Feoso (Singapore) Pte Ltd v Faith Maritime Company Limited

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 25 August 2003
• Neutral Citation: [2003] SGCA 34
• Docket Number: Civil Appeal No 116 of 2002
• Date: 25 August 2003
• Published date: 17 December 2003
• Year: 2003
• Plaintiff Counsel: Haridass Ajaib, Thomas Tan (Haridass Ho & Partners)
• Citation: [2003] SGCA 34
• Defendant Counsel: Richard Kuek,R Govintharasah (Gurbani & Co)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether appellant should be granted leave to introduce new contention on appeal contradicting pleaded case and submissions at trial,Civil Procedure,Whether vessel an arrived ship,Lien clause in order bill of lading,Voyage charterparties,Order bills,Bills of lading,Freights and liens,Carriage of goods by sea,Appeals,Admiralty and Shipping,Claim for demurrage,Whether notice of readiness validly tendered,Whether right of possession under lien survived transfer of ownership of bill of lading,Whether contractual lien for demurrage can be asserted in rem against cargo where cargo owner is not lawful holder of bill of lading

Delivered by Belinda Ang Saw Ean J

1 This appeal involved two consolidated actions. In the first of them, which is Admiralty Action In Personam No. 32 of 2000, Faith Maritime Company Limited (“Faith”), the registered owner of Daphne L was the plaintiff and Feoso (Singapore) Private Limited (“Feoso”), a company incorporated in Singapore, was the defendant. In the second action, which is Admiralty In Rem no. 21 of 2000, Feoso was the plaintiff and the defendant was the vessel Daphne L. Faith entered an appearance to the in rem action as owner of the Daphne L.

The background facts

2 A full account of the facts appears from the judgment of Woo Bih Li JC (as he then was) reported at [2002] 4 SLR 716. A summary of the facts relevant to this appeal is as follows.

3 On 8 September 1999, Feoso bought a consignment of oil described as heavy crude oil (off specification) from Ever Bright Energy Co Ltd (“Ever Bright”), a Hong Kong company. On the same date, Feoso on-sold the whole consignment to Titan Oil Pte Ltd as 380CST fuel oil. The cargo specifications attached to both the sale contracts were the same. The cargo description was later changed by agreement between Feoso and Ever Bright from “heavy crude oil (off specification)” to “crude oil slops”. It was also arranged that Ever Bright would before discharge of cargo provide Feoso with a second set of shipping documents describing the cargo as fuel oil (3.5s). In order to perform the sale contract, Ever Bright through an associated company, Nordic Long Term Lease Limited (“Nordic”) of Hong Kong, chartered on 13 October 1999 the Daphne L from Persing Energy Corporation (“Persing”) of Panama.

4 Persing as disponent owner agreed, amongst other things, to issue new bills of lading in exchange for the original set. The new bills would contain some altered details like the name of shipper, cargo description and net quantity. Nordic also agreed to provide “owners” with a letter of indemnity to cover the issuance of the new bills of lading.

5 By voyage charter on an ASBATANKVOY form dated 13 October 1999, Persing chartered the Daphne L from Faith (“the head charter”) for the carriage of a full cargo of crude and/or dirty petroleum product from Kharg Island, Iran to Huangpu, China. Persing was given the option of discharging the cargo outside the port limits of Singapore (“OPL Singapore”). In the event, cargo documents and the set of bill of lading issued at Kharg Island would be exchanged for a new set with the place of discharge changed to OPL Singapore.

6 On 14 October 1999, Persing gave voyage instructions to Faith for Daphne L to load a cargo of crude oil slops at Kharg Island. At Kharg Island, cargo described as crude oil slops was loaded on board Daphne L between 16 October 1999 and 20 November 1999. The vessel departed Kharg Island on 30 November 1999. After completion of loading, the master issued bill of lading no. KHA-001 at Kharg Island. It described the cargo as crude oil slops with a gross and net weight said to be 35,839.031 mt and 31,000.824 mt respectively. The bill of lading was issued “clean on board” on 21 November 1999 and provided, inter alia, that “freight payable as per charter party dated 13.10.99” and “all terms and conditions, liberties and exceptions of the charter party …are herewith incorporated.” All other source documents accompanying the shipment described the cargo as crude oil slops.

7 On the instructions of Persing, Daphne L called at Singapore on 14 December 1999. Both Feoso and Faith took samples of the cargo. The report Faith received from its surveyors suggested that the cargo was fuel oil contaminated with water, ash and sludge.

8 On 15 December 1999, Daphne L was instructed by Persing to proceed directly to Huangpu to discharge her cargo by ship-to-ship transfer. Her master was to tender Notice of Readiness (“NOR”) “upon arrival at the customary anchorage and when the vessel is in all respects ready to discharge her cargo.” The master was also informed of the nomination of China Ocean Shipping Agency (“Penavico”) as discharge port agents. On 16 December 1999, Nordic sent an urgent fax to its broker, Discovery Chartering Ltd (“Discovery”) and copied to the brokers for Persing, Meridian Brokerage Inc (“Meridian”). It stated:

“Re: MT ‘Daphne L’

….

