RBG Resources plc (in liquidation) v Banque Cantonale Vaudoise and Others

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 11 June 2004
• Neutral Citation: [2004] SGHC 123
• Court: High Court (Singapore)
• Year: 2004
• Published date: 30 June 2004
• Plaintiff Counsel: Sarjit Singh Gill SC and David Chan (Shook Lin and Bok), Quek Mong Hua, Matthew Saw, Mervyn Foo and Koh Kia Jeng (Lee and Lee)
• Defendant Counsel: Lawrence Teh and Loh Jen Wei (Rodyk and Davidson)
• Subject Matter: Commercial Transactions,Sale of goods,Sale and purchase of metals stored in warehouses in Singapore,Whether metals ascertained by appropriation to each contract of purchase,Whether appropriation achieved by way of warehouse accounting system,Whether metals wrongfully commingled with other metals,Whether metals sold forming part of bulk identified by subsequent agreement between the parties,Section 20A Sale of Goods Act (Cap 393, 1999 Rev Ed),Insolvency Law,Winding up,Liquidator,Whether liquidator could be estopped by representations made by company,Tort,Conversion,Claim in conversion,Whether plaintiff had converted defendant's metals
• Citation: [2004] SGHC 123

11 June 2004 Judgment reserved.

Woo Bih Li J:

Introduction

1 The plaintiff, RBG Resources plc (“RBG”), is a public limited company incorporated in England. It was placed in compulsory liquidation in England on 12 June 2002. The present action involves a claim by the second defendant, Credit Lyonnais (“CL”), a bank incorporated in England, to various metals stored in warehouses in Singapore. CL’s claim is resisted by the liquidators of RBG who, in turn, have made a claim against CL for conversion of metals owned by RBG.

2 RBG was known by the name of Impactworld plc on incorporation. It changed its name to Allied Deals plc on 17 July 1996 and then to RBG Resources plc on 17 September 2001.

3 RBG (then known as Allied Deals plc) became a customer of Credit Lyonnais Rouse Ltd (“CLR”) in 1998. CLR was at all material times a wholly-owned subsidiary of CL and a ring-dealing member of the London Metal Exchange (“LME”). Subsequently, from October 2001, RBG entered into metal trading with a division of CL called Credit Lyonnais Rouse Derivatives (“CLRD”). This division trades in various commodities, including metal. The transactions between RBG and CLRD were between October 2001 to April 2002. During this period, there were 158 transactions between CLRD and RBG regarding the purchase of metals in various locations around the world. These 158 transactions included 45 purchase transactions relating to metals in warehouses supposedly operated by Fujitrans (Singapore) Pte Ltd (“Fujitrans”).

4 The parties have referred to these warehouses as Fujitrans or Rong De warehouses. I should clarify that the warehouses were leased from PSA Corporation Limited (“PSA”) by a company known as Rong De Distribution Pte Ltd (“Rong De”). Rong De was in the warehousing and transhipment business. From January 2000, Rong De operated a warehouse at Block 513, Keppel Distripark, #02-108, at Kampong Bahru, Singapore. In late 2000, one Lim Tau Hee (“Lim”), a warehouse manager of Fujitrans, approached Rong De to provide packing, unpacking and storage services for Fujitrans. Rong De agreed. Block 513, however, was also used to store cargo from other entities. As the cargo stored for Fujitrans was increasing, Rong De was concerned about the weight thereof on the second storey of Block 513. Therefore, in March 2002, it leased another warehouse from PSA, namely, Block 519, #01-105 in the same Keppel Distripark. This warehouse was on the first floor or ground floor, as it was sometimes called, and was used exclusively for Fujitrans. For easy reference, I will also refer to these warehouses as “Fujitrans warehouses”.

5 CL treated the 45 purchases mentioned above as 13 groups of transactions. Each group of transactions comprised an initial purchase of metal by CLRD, the grant of a call option to RBG to buy the metal and a subsequent exercise of the call option by RBG, followed by what has been called “rolls” or “rollovers”, ie CLRD would then purchase the metal which RBG had exercised its option for, and grant to RBG another call option and so on. I will elaborate on the structure of the transactions later.

6 CL’s claim relates to five groups of metal transactions between RBG and CLRD. The metals forming the subject matter of those transactions were stored in the Fujitrans warehouses. These were:

(a) 173.519mt of nickel cathodes,

(b) 494.987mt of nickel cathodes,

(c) 692.447mt of copper cathodes,

(d) 504.360mt of tin ingots, and

(e) 50.882mt of tin ingots.

7 RBG’s claim against CL relates to 300mt of nickel briquettes which were removed from a Fujitrans warehouse, on the instructions of CL, on 9 May 2002.

8 Although RBG initially started trading with CLR back in 1998, there is no claim arising from transactions between RBG and CLR, which is a separate legal entity from CL. As can be seen, the claims involve the transactions with CLRD only. As CLRD is a division of CL, CL is the litigant against RBG.

9 I will deal with CL’s claims first and then with RBG’s claim. I have included, at the end of my judgment, a schedule listing the dramatis personae for easy reference. The list is of those I have referred to in my judgment more than once.

