The "Luna" and another appeal

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 20 August 2021
• Neutral Citation: [2021] SGCA 84
• Docket Number: Civil Appeals Nos 22 and 28 of 2020
• Subject Matter: Appeals,Admiralty and Shipping,Notice,Bills of lading,Admiralty jurisdiction and arrest,Wrongful arrest,Civil Procedure,Bills of lading as document of title,Bills of lading as contract of carriage,Appeals against costs order,Delivery of cargo against presentation of bills of lading
• Published date: 25 August 2021
• Hearing Date: 28 June 2021
• Defendant Counsel: Toh Kian Sing SC, Vellayappan Balasubramaniyam, Dinesh Sabapathy, Ravi Dharini and Chan Qin Pei (Rajah & Tann Singapore LLP)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Bazul Ashhab bin Abdul Kader, Yap Ming Kwang Kelly, Prakaash s/o Paniar Silvam, Toh Ka-Chun Gregory (Tu Jiajun), Shawn Lim Zi Xuan and Tan Yu Hang (Oon & Bazul LLP),Chan Leng Sun SC (Chan Leng Sun LLC), Teo Ke-Wei Ian, Chen Zhida and Huang Peide (Helmsman LLC) (instructed), Lim Wei Ming Keith, Reuben Tan Wei Jer and Joel Raj Moosa (Quahe Woo & Palmer LLC)

Steven Chong JCA (delivering the judgment of the court): Introduction

The bill of lading has been described as the cornerstone of modern sea carriage. It typically co-exists, in the context of the carriage of goods by sea, alongside an underlying sales contract. However, these two instruments serve different purposes that have been extensively explored in contemporary jurisprudence. But once in a blue moon, these co-existent and distinct instruments may assume roles unlike their traditionally well-recognised ones. On this occasion, the blue moon has indeed shone its light on the Luna – and thus presents a fitting opportunity for us to examine and clarify some of the fundamental principles undergirding the symbiotic relationship between bills of lading and their underlying sales contracts.

While it is correct that a bill of lading contract is typically independent of the underlying sale contract, it does not follow that the terms of the sale contract would play no role in construing the effect of a bill of lading. In most cases, when a bill of lading is used to serve its traditional functions, its legal effect would be self-evident. However, on the rare occasions when it is clear that the bill of lading could not possibly serve any of its traditional functions, the question would then arise as to what legal effect, if any, should be ascribed to such a bill of lading. In those situations, over-emphasis on the “independence” of a bill of lading from its underlying sale contract would risk obfuscating the proper analysis of its true legal effect.

It cannot be gainsaid that a bill of lading is invariably issued to fulfil an underlying sale transaction which would usually precede the bill of lading. While a bill of lading is independent in the sense that the parties, ie, the shipper and the carrier, are different from the parties to the sale contract, ie, the buyer and the shipper/seller, and the two instruments are governed by different terms, there can be no dispute that these two separate or “independent” contracts operate in tandem. It therefore stands to reason that the terms of the sale contract will usually be useful to elucidate the true legal effect of the accompanying bill of lading.

On the unique facts of this case, the High Court judge (“the Judge”) found that the relevant bills of lading “served none of the purposes” which a bill of lading is expected to serve. This, in itself, is quite a remarkable finding and only serves to demonstrate the exceptional circumstances of this case. Yet, the Judge decided that the relevant bills of lading “had contractual force as bills of lading and that the [appellants] had, by issuing the [bills of lading] undertaken to the [respondent] to deliver only against presentation of the [bills of lading]” [emphasis in original omitted].

In our judgment, the holding by the Judge that the bills of lading had contractual force is ultimately incompatible with his finding that those bills of lading “served none of the purposes” of a typical bill of lading. For the reasons set out below, we disagree with the decision below and accordingly allow the appeals save for the appeal against the dismissal of the counterclaim for wrongful arrest in CA/CA 28/2020 (“CA 28”).

Facts The parties

The respondent in CA/CA 22/2020 (“CA 22”) and CA 28 is Phillips 66 International Trading Pte Ltd. One of the respondent’s business activities is the trading and supply of bunker fuel. This entails purchasing fuel oil in bulk, storing and blending the fuel oil in storage tanks leased from Vopak Terminal Pte Ltd (“Vopak Terminal”), and then selling the product from Vopak Terminal. In some of these sales, the bunkers were sold on an FOB basis for delivery to bunker barges. The bunker fuel loaded on board these bunker barges would then be on-sold by the respondent’s customers to ocean-going vessels in Singapore. This is referred to as the sale of “ex-wharf bunkers”.

The appellant in CA 22 (“the CA 22 appellant”) was the demise charterer of the vessel Luna. The appellants in CA 28 (“the CA 28 appellants”) were the owners of the vessels Zmaga, Nepamora, Star Quest, Petro Asia and Arowana Milan. The Luna, Zmaga, Nepamora, Star Quest, Petro Asia and Arowana Milan (collectively, “the Vessels”) are bunker barges used to supply bunker fuel to other vessels.

