraud by the beneficiary of the credit. Whitewear made a cross-demand for $126,106.17, being the total of the drafts for the two invoices. The bank sued Whitewear and another for monies owing under a promissory note. In spite of Whitewear's representations the bank paid the draft. Before the draft accompanying invoice 0014 was paid, Whitewear advised the bank that there were certain discrepancies on the face of the documents tendered with the draft. The draft accompanying invoice SS/3 for $107,061.60 was paid by the bank before Whitewear became aware of and informed the bank of a forged signature on the invoice. Whitewear disputed the bank's decision to pay two drafts presented for payment by the negotiating bank (Protective's bank). The parties agreed that the Uniform Customs and Practice for Documentary Credits applied. The letter of credit was a negotiation credit that included an undertaking to honour drafts presented with conforming documents by a negotiating bank. Drafts under the letter of credit were to be accompanied by specified documents. Whitewear opened an irrevocable letter of credit in favour of Protective (a Hong Kong company) to cover the purchase of uniforms from Protective. and Angelica Corporationīeetz, Estey, Chouinard, Le Dain and La Forest, JJ.
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