The "Pacific Vigorous"

JudgeBelinda Ang Saw Ean J
Judgment Date09 June 2006
Neutral Citation[2006] SGHC 103
Citation[2006] SGHC 103
Defendant CounselLeong Kah Wah and Derek Tan (Rajah & Tann)
Published date09 June 2006
Plaintiff CounselLoo Dip Seng (Ang & Partners)
Date09 June 2006
Docket NumberAdmiralty in Rem No 66 of 2005 (Registrar's Appeal No 267 of 2005)
CourtHigh Court (Singapore)
Subject MatterPlaintiff having right to sue buyer for breach of sale contract and right to sue shipowner for breach of contract of carriage,Whether plaintiff's remedies alternative or cumulative,Election at common law,Contract,Whether plaintiff's acceptance of partial payment from buyer under contract for sale of goods amounting to election at common law precluding plaintiff from exercising right to sue shipowner,Remedies

9 June 2006

Belinda Ang Saw Ean J:

1 The in rem proceedings here arose out of the shipment of 41,895mt of Indonesian steaming (non-coking) coal in bulk (“the cargo”). The plaintiff, Agritrade International Pte Ltd (“Agritrade”), applied for summary judgment against the defendant, Pacific Vigorous Shipping Inc, for the misdelivery of the cargo at the port of discharge otherwise than against production of the relevant bills of lading covering the subject cargo. I allowed Agritrade’s appeal with costs and entered interlocutory judgment for Agritrade with damages to be assessed. The defendant has appealed against my decision.

2 The undisputed facts are as follows. Agritrade sold the cargo to Bhatia International Ltd (“Bhatia”) under Contract No BIL 510205 dated 2 February 2005. Payment was to be by letters of credit opened by two Indian banks, namely, the State Bank of Mysore and the Union Bank of India. Five bills of lading (Nos SAT/IND-01/II/2005, SAT/IND-02/II/2005, SAT/IND-03/II/2005, SAT/IND-04/II/2005 and SAT/IND-05/II/2005) all dated 18 February 2005 were issued for the cargo shipped on board the Pacific Vigorous at Muara Satui, South Kalimantan, Indonesia for carriage to and delivery at Port Pipavav which is located south-west of Bhavnagar in the Saurashtra region of the state of Gujarat. Bhatia as subcharterer of the Pacific Vigorous issued three letters of indemnity dated 21 February 2005 to the head time charterer, Eitzen Bulk A/S, for delivery of cargo without production of the relevant bills of lading. Eitzen Bulk A/S in turn issued back-to-back letters of indemnity dated 22 February 2005 to the defendant as owner of the Pacific Vigorous. The vessel arrived at the discharge port of Pipavav on or about 4 March 2005. The entire cargo was discharged and delivered to Bhatia by 8 March 2005 against the letters of indemnity.

3 Discrepancies in the shipping documents tendered to the issuing banks were formally notified to Agritrade on 11 March 2005. Suffice it to say, efforts to get Bhatia to waive the discrepancies were not successful. By then, a dispute had arisen and developed between Agritrade and Bhatia regarding the contractual quality of the cargo. The moisture content of the cargo was outside its contractual specification, and communications on this topic ensued between them from 10 March through to 21 March. Despite’s Bhatia’s complaints, it did not reject the cargo; instead Bhatia delivered the cargo to its end users sometime after 21 March. Bhatia unilaterally deducted a sum of US$372,249.51 for breach of the sale contract and on 8 April 2005 credited Agritrade’s bank account with the sum of US$1,218,281.60 for the cargo. Agritrade regarded the sum of US$1,218,281.60 as part payment of the cargo. The amount deducted was not an agreed sum. Agritrade said that it did not know how Bhatia arrived at that figure.

4 On 15 April 2005, Agritrade commenced in rem proceedings against the Pacific Vigorous for the loss it had suffered in consequence of the misdelivery of the cargo to Bhatia. Initially, Eitzen Bulk A/S entered an appearance to the action as interveners. The defendant later on took over the proceedings, and by order of court dated 13 December 2005 all pleadings and affidavits filed on behalf of the interveners were allowed to stand as though they were the defendant’s.

