The Court of Appeal of Tanzania has delivered an important judgment on the relationship between banks, customers, letters of credit, marine cargo insurance and the law of pleadings in CRDB Bank PLC v Asif Ali Riasat t/a Ahmed Business Center, Civil Appeal no. 729 of [2024] TZCA 422 (17 april 2026). The judgment, delivered by Mwandambo, J.A., Mdemu, J.A. and Mgeyekwa, J.A., on 17 April 2026, overturned the High Court's decision that had awarded the respondent USD 50,000 in general damages.
The decision is particularly significant for international trade finance because it addresses a recurring question that “when a bank issues a documentary letter of credit and receives documents that comply with its terms, how far must the bank go in investigating whether the goods described in those documents actually exist or have been shipped?”
The Court of Appeal's answer was that, on the facts and pleadings of this case, the bank's obligations were principally governed by the letter of credit and the applicable UCP 600 rules. Once the documents constituted a complying presentation, the bank was not required to investigate the physical delivery of the goods.
In 2024, I represented CRDB Bank PLC, the respondent, before the High Court in proceedings instituted by Asif Ali Riasat, trading as Ahmed Business Center.
The plaintiff was a customer of CRDB Bank PLC at its Oysterbay Branch in Dar es Salaam. In May 2023, he intended to import approximately 24,000 reams of copy paper from PT Sampoerna Putera Mandala of Indonesia at an agreed purchase price of USD 48,000. To facilitate the proposed transaction, the plaintiff applied to CRDB Bank PLC for the issuance of a letter of credit. The application was submitted on 22 May 2023, following which the Bank issued an irrevocable Letter of Credit, No. CRDB231C0537, on 23 May 2023.
The transaction required the shipment to be made from Surabaya Port in Indonesia to Dar es Salaam Port in Tanzania under CIF terms. The letter of credit stipulated, among other things, that partial shipment and transshipment were not permitted. It was also governed by the UCP 600 Rules. The letter of credit contemplated payment by the issuing bank against presentation of documents complying with its terms. On 4 July 2023, CRDB Bank notified the respondent that it had received the documents required under the letter of credit and considered them to constitute a complying presentation. The bank consequently paid the letter of credit amount through the relevant banking channel and debited the respondent's account.
The respondent subsequently attempted to arrange clearance of the goods. However, difficulties arose when the clearing and forwarding agent and the shipping line identified in the documents allegedly had no record of the consignment. The goods could not be traced. The respondent therefore brought proceedings against CRDB Bank, alleging, among other things, that the bank had acted negligently by making payment without adequately verifying the transaction and by failing to take appropriate steps after being informed that the shipment could not be traced.
On the first issue, the High Court found in favour of CRDB Bank. It held that the bank had not breached the terms of the letter of credit or UCP 600. However, the High Court took a different approach to negligence.
It held that the bank owed a duty of care to the respondent and that the bank had breached that duty by failing to communicate directly with the supplier's bank concerning the status of the shipment. The High Court considered communication with the bank's correspondent, Citibank N.A. in Singapore, insufficient. The High Court also found that CRDB Bank had an obligation to claim indemnity under the marine cargo insurance policy because the bank was named as the assured and the policy provided broad coverage.
Consequently, the High Court awarded the respondent USD 50,000 in general damages, together with interest at 7% per annum from the date of judgment until payment in full and costs. CRDB Bank appealed.
The Court of Appeal essentially considered two substantive questions.
First, could the bank be held negligent under a general banker-customer relationship when the customer's pleaded case arose specifically from the letter of credit transaction?
Second, did the marine cargo insurance policy require the bank to seek indemnification when there was no evidence that the goods had actually been shipped from the port of loading?
The Court answered both questions in favour of CRDB.
One of the central features of the judgment is the Court's treatment of the nature of a letter of credit transaction. The Court of Appeal emphasized that the Letter of Credit constituted a specific contractual arrangement governing the parties' obligations in relation to the transaction. Under the documentary credit system, the bank's obligation is principally concerned with documents rather than the actual goods or performance of the underlying commercial contract.
This principle is reflected in Article 5 of UCP 600, under which banks deal with documents and not with goods, services or performance to which the documents may relate. The Court relied on its earlier decision in Citibank Tanzania Limited v Total Tanzania Limited [2025] TZCA 555, emphasizing the principle of strict compliance.
