The ‘Dolphina’

• Jurisdiction: Singapore
• Judgment Date: 30 December 2011
• Date: 30 December 2011
• Docket Number: Admiralty in Rem No 113 of 2008
• Court: High Court (Singapore)

The ‘Dolphina’

[2011] SGHC 273

Belinda Ang Saw Ean J

Admiralty in Rem No 113 of 2008

High Court

Admiralty and Shipping—Bills of lading—Bills of lading as contract of carriage—Delivery of cargo against presentation of bills of lading—Incorporation of charterparty terms—Vessel delivering cargo against charterer's letter of indemnity—Charterparty term permitting this incorporated into contract of carriage—Whether breach of contract by shipowner

Admiralty and Shipping—Bills of lading—Carriage of Goods by Sea Act—Charterer issuing letter of indemnity to shipowner—Bill of lading to be returned to shipowner as soon as it came into charterer's possession—Charterer coming into possession of bill of lading after cargo delivered against charterer's letter of indemnity—Charterer fraudulently endorsing bill of lading in blank—Bank eventually coming into possession of bill of lading—Whether bank having title to sue shipowner for breach of contract—Whether bank a ‘holder’ of bill of lading—Whether charterer's endorsement valid—Section 5 (2) (b) Carriage of Goods by Sea Act 1992 (c 50) (UK)

Admiralty and Shipping—Bills of lading—Incorporation of charterparty terms—Whether governing law clause of charterparty to be incorporated into contract of carriage contained in or evidenced by bill of lading

Civil Procedure—Pleadings—Amendment—Bank applying after trial to amend pleadings to insert new claim in conspiracy after charterer introduced new evidence after trial—Whether amendment should be allowed—Whether pleadings deficient

Conflict of Laws—Choice of law—Contract—Charterparty containing governing law clause—Bill of lading containing general words of incorporation incorporating conditions, liberties and exceptions of charterparty—Proper law of contract of carriage contained in or evidenced by bill of lading—Whether bill of lading incorporated governing law clause in charterparty

Tort—Conspiracy—Lawful means conspiracy—Unlawful means conspiracy—Charterer and shipowner closely connected entities—Charterer issuing letter of indemnity to shipowner—Bill of lading to be returned to shipowner as soon as it came into charterer's possession—Charterer coming into possession of bill of lading after cargo delivered against charterer's letter of indemnity—Charterer fraudulently falsifying contractual documents and endorsing bill of lading in blank to secure payment for cargo—Whether any conspiracy between charterer and shipowner—Whether shipowner having sufficient knowledge

The defendant (‘Universal’) was the registered owner of the vessel Dolphina. Universal had three directors, viz, Alvin Kwan, Steve Kwan and K H Chong, but only Alvin Kwan and K H Chong testified in these proceedings. By virtue of common shareholdings and directorships between them, Universal was connected to a number of other companies, including Kwantas Oil Sdn Bhd (‘KOSB’), and Dongma Oils and Fats (Guangzhou Free Trade Zone) Co, Ltd (‘Dongma’).

In January 2008, KOSB entered into a contract (‘the Zhongguang Contract’) with Zhejiang Zhongguang Industry Co Ltd (‘Zhongguang’), pursuant to which KOSB sold a parcel of 3,000 mt (2% more or less at KOSB's option) of RBD Palm Oelin to Zhongguang, with shipment to be effected during March 2008 and before 31 March 2008, and payment to be made by draft by Zhongguang opening an irrevocable letter of credit in favour of KOSB seven days before shipment. The documents required for payment under the letter of credit were, inter alia, KOSB's signed commercial invoice and a full set of clean bills of lading made out to order and blank endorsed.

Pursuant to a charterparty in February 2008 (‘the February Charterparty’), which was governed by English law, KOSB chartered the Dolphina from Universal to carry 11,500 mt of RBD Palm Oelin from Kuantan, Malaysia, to Huangpu, China. In early March 2008, pursuant to a contract (‘the Felda Contract’) the exact terms of which were not initially known, KOSB bought 11,500 mt of RBD Palm Oelin (‘the Cargo’) from Felda Vegetable Oil Products Sdn Bhd (‘Felda’).

In March 2008 the Cargo was loaded on board the Dolphina at Kuantan and Universal issued four bills of lading to Felda as the shipper of the Cargo. The present proceedings were concerned with the fourth bill of lading (‘BL4’), the subject matter of which was 2,999.901 mt of RBD Palm Oelin (‘the BL4 Cargo’) to be used to fulfil the Zhongguang Contract.