The structure of the transactions between RBG and CLRD

10 Prior to the first metal transaction between RBG and CLRD, RBG and CLRD had engaged in an exchange of e-mail in which RBG had sought financing from CLRD and CLRD agreed to provide financing. However, the eventual structure of each group of transactions is as set out below.

11 CLRD would purchase a certain quantity of a particular metal (eg nickel) from RBG on an over-the-counter or private contract basis. The metal was supposed to be of LME grade. The purchase was constituted or evidenced by CLRD’s purchase confirmation, the terms of which required delivery documentation to be delivered to CLRD. The purchase confirmation also provided for title and risk to the metal to pass from RBG to CLRD when the delivery documentation was received by CLRD and the purchase price was paid by CLRD.

12 The purchase price was the price calculated by CLRD and agreed to by RBG. The calculation started off with a basis price from which various items were discounted or deducted. This lower price became the purchase price. The various items deducted were in respect of:

(a) warehouse rent,

(b) finance charges,

(c) CLRD’s margin, and

(d) deliverability allowance.

13 It was anticipated that CLRD would enter into a concurrent LME hedging transaction with CLR for the forward sale by CLRD to CLR of a similar quantity of the same generic LME metal. The price for this forward sale formed the basis price for the initial purchase by CLRD from RBG. The period of time between the initial purchase and the forward date was the period of time over which the discounts were calculated.

14 On the same date as the purchase confirmation, CLRD would grant RBG a call option giving RBG the right, but not the obligation, to purchase a similar quantity of the same generic metal. The call option was exercisable within a stipulated period. The expiry date of the option would be a date earlier than the forward date in the hedging transaction.

15 If and when RBG exercised the call option, the hedging transaction placed by CLRD would be unwound or closed out. In the meantime, CLRD was supposed to deliver, by way of documentation, the metal to RBG and RBG would make payment.

16 However, in the groups of transactions before me, the matter did not end there. After the exercise of a call option, CLRD would enter into a similar set of transactions all over again, ie CLRD would purchase the metal from RBG, hedge it and issue a call option to RBG to purchase the metal during a future period. This was referred to as a “roll” or “rollover”. The number of rollovers would vary depending on whether RBG exercised the call option or not and whether another set of transactions was then entered into. However, in the rollovers, no fresh delivery of delivery documentation was required of RBG.

17 In each rollover, RBG’s obligation to pay for its purchase was set off against CLRD’s obligation to pay for its subsequent purchase. The difference was reflected in RBG’s account.

18 I should mention here that the delivery documentation I have referred to was in the form of warehouse receipts on Fujitrans’ letterhead. The person involved in such delivery documentation was Fujitrans’ Lim.

Background leading to the dispute between RBG and CL

19 In early March 2002, CL received information that RBG’s auditors had resigned on the ground that certain transactions undertaken by RBG could not be substantiated. CL then decided to have a visual inspection of the metals it believed it had purchased from RBG. The inspection of metals in Fujitrans warehouses was done on 12 March 2002 by CLRD’s William John Harris (“Harris”), also known as Bill Harris, the person who had been dealing with RBG’s representatives on the metal transactions. After this inspection various events occurred:

(a) On 2 May 2002, the English court ordered RBG to be placed in provisional liquidation with effect from 3 May 2002.

(b) On 6 May 2002, Darryl John Kennard (“Kennard”), an English solicitor representing another bank, Banque Cantonale Vaudoise (“BCV”), spoke to and also met with Lim about the metals in the Fujitrans warehouses. Lim told Kennard that all such metals belonged to RBG.

(c) On 7 May 2002, Harris had a telephone discussion with Lim. As a result of the discussion, another warehouseman, C Steinweg Warehousing (FE) Pte Ltd (“Steinweg”), was allowed to take delivery of 300mt of nickel briquettes out of a Fujitrans warehouse, on behalf of CL on 9 May 2002. This is the subject of RBG’s conversion claim.

(d) On 9 May 2002, BCV commenced an action in Singapore against RBG and Fujitrans. BCV also obtained, on the same day, an interim injunction restraining RBG and Fujitrans from dealing with or disposing of all metals which were the property of RBG.

(e) On 11 May 2002, CL commenced an action in Singapore against Fujitrans. CL also obtained, on the same day, an interim injunction to restrain Fujitrans from dealing with or disposing of all metals held by Fujitrans for CL.

(f) Between 16 May and 20 May 2002, Fujitrans joined Lim and others as parties to the BCV action and obtained, inter alia, Anton Piller orders against them.

(g) On 18 June 2002, Fujitrans applied in the BCV action for interpleader relief, citing the claims against Fujitrans made by BCV and CL, and the demands from various other bank creditors of RBG.

(h) Lim was found dead on or about 25 June 2002. He had apparently committed suicide.

(i) On 10 July 2002, RBG obtained an order in the BCV action giving RBG discovery of all documents obtained by Fujitrans under Fujitrans’ Anton Piller orders and all affidavits filed by Lim and documents produced by Lim in the BCV action. The order also allowed RBG to use any of the documents discovered, as a result of the order, for the protection or...