According to the Court's reasoning, when documents are presented under a letter of credit, the bank must determine whether the documents, on their face, comply with the terms of the credit and applicable banking rules. The bank is not ordinarily required to investigate matters outside the documents or independently establish whether the underlying goods have actually been shipped or delivered.
The High Court had already determined that the documents presented under the LC constituted a complying presentation. Therefore, the Court of Appeal considered that CRDB Bank had fulfilled its contractual obligation under the documentary credit.
Among the significant aspect of the judgment is the Court's distinction between two potentially different legal relationships. The first was the special contractual relationship created by the letter of credit. The second was the general banker-customer relationship between CRDB Bank and the respondent.
The Court of Appeal held that the respondent's pleadings were based on the special relationship arising from the letter of credit transaction. In particular, the respondent had alleged that the bank failed to exercise reasonable care before making payment under the letter of credit. The respondent had not pleaded a separate cause of action based upon an alleged breach of the bank's ordinary duties arising from the general banker-customer relationship. The Court of Appeal therefore found that the High Court had gone beyond the case pleaded by the respondent when it imposed liability upon the bank as a "reasonable banker."
The Court of Appeal emphasized the established principle that parties are generally bound by their pleadings and that a case should be determined according to the issues properly raised before the court. The Court of Appeal referred to James Funke Ngwagilo v Attorney General [2004] T.L.R. 161 for the proposition that trials should ordinarily be confined to the pleadings and issues framed. The Court of Appeal also acknowledged the principle in Agro Industries Ltd v Attorney General [1994] T.L.R. 43 that a court may, in appropriate circumstances, determine an unpleaded issue where the matter has effectively been left for determination and the parties have been heard on it. However, the Court of Appeal found that this exception did not apply in the present case.
The Court of Appeal rejected the argument that CRDB Bank was required to contact the supplier's bank and investigate the status of the shipment after receiving the complying documents. The Court of Appeal reasoned that communication with the supplier's bank concerning the physical shipment was not an obligation imposed upon the bank by the letter of credit. The bank's contractual obligation was to examine the documents and determine whether they complied with the requirements of the letter of credit. Once a complying presentation had been made, the bank's payment obligation arose in accordance with the documentary credit.
This was particularly important because the respondent's case was not based on an allegation that the bank had failed to detect documentary discrepancies. Rather, the complaint concerned the failure of the underlying commercial transaction the apparent absence or non-delivery of the goods. The Court of Appeal consequently held that the bank could not be made liable under the pleaded case merely because the goods were not subsequently found.
The judgment also reinforces the procedural importance of pleadings in commercial disputes. The Court of Appeal observed that the respondent's case arose from the specific contractual arrangement embodied in the letter of credit. It was therefore not open to the respondent to effectively introduce a different case based on a general banker-customer duty during the trial.
This aspect of the decision demonstrates that pleadings are not merely procedural formalities. They identify the case that the opposing party is required to meet and define the matters that the court is called upon to determine. A party who pleads breach of a particular contract must establish the relevant contractual obligation, the breach of that obligation and the resulting loss. The Court of Appeal found support for this proposition in the legal principle that, in a contractual claim, the actual contract governing the relationship should be properly identified and pleaded. For commercial litigants, this means that considerable care must be taken when framing a plaint or defence, particularly where several legal relationships exist simultaneously.
The second major issue concerned the marine cargo insurance policy. The respondent argued that CRDB Bank was named as the assured under the marine cargo insurance certificate and that the policy covered "all risks" of loss or damage to the insured goods. The High Court accepted this argument and concluded that the bank had an obligation to claim indemnity under the policy. The Court of Appeal, however, examined the nature and scope of the insurance contract more closely.
The policy covered copy paper being transported from Surabaya Port, Indonesia, to Dar es Salaam Port, Tanzania. It incorporated Institute Cargo Clauses (A), which provided broad coverage subject to specified exclusions. The crucial question was whether the insurance risk had attached where the goods had never actually commenced the insured voyage.
The Court of Appeal relied on principles of marine insurance law and the English decision in Nima S.A.R.L. v Deves Insurance Public Co Ltd (The Prestrioka) [2002] EWCA Civ 1132. The Court of Appeal recognized the basic concept that marine insurance is concerned with losses arising from a marine adventure and maritime perils. Consequently, an "all risks" clause does not automatically mean that every possible commercial loss connected with the transaction is insured. The scope of the policy must still be considered in the context of the particular insured voyage and the risks contemplated by the policy.
