Chan Cheng Kum v Wah Tat Bank Ltd

JudgeLord Devlin
Judgment Date29 March 1971
Neutral Citation[1971] SGPC 1
Citation[1971] SGPC 1
Date29 March 1971
Plaintiff CounselRJ Parker QC, MJ Mustill QC and KA OÂ’Conner (Linklaters & Paines)
Docket NumberAppeal No 6 of 1969
CourtPrivy Council
Published date19 September 2003

The respondents in this case, plaintiffs at first instance, are two banks. The first is the Wah Tat Bank who carried on business in Sibu in Sarawak and who financed shipments from that port to Singapore made by merchants called Tiang Seng Chan (Singapore) Ltd. The other bank is the Oversea-Chinese Banking Corp Ltd who acted as Wah Tat`s correspondents and agents in Singapore. For the purposes of this case no distinction need be drawn between the two banks who can be referred to compendiously as `the bank`.

The arrangement whereby the bank financed the shippers was made orally but its terms were not in dispute.
The bank advanced the money to pay the produce merchants who sold the goods to the shippers and the shippers agreed to pledge the goods to the bank. The shippers, when they shipped the goods from Sibu to Singapore, obtained from the ship a mate`s receipt in which the bank was named as consignee and delivered it to the bank together with other documents for which the bank stipulated, such as an insurance policy and a bill of exchange for the amount of the advance. The bill was presented for payment on arrival of the goods at Singapore and on payment the bank handed back the mate`s receipt endorsed to the shippers so that they could get delivery of the goods.

In May and June 1961 the shippers, who were evidently in financial difficulties, in breach of this arrangement instructed the ship to deliver to them on arrival four consignments of pepper and rubber covered by 20 mate`s receipts; and the ship did so against an indemnity and without production of the mate`s receipts.
These are the circumstances in which the bank sue the shipowners, the defendants at first instance and the appellants before the Board, for conversion of the four consignments.

The bank`s agreement with the shippers was, it is conceded by the appellants, such as to constitute them equitable pledgees of the goods.
Had they given notice of their interest to the ship and had they intervened in time, they might have succeeded in restraining the ship from parting with the goods. But they gave no notice; and anyway by suing in trover are relying only on their rights at common law. At common law a pledge of goods is not complete without delivery. Delivery is likewise necessary to give the bank the possessory right without which they cannot sustain an action for conversion. So the question in this appeal is simply whether there has been delivery, actual or constructive, of the goods to the bank.

If the mate`s receipt had been a bill of lading, the legal position would be beyond dispute.
Not only is the bill of lading a document of title, but delivery of it is symbolic delivery of the goods. But the mate`s receipt is not ordinarily anything more than evidence that the goods have been received on board. This is so firmly settled by Hathesing v Laing (1873) LR 17 Eq 92 and Nippon Yusen Kaisha v Ramjiban Serowgee [1938] AC 429 that the respondents have not sought to argue otherwise. Their contention is that a mate`s receipt must in this case be treated as a document of title equivalent to a bill of lading by virtue of a custom in the trade in which it was issued. In the alternative, they seek to establish delivery on various other grounds based on attornment, estoppel and appropriation. The action failed at first instance in the High Court of Singapore, Kulasekaram J giving judgment against the plaintiffs on 30 December 1965. This judgment was reversed in the Federal Court of Malaysia on 7 July 1967. The Chief Justice, who delivered the judgment of the court, found the alleged custom to be good in fact and in law and held consequently that as holders of the mate`s receipts the bank had the right to possession from the ship. He held also that the ship was estopped from denying the bank`s right to possession; and further that there had been an appropriation of the goods by the shippers to the bank by virtue of which on the authority of Bryans v Nix (1839) 4 M & W 775; 150 ER 1634 and Evans v Nichol (1841) 3 M & G 614; 133 ER 1286 the bank could make good its claim.

Their Lordships have concluded that the action should succeed upon the comparatively simple ground that in the circumstances of this case the shipment of the goods was a delivery to the ship as bailee for the bank so that thereby the pledge was completed and the bank given the possessory title on which it relies.
This makes the plea of estoppel superfluous and their Lordships need nor deal with it. Nor need their Lordships discuss the pleas of attornment and appropriation. Furthermore their Lordships conclusion, since it is immaterial to it whether or not the mate`s receipt was by local custom a document of title, makes it, strictly speaking, unnecessary for them to deal with the issue which was the chief matter in debate in the courts below as well as before the Board. But since the allegation of custom has been so fully explored in evidence and in argument and in the judgments of the courts below and since it is obviously a matter of some importance in the port of Singapore, their Lordships think it right that they should reach and state a conclusion upon it; and it is convenient that they should begin by considering it.

