The Cherry

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
JudgeChao Hick Tin JA
Judgment Date12 November 2002
Neutral Citation[2002] SGCA 49
Citation[2002] SGCA 49
Plaintiff CounselSteven Chong SC, Lim Tean and Shem Khoo (Rajah and Tann)
Docket NumberCivil Appeals Nos 39, 40 and
Date12 November 2002
Defendant CounselVivian Ang, Corina Song and Kenny Yap (Allen and Gledhill)
Published date19 September 2003
Subject MatterWhether breach of contract was cause of loss or whether loss would have occurred even if there had been no breach,Causation,Agency,Breach,Whether delivery includes discharge,Obligation to discharge under bill of lading contract,Implied authority of agent,Bills of lading,Right to sue for conversion,Whether partial discharge in accordance with instructions of cargo owner,Whether person suing having either actual possession of, or immediate right to possess, goods at time of alleged conversion,Whether delivery to third party amounts to delivery to cargo owner,Tort,Construction of agent’s authority,Delivery of cargo without surrender of original bills of lading,What constitutes delivery,Conversion,Contract,Whether implied authority given to third party to decide on discharge quantity,Admiralty and Shipping,Third party authorised to arrange discharge of cargo,Whether third party acting as agent of cargo owner and authorised to give instructions on discharge quantity

Judgment Cur Adv Vult

GROUNDS OF DECISION

1 There are three appellants in these consolidated appeals. They are, respectively, the owners of the vessels Cherry, Epic and Addax. The appeals arise out of the carriage of three parcels of fuel oil on board the vessels from Kuwait to the port of Fujairah in the United Arab Emirates and the discharge of a further parcel of oil into the Cherry at Fujairah. The respondents in all three appeals are Glencore International AG of Switzerland. Claiming as owners of the fuel oil, the respondents commenced admiralty actions against each of the ships to recover damages for fuel oil that was not delivered to them and/or was converted by the appellants.

2. Although the actions involved three different voyages, three different ships and four different parcels of cargo, the basic facts of the three actions were so similar as to necessitate a joint hearing. The consolidated actions were tried before Kan Ting Chiu J who found in favour of the respondents on all their claims. He entered interlocutory judgment against the appellants for damages and costs and directed the Registrar to assess the damages. Against his judgment, these appeals are now brought.

The background

3. The events giving rise to the actions took place in November and December 1997. At the time, the three vessels were managed by a Greek company called Dynacom Tankers Management Ltd. They were also on time charter to Metro Trading International Inc (‘Metro’). Metro was then a significant supplier of bunkers in the Persian Gulf as well as of fuel oil to the Far East. In addition, Metro owned and operated a floating fuel oil storage and blending facility using vessels anchored in the waters off Fujairah. The primary storage and blending vehicle was an oil tanker called Metrotank.

4. Between April 1992 and February 1998, the respondents and Metro did business together on many occasions. From the end of 1994 onwards, the respondents regularly delivered substantial quantities of oil into Metro’s floating storage facility at Fujairah. These cargoes were intended for subsequent resale, often in the form of blended products. The arrangement between Metro and the respondents from June 1996 onwards was that the respondents would purchase oil to be stored at Fujairah on the basis that such oil would subsequently be sold to Metro who would then sell it on to consumers in India and the Far East. Both Metro and the respondents purchased the oil required for this business operation. Additionally, the respondents financed Metro’s purchases. Whenever Metro entered into a contract with a supplier, the respondents would enter into a contract with Metro to purchase the oil on back-to-back terms and the respondents would then provide the letter of credit necessary to enable the supplier to receive payment. It became the practice for the respondents to open a letter of credit in the name of Metro in favour of the supplier and for Metro to give irrevocable instructions to its bankers to hold the documents of title relating to the cargo to the order of the respondents.

5. Three of the four parcels of oil involved in the present case were purchased by Metro from Kuwait Petroleum Corporation (‘KPC’) on FOB Kuwait terms. These parcels were on-sold by Metro to the respondents. The respondents then voyage chartered the vessels Cherry, Epic and Addax from Metro to carry the oil to Fujairah and deliver the same to the floating storage facility. In respect of these parcels, the respondents’ claims related to the fact that on the arrival of Cherry and Addax at Fujairah, only part of their cargoes were discharged into the storage facility. The rest was retained on board. In respect of Addax none of the cargo was discharged. The claims were made in respect of the cargo so retained.

6. The fourth parcel was bought by Metro from the National Iranian Oil Company and shipped on board the vessel Hyperion at Bandar Mahshahr, Iran, to be carried to Fujairah. Metro on-sold it to the respondents. When the Hyperion arrived at Fujairah, instead of discharging its cargo into the storage tanks there, it discharged the cargo into the Cherry. The Cherry then carried the cargo on to Singapore and delivered it to a third party.

