The "Cherry" and others

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 05 April 2002
• Neutral Citation: [2002] SGHC 68
• Docket Number: Admiralty in Rem Nos 834, 750 and
• Date: 05 April 2002
• Published date: 19 September 2003
• Year: 2002
• Plaintiff Counsel: Vivian Ang, Corina Song and Kenny Yap (Allen & Gledhill)
• Citation: [2002] SGHC 68
• Defendant Counsel: Lim Tean, Minn Naing Oo and Shem Khoo (Rajah & Tann)
• Court: High Court (Singapore)
• Subject Matter: Cargo owners having no actual possession of bill of lading,Conversion,Tort,Whether carriers liable for conversion,Breach,Carriage of goods by sea,Transhipment of goods without cargo owners' knowledge or consent,Whether cargo owners clothe vessel's character with appearance of ownership of the cargo,Loss of goods,Admiralty and Shipping,Whether title to sue transferable to cargo owners through their agent,Bills of lading act,Bills of lading,Words and Phrases,'Holder',Whether vessel's owner breached obligation to deliver by accepting instructions of charterer's representative instead of cargo owner's,Whether Cargo owners' loss brought about by vessel's owner,Whether holder of bill can hold bill in agent's physical possession,Whether acts of vessel's charterer binds plaintiffs,Title to sue,Voyage charterparties,Whether physical possession of bill necessary before party can claim as holder,s 5 Bills of Lading Act (Cap 384, 1994 Ed)

Judgment

GROUNDS OF DECISION

1. This is a consolidated trial of three actions arising from the shipment of fuel oil from Kuwait to Fujairah in the United Arab Emirates on three vessels

2. Each action related to a different vessel, namely the "Cherry", the "Epic" and the "Addax". The plaintiffs in all the actions are Glencore International AG of Switzerland. The defendants are the owners of the vessels, Stanley Shipping Ltd, Crest Shipping Ltd and Wyndham Shipping Ltd, all of Malta. The vessels were operated by a Greek company, Dynacom Tankers Management Ltd ("Dynacom").

3. The three vessels were sailing under time charterparties to Metro Trading International Inc. ("Metro" or "MTI") which was previously known as Metro Bunkering and Trading Co and under voyage charterparties to Alpine Shipping Co of Monrovia, the plaintiffs’ chartering arm.

4. The plaintiffs had purchased the oil shipped on the three vessels from Metro. Metro had in turn purchased the oil from the Kuwait Petroleum Corporation ("KPC") on FOB Kuwait terms. The plaintiffs entered into voyage charterparties with Metro to carry the oil from Kuwait to Fujairah where Metro operated storage facilities consisting of floating storage tanks, the principal one being the M.T. Metrotank. Their claims were for the loss of the cargoes that were partly unloaded, or not unloaded at all at Fujairah.

5. As the facts and issues in the three actions are for practical purposes similar, I will use the Cherry action to consider the common matters.

6. The "Cherry" loaded a cargo of 87,972 mt, 380 cst fuel oil at Mina Al Ahmadi and Mina Abdulla, Kuwait. The oil had been purchased by Metro and sold on to the plaintiffs on 24 November 1997 on substantially back-to-back terms. The plaintiffs chartered the "Cherry" on a voyage charterparty on the same day to carry the oil from Kuwait to Fujairah. The oil was loaded on the "Cherry" on 3 December 1997 and arrived at Fujairah on 8 December.

7. The bill of lading issued for this shipment on 3 December 1997 stated

Shipped in apparent good order and condition by Kuwait Petroleum Corporation in the tank ship called the M.V. "Cherry" at the port of Mina Abdulla, Kuwait, a quantity of petroleum products said to be bunker grade fuel oil 380 cst, 571,353 Barrels, 86,582 long tons, 87,972 metric tons, in bulk and to be delivered (subject to all the terms, conditions, liberties and exceptions herein incorporated or contained whether written printed or stamped on the fact of back hereof) in the like good order and condition at the port of Fujairah U.A.E. or so near thereto as the said ship may safely get (always afloat) unto the order of Banque Trad Credit Lyonnais (France) S.A. Paris or to his or their Assigns or Order upon payment of freight as per Charter Party or as may be agreed or hereinafter set out.
(Emphasis added)

8. The plaintiffs as voyage charterers issued discharge instructions to Metro for the "Cherry" on 4 December 1997 in the following terms

Please find below our discharge instructions, after completion of loading please forward full loaded details and instruct vessel to proceed to off Fujairah where she will discharge into M.T. Metrotank and or any other vessel and or shoretanks as instructed by Metro local representative.

Receivers: Glencore International A.G.

Inspectors: We understand that you will ullage vessel on her arrival at Fujairah and that provided there is not a significant difference between arrival quantity and B/L quantity vessel will discharge without inspector being present and B/L quantity will be applied to inventory.
Obviously should you note a significant difference between vessels arrival quantity and B/L then we request that you appoint Caleb Brett to attend for outturn quantity prior to vessel commencing discharge.

ETA notices to be sent to following on a daily basis and then 12/6 hrs.