In the present case, there was no evidence that the insured cargo had actually been shipped from Surabaya for carriage to Dar es Salaam. The Court of Appeal therefore concluded that the insured voyage had not commenced. This meant that the loss complained of did not fall within the scope of the marine cargo insurance policy in the circumstances established before the Court. The fact that the policy contained broad "all risks" language did not extend coverage to a situation where the insured voyage itself had never been undertaken.
Having concluded that the loss fell outside the policy, the Court rejected the finding that CRDB Bank had been negligent for failing to make an insurance claim. The Court reasoned that an obligation to make a claim could not arise where there was no established insured loss falling within the policy. The Court therefore held that the High Court had erred in concluding that CRDB Bank was required to claim indemnity under the marine cargo insurance policy. This finding was important because the respondent's argument depended partly on the fact that CRDB Bank was named as the assured. The Court's reasoning demonstrates that being named as an insured or assured does not, by itself, establish an obligation to claim every loss arising from the underlying commercial transaction. The actual terms and scope of the insurance contract remain decisive.
The Court of Appeal also addressed the consequence of its findings for the award of USD 50,000 in general damages. Once the Court determined that CRDB Bank was not liable either for breach of its obligations under the letter of credit or for failure to claim under the marine cargo insurance policy, there was no legal basis for maintaining the damages award. The Court consequently held that the award of USD 50,000 could not stand.
The Court of Appeal allowed the appeal. It set aside the judgment and decree of the High Court and substituted them with an order dismissing the respondent's suit. The appellant, CRDB Bank PLC, was awarded costs both in the Court of Appeal and in the High Court.
• First, banks dealing with letters of credit deal primarily deal with documents
Where a letter of credit requires payment against specified document, the bank’s responsibility is to determine whether the document whether comply with letters of credit and applicable UCP rules. The bank is not generally required to investigate the actual goods or underlying commercial transaction once a complying presentation has been made
• Second, the terms of letter of credit define the bank’s obligations in the special transaction
A court should not impose additional obligations upon a bank that are inconsistent with the contractual framework established by the parties. The court of appeal found that communicating with the supplier’s bank about the physical status of the goods was not an obligation imposed upon CRDB by the letter of credit
• Third, parties are bound by their pleadings
A claimant must establish its case on the legal and factual basis pleaded. The court of appeal found that the High Court erred by finding negligence based on general banker-customer duty when the respondent’s pleaded case arose from special letter of credit transaction.
• Fourth, an “all risks” marine insurance clause does not necessarily cover every form of non-delivery.
The word “all risks” must be interpreted within the scope of the insured subject matter and voyage. Where the insured cargo never embarked upon the insured voyage, the policy may not respond to the alleged loss.
• Fifth, damages depend upon establishing liability
Once the court determined that CRDB had no liability, the award of general damages could not stand
CRDB Bank PLC v Asif Ali Riasat t/a Ahmed Business Center provides significant guidance on the legal boundaries of an issuing bank's responsibilities in a documentary credit transaction.
The central message of the decision is that the obligations arising from a letter of credit must be distinguished from obligations arising from other legal relationships. Where the letter of credit requires the bank to deal with documents, and the documents presented comply with the letter of credit and UCP 600, the bank's obligation does not ordinarily extend to independently investigating whether the underlying goods have actually been shipped or delivered.
The judgment further emphasizes the importance of pleadings. A court must generally determine the dispute on the case presented by the parties and should not impose liability on the basis of an alternative legal relationship that was neither properly pleaded nor submitted for determination.
On insurance, the Court's reasoning demonstrates that the expression "all risks" must be understood within the contractual framework of the particular marine policy. Where the insured voyage never commenced, the existence of a broad insurance clause does not necessarily create liability for the insurer or an obligation upon the assured bank to pursue indemnity.
Ultimately, the Court of Appeal's decision establishes a clear distinction between the documentary obligations of an issuing bank, the general banker-customer relationship, and the separate contractual obligations arising from marine insurance. The case is therefore likely to be of considerable relevance to banks, importers, exporters, insurers, trade-finance practitioners and commercial litigants dealing with documentary credits and international trade transactions in Tanzania.
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