Although Zhongguang failed to open a letter of credit seven days before shipment as required under the Zhongguang Contract, the entire Cargo of 11,500 mt of RBD Palm Oelin was nonetheless shipped on or around 23 March 2008. Enquiries were made a few days later as to whether the Cargo could be released with production of the original bills of lading, which request was copied to Steve Kwan. On 27 March 2008, KOSB issued a letter of indemnity (‘LOI’) to Universal, agreeing, inter alia, to indemnify Universal against all liability as a result of delivering the Cargo without production of the original bills of lading, and to return the original bills of lading to Universal as soon as they came into KOSB's possession. A similar LOI had been obtained by KOSB from Dongma, and confirmation was given that the Dolphina could release the Cargo without requiring production of the original bills of lading, which confirmation was also copied to Steve Kwan. The Dolphina completed discharge of the Cargo by 1 April 2008 (‘the Discharge Date’).

On 6 June 2008, the plaintiff bank (‘BOC’) received Zhongguang's application for an irrevocable letter of credit in favour of KOSB, and in support of its application Zhongguang furnished a copy of the Zhongguang Contract marked ‘Good Copy’, which, apart from providing that shipment was to be effected in June 2008 and before 30 June 2008, was otherwise identical to the Zhongguang Contract. BOC approved Zhongguang's application and issued Zhongguang a letter of credit (‘the June L/C’), and a bill of exchange (‘the June B/E’) was drawn by KOSB on BOC for payment to the order of Malayan Banking Berhad (‘Maybank’).

On 9 June 2008, Maybank presented the June B/E, KOSB's signed commercial invoice and BL4 to BOC. By this point in time, the reverse side of BL4 carried three undated endorsements, viz, an endorsement in blank by Felda, an endorsement by Maybank to KOSB, and an endorsement in blank by KOSB. BOC sent the documents to Zhongguang, which authorised BOC to make payment under the June L/C, and BOC duly accepted the June B/E. Two days later, however, Zhongguang returned the documents (including BL4) to BOC, citing financial difficulties. BOC then attempted to claim possession of the BL4 Cargo in Huangpu, but discovered that it had been shipped in March 2008 and that the BL4 Cargo had been released and discharged by the Discharge Date.

BOC commenced proceedings against Universal, claiming to sue as lawful holder of BL4 for breach of contract due to Universal's misdelivery of the BL4 Cargo without proper production of BL4, and a preliminary issue arose as to the proper law of the contract of carriage. After the conclusion of the trial of the breach of contract claim, the court called for further submissions from the parties, which resulted in Universal introducing new documentary evidence which revealed, inter alia,the precise terms of the Felda Contract, and that KOSB had in fact paid Felda for the Cargo and received BL4 from it on 4 April 2008. BOC then applied to amend its pleadings to include a claim in civil conspiracy, alleging that Universal conspired with, inter alia, KOSB and/or Zhongguang to induce BOC to issue the June L/C, accept the documents presented thereunder by Maybank, and to make payment accordingly.

Held:

(1) BOC's application to amend its pleadings was allowed as the proposed amendment would enable the real issues between the parties to be tried, and the amendment would not cause injustice or injury to Universal which could not be compensated for by costs or otherwise. Universal had tacitly accepted that conspiracy was an issue in dispute, which BOC's proposed amendment would clarify, rather than a completely different issue as such. Given that it was Universal which had belatedly introduced new evidence, it lay ill in Universal's mouth to allege that the lateness of BOC's proposed amendment was fatal, or that the proposed amendment caused prejudice to Universal. Further, this was an exceptional case in which the discovery of evidence given by Universal had been selective, and because of the highly unusual route by which the new evidence was eventually disclosed: at [107].

(2) The proper law of the contract of carriage, contained in or evidenced by BL4, was English law, because BL4 expressly incorporated the terms of the February Charterparty, including cl 32 thereof, which stated that the February Charterparty was governed by English law: at [62], [128], [131] and [132].

(3) Universal was, as at the Discharge Date, in breach of contract by delivering the BL4 Cargo without requiring the production of BL4, and this conclusion was not affected by cl 19 of the February Charterparty, which merely permitted Universal to discharge the Cargo against KOSB's LOI without requiring the production of the bills of lading, but did not oblige it to do so: at [146] and [152].

(4) BOC had no title to sue for Universal's breach, because the relevant provisions of the Carriage of Goods by Sea Act 1992 (c 50) (UK) were predicated on there being a ‘holder’ of a bill of lading (ie,BL4), which in turn depended on there being a valid endorsement of BL4, and KOSB's blank endorsement of BL4 was not valid because it was tainted by fraud, for KOSB was clearly aware that under the terms of its LOI it was not entitled to deal with BL4 or endorse it to any third parties, but was obliged to withdraw it from circulation by returning it to Universal. Despite this, KOSB endorsed BL4 in blank, falsely representing that it still had legal...