We have already advised that owners/Master should declare this cargo as ‘fuel oil (3.5s) not crude oil slops. The fuel oil grade has been attested by both SGS and Saybolt in Iran and new certificate quality shown as ‘fuel oil (3.5S) have been duly issued.

Pls ensure that Master do not disclose or present any loadport document with description as crude oil slops. Master should prepare a new cargo manifest for ‘fuel oil (3.5S)’ and fax a copy to us…

As you know that China prohibits import of crude oil, we would remind owners/Master to abide by this instruction otherwise owner/Master will be fully responsible for all consequences that may arise to the vessel and the cargo.

Pls treat this as an important instruction and confirm owners/master’s compliance.” [emphasis added]

9 On 16 December 1999, Meridian passed on Nordic’s instructions to the vessel’s manager, Seaworld Management & Trading Inc (“Seaworld”). Meridian’s fax included the following instruction:

“Very Important

We understand that Master has already informed agents [Penavico] that cargo is crude oil. Please request Master to immediately send agents correction advising them that cargo on board is fuel oil 3.5S.”

10 On the same date, Meridian also sent another fax to Faith’s broker, DLP Maritime:

“In the meantime agents have kept master’s correspondence which was sent in error and will (sic) handed to our [charterers’] reps. Mwhile please ensure master will only name cargo as fuel oil. Also please request master to amend cargo manifest read “Fuel Oil 3.5S” and sent (sic) a copy to us.”

11 Meanwhile, Nordic in Hong Kong issued bills of lading nos. KHA-002, KHA-003 and KHA-004 dated 30 November 1999 on 17 December 1999 (“the switch bills”) with details of the original bill altered. Freight was stated as “freight prepaid”; Ever Bright was named as shipper and Sinochem Guangdong Import and Export Corporation as notify party. The switch bills of lading described the cargo as Fuel Oil (3.5s) and on the switch bills only the net weight of the cargo was stated. Nordic’s letter of indemnity dated 17 December 1999 was addressed to Persing and Faith with Nordic agreeing to indemnify Persing and Faith for all loss, damage and expense of whatsoever nature which they might sustain by reason of authorising Nordic at its request to issue the switch bills. The indemnity also contained a promise to deliver up the original bill of lading no. KHA-001 once it was in Nordic’s possession. Although the letter of indemnity was addressed to Faith, the latter did not receive a copy of it. Faith had also not authorised Nordic to issue the switch bills on its behalf. Feoso received the switch bills from Ever Bright on 25 December 1999.

12 On 21 December 1999 Daphne L arrived at Gui Shan, the area specifically designated by Penavico for the vessel to drop anchor and await cargo receiver’s instructions. Daphne L tendered NOR at 1237 hours.

13 On 21 December 1999, Nordic wrote to Meridian with instructions and those instructions were forwarded to Faith’s brokers, DLP Maritime:

“Prior to releasing of cargo and commencing discharge, please instruct Master to forbid any person to go aboard the vessel to inspect and/or take cargo sampling.”

14 Faith became aware of the existence of the switch bills on 21 December 1999. The switch bills were referred to in a telex the master had received from Meridian. At that point, Faith objected to the switch bills as they were issued without Faith’s authority. Penavico was alerted not to accept the switch bills and the latter in turn notified Feoso of the position on 24 December 1999. On 27 December 1999, Persing confirmed to Feoso that it had not given Nordic authority to issue the switch bills.

15 Counsel for Feoso, Mr. Haridass Ajaib, at the trial below conceded that the switch bills were issued without Faith’s authority. However, Feoso’s position during the vessel’s stay at Gui Shan was quite the opposite. At all material times, Feoso insisted on delivery of the cargo against the switch bills whereas Faith was only prepared to deliver the cargo against presentation of bill of lading no. KHA-001 as the switch bills were unauthorised and hence invalid. The present claim arose out of the circumstances that existed and developed in Huangpu on account of the cargo documents.

16 Faith made a number of proposals to resolve the impasse. None of them were acceptable to Feoso. Eventually, Faith ordered the vessel to sail from Huangpu to Singapore which she did on 13 January 2000. The vessel reached OPL Singapore on 18 January 2000 and entered port limits on 26 January 2000.

17 On 1 March 2000, Faith obtained an order from the High Court for the cargo to be appraised and sold by the Sheriff. The cargo was sold for US$1,607,638.12. The cargo was discharged to the new buyer on 29 April 2000. Daphne L was free of the cargo by 2 May 2000.

18 The delays occasioned at discharge port and in Singapore extended over 130 days – from 1837 hours on 21 December 1999 to 2100 hours of 29 April 2000. Faith’s demurrage claim amounted to US$1,951,489.50. In consequence, Faith asserted a lien on the cargo on board. Feoso in its action alleged breach of contracts contained in or evidenced by bills of lading nos. KHA-002 to 004 occasioned by Faith’s failure to deliver the cargo to Feoso at Huangpu or to discharge the cargo into shore tanks at Huangpu. Feoso also put forward a claim for damages for conversion.

The decision below

19 The judicial commissioner gave judgment on 1 October 2002. He held that Faith was entitled to assert a lien on the cargo for demurrage in the sum of US$1,890,000 (based on 126.1 days x US$15,000) together...