He who sets up a custom must first prove as a matter of fact the existence a practice that is sufficiently widespread within the area in which it is alleged to exist, to make it part of the local usage; and then he must show that the practice he has established conforms with the law`s requirements for a valid custom.
A great deal of evidence for and against the existence of the practice was called at the trial. The trial judge made no finding of fact because he took the view that the custom, if proved, would inevitably be bad in law. On appeal it was agreed that the Federal Court was in as good position as the trial judge to assess the value of the oral evidence. The court concluded that a custom was proved which the Chief Justice expressed in the following terms:

I am accordingly of the opinion that the appellants have proved that it is a custom of the trade relating to shipment of goods between Sarawak ports and Singapore that mate`s receipts such as those to which this present action relates are treated as documents of title to the goods thereby covered, in the same way as bills of lading.

The Board would hesitate long before it reversed on the facts a finding of this character by the Supreme Court of the state.
It is satisfied in this case that there was ample evidence to justify the conclusion of fact. It has been suggested that the Chief Justice`s finding was intended to apply only to the trade from Sarawak to Singapore and not to the trade in the opposite direction and the Board has been referred to earlier passages in the judgment which seem to support this suggestion. The finding in the narrower form is sufficient for the respondents in this case which is concerned with shipments from Sarawak to Singapore. But as the point is of general importance, their Lordships will express their opinion that the evidence is sufficient to justify the wider finding. The difference between the two is that evidence shows that from Sarawak to Singapore between 90% and 95% of the traffic was being carried on mate`s receipt without a bill of lading whereas in the opposite direction the percentage was between 75% and 80%. But the custom alleged was not one which excluded the use of a bill of lading. There was shown to be a minority who for one reason or another, mainly when cargoes from Sarawak were being transhipped at Singapore for onward carriage across the seas, demanded a bill of lading in the usual way in exchange for the mate`s receipt. Of course if a number of shippers concerned solely with the local trade had demanded a bill of lading, it would be difficult to show any sufficiently widespread usage in relation to the mate`s receipt. But, once it is established that the great preponderance of such traffic is carried on mate`s receipt alone, the issue turns on what the evidence shows about the treatment of the mate`s receipt. The evidence on this point does not differentiate between traffic from Sarawak to Singapore and traffic from Singapore to Sarawak. In the one category as much as in the other the mate`s receipt was regularly negotiated in the same way a s a bill of lading.

The trial judge expressed as follows his reasons for disregarding the evidence on custom.

No amount of custom as that described in this case can change the character of this document so as to confer any additional rights and thus make the mate`s receipt equivalent to documents of title. A local custom however strong can never achieve this effect.

It could be achieved, he said, only if the custom had been proved `to be applicable all over the world`.
What otherwise, he asked, would be the position of a new carrier who came into the trade.

Certainly there have not been many cases since the famous case of Lickbarrow v Mason (1794) 5 TR 683; 101 ER 380 (which declared that by the custom of merchants bills of lading were negotiable and transferable) in which custom had created a document of title.
The point was entertained but not decided in Bryans v Nix . Mr Le Quesne had cited two cases in which a custom to treat ware-house certificates or warrants as documents of title was held good: Fraser v Evans (1867) 6 NSW 325 and Merchant Banking Co of London v Phoenix Bessemer Steel Co (1877) 5 Ch D 205. In the only case, however, in which a mate`s receipt has been considered, the allegation that it was by custom a document of title failed. This is the case already referred to of Hathesing v Laing in which the plaintiffs sought to prove a custom at Bombay. As an authority for its main proposition that a mate`s receipt is not under the ordinary law a document of title, Hathesing v Laing has stood unquestioned for nearly a century and is now unassailable. But as a...

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    ...whether that document be regarded as a contract or as a document of title” [emphasis added]: Chan Cheng Kum v Wah Tat Bank Ltd [1971-1973] SLR(R) 28 at [15]. The difficulty which the respondents face with this defence is that once the Vopak bills of lading are construed as regular order bil......

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