The sale contracts

By way of three sale contracts dated 10 September 2014, 22 September 2014 and 13 October 2014, the respondent sold several parcels of bunkers FOB to OW Bunker Far East (Singapore) Pte Ltd and Dynamic Oil Trading (Singapore) Pte Ltd (collectively, “the Buyers”). The Buyers were subsidiaries of OW Bunker A/S (“OW Bunker”), one of the world’s largest bunker suppliers prior to its insolvency in 2014.

The terms of the sale contracts were substantially similar and will be discussed in greater detail below. At this point, it suffices to highlight that the sale contracts incorporated the respondent’s General Terms and Conditions for Sales of Marine Fuel February 2013 (“GTC”). The sale contracts also provided that payment for the bunkers would only become due upon the expiry of 30 calendar days after the certificate of quantity (“CQ”) date. In other words, the Buyers purchased the bunkers from the respondent on 30 days’ credit.

The loading of the bunkers and the issuance of the Vopak BLs

Pursuant to the sale contracts, the Buyers nominated the Vessels for loading of the bunkers at Vopak Terminal on various dates between 10 October 2014 and 29 October 2014. Upon loading, Vopak Terminal generated several documents in respect of the bunkers, including a CQ and a document issued in triplicate titled “Bill of Lading” (“the Vopak BLs”).

The Vopak BLs were required to be signed and stamped by the master of the Vessel. The main terms of each Vopak BL read as follows:

…

SHIPPED in apparent good order and condition by PHILLIPS 66 INTERNATIONAL TRADING PTE LTD on board the SINGAPORE vessel called [name of vessel] whereof [captain’s name] is Master of this present voyage now at the port of PULAU SEBAROK, SINGAPORE and bound for BUNKERS FOR OCEAN GOING VESSELS

…

Remarks:

which are to be delivered in the like good order and condition at the aforesaid port of BUNKERS FOR OCEAN GOING VESSELS or so near as the vessel can safely get, always afloat, unto TO THE ORDER OF PHILLIPS 66 INTERNATIONAL TRADING PTE LTD or assigns weight, quantity or quality unknown.

Not responsible for leakage, deterioration of quality and contamination. Freight and all other conditions and expectations as per Chartered stated dated in PAYABLE AS AGREED

In witness whereof, the Master of said ship has signed THREE(3) ORIGINAL Bill of Lading all of this tenor and date, one of which being accomplished, the others to stand void.

…

[emphasis in original]

Shortly after the completion of each loading, the CQ, the Vopak BLs and other documents would be sent by Vopak Terminal to the respondent. In the event that the original CQ and the Vopak BLs were not yet in hand, the respondent would email scanned copies of the CQ and the Vopak BLs together with its invoice to the Buyers. Once in hand, only the original CQ would be couriered to the Buyers; the Vopak BLs would remain with the respondent until after payment was received. In this case, the respondent issued its invoices for the bunker shipments sometime after the loading dates, between 31 October 2014 and 5 November 2014.

The delivery of the bunkers

Meanwhile, the Vessels delivered the bunkers to various ocean-going vessels within several days from the date of loading. This was done without production of the original Vopak BLs, which were still in the respondent’s possession at the material time. In the case of some of the Vessels, they returned to Vopak Terminal or went to another terminal in Singapore to load additional bunkers even before the previous shipment of bunkers had been fully discharged. This resulted in the commingling of bunkers on board.

The letters of demand and arrest of the Vessels

Sometime in November 2014, OW Bunker became insolvent and the Buyers defaulted on payment. The respondent found out about OW Bunker’s insolvency on or about 6 November 2014.

On or about 14 November 2014, the respondent demanded delivery of the bunkers from the appellants, on the basis that it was the shipper and/or person entitled to possession of the bunkers under the Vopak BLs and the holder of the Vopak BLs.

The Vessels were separately arrested by the respondent on 14 November 2014, 15 November 2014, and 17 November 2014.

Application for summary judgment

After the Vessels were arrested, the respondent applied for summary judgment of its claims against the appellants. This was dismissed at first instance by the learned Assistant Registrar Nicholas Poon (“the AR”), who granted the appellants unconditional leave to defend.

On appeal, the AR’s decision was upheld by the High Court in The “Star Quest” and other matters [2016] 3 SLR 1280 (“The Star Quest”). One of the main issues raised in the summary judgment proceedings was whether the Vopak BLs had been intended to operate as contractual documents and/or as documents of title. While the respondent contended that the Vopak BLs were typical bills of lading and ought to be given their full force as such, the appellants submitted that the Vopak BLs merely functioned as acknowledgements of the receipt of the bunkers and did not operate as contractual documents and/or as documents of title (see The Star Quest at [12]–[13]).

The decision below

Following the grant of unconditional leave to defend, the relevant issues were fully ventilated before the Judge over the course of an 18-day trial. The respondent’s case was that the appellants were liable to it in contract, conversion, bailment, negligent misrepresentation, and/or for damage to its reversionary interest. The appellants denied these claims and, in the...