1) Glencore, London tlx 21223 attn. D. Hawkins

1. Please also keep the above informed of vessel tendering nor and throughout discharge.

(Emphasis added)

9. On the same day Metro as the time charterers instructed Dynacom as follows

Please note charterers hereby invoke letter of indemnity clause of the charterparty and request owners to discharge cargo as below without production of original bill of lading as per Metro Trading International Inc orders, at Fujairah

Quantity : 87972.00 mt

Description : FO 380 cst

Bill of Lading Date : 3.12.97 Kuwait

(Emphasis added)

10. The defendants accepted those instructions and complied with Metro’s orders without the bill of lading being produced. They also 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.

11. Payment was to be made by the plaintiffs through a letter of credit issued by Banque Trad-Credit Lyonnais in favour of KPC, with Metro’s instructions that all correspondence relating to the letter of credit were to be addressed to the plaintiffs and to place the bills of lading at the disposal of the plaintiffs.

12. The bank made payment under the letter of credit upon presentation of the bills of lading. On 2 February the plaintiffs instructed the bank through their agents Glencore UK Ltd ("Glencore UK") to endorse the bills of lading to the order of Credit Lyonnais, London and forward them to Credit Lyonnais with further instructions for the latter to endorse the bills in blank and forward them to Glencore UK. These instructions were complied with, and Credit Lyonnais forwarded the bills of lading to Glencore UK on 5 February 1998.

13. The action over this shipment arose because only 32,000 mt of the oil was discharged from the "Cherry" after she arrived at Fujairah. The remaining 55,972 mt remained on board and were carried to Singapore without the plaintiffs’ knowledge or consent. The defendants claimed that this was done on the instructions of Metro. Metro having collapsed in February 1998 was left out of these proceedings.

The claim

14. The plaintiffs claimed that the defendants were obliged under the bills of lading to discharge the entire Cherry cargo at Fujairah and alternatively, that they were liable in tort for conversion of the oil.

The defence

15. The defendants denied the plaintiffs’ claims and made a counterclaim which was subsequently withdrawn. At the end of the case, the main points of the defence were identified as

(a) the plaintiffs had no title to sue on the bills of lading because they were not holders of the bills of lading as defined in the Bills of Lading Act (Cap 384) ("the Act");

(b) the plaintiffs had no title to sue in conversion as they did not have the immediate right of possession of the oil when the alleged conversion took place in December 1997;

(c) the defendants were not in breach of contract because they had delivered the cargo to Metro, the plaintiffs’ agents, at Fujairah;

(d) the defendants had acted on the instructions of the plaintiffs’ agents, Metro at Fujairah;
(defences (c) and (d) will be dealt with together under "Delivery to Metro")

(e) the plaintiffs had clothed Metro with all the appearances of being the owner of the cargo, and were bound by Metro’s acts, and

(f) the plaintiffs had failed to prove that the defendants’ acts caused their loss.

Title to sue on the bills of lading

16. Section 5 of the Act refers to a holder of a bill of lading as a person "with possession" of the bill. This provision does not refer to physical possession specifically. The defendants argued that the plaintiffs cannot sue as the holders of the bill of lading because they were not in physical possession of the bill which was with Glencore UK. They contended that a holder of the bill of lading under the Act must have physical possession of the bill because the rights under the bill are only passed by the act of physically transferring the bill to the transferee.

17. This line of defence called for an examination of the relationship between the plaintiffs and Glencore UK which led to the bill of lading going into the physical possession of the latter.

18. Glencore UK is a wholly owned subsidiary of the plaintiffs. The two companies are parties to a consulting and management agreement dated 1 January 1991 when the plaintiffs were known as Marc Rich & Co AG and Glencore UK was known as Marc Rich & Co Ltd. Under the agreement Marc Rich & Co Ltd was to act, inter alia, as a correspondent of Marc Rich & Co AG for the transmission of information, correspondence and documents and serve as the latter’s London liaison with bankers, financiers and charterparties. When Glencore UK gave written instructions to Banque Trad Credit Lyonnais on 2 February 1998 to forward the bill of lading to themselves the instructions were expressly stated to be issued pursuant to that agreement. When the bill of lading was sent to Glencore UK, they received it as the agent of the plaintiffs with no interest in it of their own.

19. Defence counsel referred to "The Shravan" [1999] 4 SLR 194 where it was held that a party suing on a bill of lading as holder must be in possession of the bill at the time of the commencement of the action. The decision was of little assistance to the defendants’ contention because the questions whether possession for that purpose means physical possession and whether possession through an agent puts the principal in possession were not considered.

20. There is a discussion on this point in Carver on Bills of Lading (1^st Edn) at para 5-017 in the context of the Carriage of Goods by Sea Act, 1992 which is equivalent to the Bills of Lading Act:

Possession held by agent. Where a bill of lading is transferred, e.g. by a seller who has shipped goods in pursuance of a contract for the sale of those goods, the actual possession of the bill may be acquired, not by the buyer himself, but by a person who acts as his agent for the purpose of taking delivery of the goods from the carrier. Under the...