7. In respect of the cargoes loaded on to the vessels at Kuwait, the respondents’ original claims were for damages for breach of the bills of lading contracts and/or duty and/or breach of duty as bailees. The claims were founded in contract and, alternatively, in tort. In respect of the Hyperion cargo loaded onto the Cherry, the respondents’ claim was for damages for breach of duty as bailees and/or conversion and/or wrongful detention and/or wrongful interference with the cargo by misappropriating it or removing it from Fujairah. The difference stemmed from the fact that the respondents had no contractual relationship with the owners of the Cherry in relation to their receipt of the Hyperion cargo so that this claim was founded only in tort. We will consider the appeals on the contractual claims and the tortious claim separately.

The bills of lading claims: the facts

8. As the facts and issues in the three appeals relating to the carriage of the cargoes to Fujairah by the appellants are, for practical purposes, similar, we will adopt the approach of the judge and use the Cherry action to consider the common matters.

9. On 24 November 1997, the respondents chartered the Cherry from Metro as disponent owners to carry a parcel of oil from Kuwait to Fujairah. Pursuant to the charterparty, on 3 December 1997, the Cherry loaded a cargo of 87,972 metric tons of bunker grade fuel oil 380 cst at the port of Mina Abdulla, Kuwait.

10. The bill of lading issued for the shipment on 3 December 1997 named KPC as the shipper, was signed on behalf of the master, and was made out to the order of Banque Trad Credit Lyonnais (France) SA (‘BTC’). In accordance with the arrangements described in 4, BTC had, at the instance of the respondents, issued a letter of credit in favour of KPC and Metro had given instructions that all correspondence relating to the credit were to be addressed to the respondents and the bill was to be at their disposal.

11. BTC duly made payment under the letter of credit upon presentation of the bill and, on 2 February 1998, the respondents instructed BTC through their agents, Glencore UK Ltd (‘Glencore UK’), to endorse the bill to the order of Credit Lyonnais and forward it to Credit Lyonnais with further instructions for the latter to endorse the bill in blank and forward it to Glencore UK. These instructions were complied with and Glencore UK duly received the bill.

12. In the court below, the appellants contended that the respondents could not sue as holders of the bill of lading because they were not in physical possession of the bill which was with Glencore UK. The judge found that Glencore UK was holding the bill simply as the agent of the respondents for the transmission of documents and therefore the respondents were the holders of the bill for the purposes of the Bills of Lading Act (Cap 384). On appeal, the appellants did not contest this finding. Thus, before us the ability of the respondents to sue the appellants in contract as parties to the respective bills of lading is not challenged.

13. Before loading took place, Metro as time charterers had ordered the vessel to proceed to Kuwait to load the cargo of fuel oil and ‘on completion of loading vessel to proceed for orders to STS Area offshore Fujairah … if Fujairah will be declared as final dischport [ie discharge port], cargo will be discharged according to the instructions of ‘Metro Storage Coordinator …’. After the vessel loaded the cargo, the respondents as voyage charterers gave instructions to Metro regarding the discharge of the cargo.

14. The instructions which Metro received from the respondents were not conveyed to the ship. Instead, on the same day, Metro asked the appellants to tell the master of the Cherry to discharge the cargo at Fujairah without production of the bill of lading and in accordance with Metro’s instructions there. In making this request, Metro invoked the clause in the time charter (‘the LO1 clause’) which provided that they could make a request for delivery of the cargo despite non-production of the bill of lading against provision of a letter of indemnity for such delivery. This letter of indemnity was duly provided thereafter.

15. The Cherry arrived at Fujairah on 8 December and discharged only 32,000 metric tons of the oil. 55,972 metric tons remained on board and were carried to Singapore without the respondents’ knowledge or consent. The appellants claimed that they acted under the instructions of Metro’s officers at Fujairah when they discharged part of the oil and retained the rest on board.

16. The respondents sued the appellants for having breached their obligations under the bill of lading to deliver the entire Cherry cargo at Fujairah. Metro, having collapsed in February 1998, was left out of these proceedings.

The decision below

17. The substantive issues raised by the appellants below in respect of the Cherry, Epic and Addax cargoes were:

(1) the appellants were not in breach of contract because they had delivered the cargo to Metro, the respondents’ agents, at Fujairah.

(2) the appellants had acted on the instructions of the respondents’ agents, Metro, at Fujairah.

(3) the respondents had clothed Metro with all the appearance of being the owner of the cargo and were bound by Metro’s acts; and

(4) in any event, the respondents had failed to prove that the appellants’ acts had caused their loss.

The last issue, that of causation, is also relevant in relation to the Hyperion claim and will be dealt with after we have considered the arguments on substantive liability in respect of both the contractual and conversion claims.

18. The judge considered the first two issues together. He agreed with the appellants’...

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