5 It is trite law that a lawful holder of an order bill is entitled to call for delivery of the goods covered by that transferable document of title. Correspondingly, the shipowner is obliged to give proper delivery and does not fulfil its contractual obligations if the goods are delivered to a person (even the cargo owner) who cannot produce the bill of lading. In The Ines [1995] 2 Lloyd’s Rep 144, Clarke J (as he then was) correctly stressed the fundamental nature of the promise not to deliver other than in return for a bill of lading, as did the English Court of Appeal in Kuwait Petroleum Corporation v I&D Oil Carriers Ltd (The Houda) [1994] 2 Lloyd’s Rep 541 and our Court of Appeal in The Cherry [2003] 1 SLR 471 at 480–481. Even though the shipowner no longer has the goods, the bill of lading is not spent and as such it does not cease to be a transferable document of title. The contract of carriage generally continues and the bill of lading remains effective until the goods are delivered to the person entitled under the bill of lading (as to which see The Future Express [1992] 2 Lloyd’s Rep 79). It follows that a lawful holder is entitled to sue in contract in respect of any breach of the contract of carriage committed even prior to the time at which the claimant became holder of the bill. See BNP Paribas v Bandung Shipping Pte Ltd [2003] 3 SLR 611 and s 2(2) of the Bills of Lading Act (Cap 384, 1994 Rev Ed).

6 Before the assistant registrar, the defendant in resisting the application for summary judgment raised three triable issues as giving rise to defences to the action. Of the three triable issues, two of them were not pursued at the appeal. They were (a) the plaintiff’s title to sue as lawful holders of the bills of lading and (b) the issue of causation, where the contention was that the loss was due to breach of the sale contract and not the defendant’s breach of the contract of carriage. Agritrade was able to and did produce the original bills at the hearing before the assistant registrar. As lawful holders of the bills of lading, Agritrade has a right to possession of the cargo against the defendant even after the cargo had been wrongly delivered to Bhatia (see [5] above). Moving on to the causation point, Agritrade had stated in its affidavit that it was suing the defendant in contract. That position was reaffirmed by its counsel, Mr Loo Dip Seng, at the hearing before me. In the event, counsel for the defendant, Mr Leong Kah Wah, rightly accepted that as the ordinary principles of remoteness of damage and causation would apply to Agritrade’s damages claim for breach of contract, the issue of causation as presented was a point to be taken and argued at the assessment of damages.

7 The third triable issue raised by the defendant was that the plaintiff consented to the delivery of the cargo to Bhatia without production of the relevant bills of lading. I was persuaded by Mr Loo that there was nothing to this point and this assertion was easily disposed of. The cargo was discharged and delivered to Bhatia by 8 March 2005 against letters of indemnity (see [2] above) and not on the basis of any prior consent by Agritrade. Significantly, the allegation that Agritrade consented to delivery was never a defence pleaded in the defence filed on 9 June 2005. It was raised as a triable issue in the affidavit of Pin Ying-Kwan dated 22 July 2005 and subsequently addressed in reply by Agritrade. Bhatia as f.o.b buyer arranged the shipment and that would explain the absence of any communication relating to the shipment between Agritrade and the defendant. The defendant resorted to the exchanges of correspondence between Agritrade and Bhatia to cull for itself a defence that was based on ex post facto reasoning. Those communications from 10 March 2005 onwards did not bear out the defendant’s assertion that the plaintiff as a fact knew and consented to the discharge of the cargo into the possession of Bhatia against letters of indemnity. Bhatia’s letter dated 18 March 2005 was written after the cargo was delivered into the possession of Bhatia and was sent in reply to Agritrade’s query on how the vessel could have delivered the cargo without its approval. Bhatia wrote:

This is the first time that such a frivolous contention is being taken by you particularly when the material had been discharged at the disport with your knowledge and concurrence and the same has not been objected to till date in all your correspondences after the material has been discharged at the disport.

Nothing in that paragraph offered a foundation for the defendant’s assertion that Agritrade had prior to the discharge consented to delivery without presentation of the relevant bills of lading. Bhatia’s remark – that there was no objection from Agritrade during the earlier exchanges on the off-specification cargo – did not support the defendant’s stance.

8 The general picture that emerged from the affidavits and documents is this. Agritrade found itself in a situation where the cargo was in the hands of Bhatia following the defendant’s defective performance, as it were, of the contract of carriage. The cargo had been taken and what remained was Agritrade’s right to claim damages for breach of contract (see [9] below). As for the sale contact, it was Bhatia who elected to accept the non-contractual cargo by electing not to reject the cargo for breach of condition but to limit its right to claim damages for breach of warranty (s 11(2) of the Sale of Goods Act (Cap 393, 1999 Rev Ed). Having accepted the non-conforming cargo, Bhatia proceeded to unilaterally deduct what it believed was reasonable as damages for the breach of contract and thereafter credited the plaintiff’s account for the value of the non-conforming cargo. Since Agritrade was in this situation, it treated the payment by Bhatia as partial payment of the cargo under the sale contract and separately commenced proceedings against the defendant for breach of the contract of carriage.

9 Simply put, was there anything in these circumstances to conclude that Agritrade’s conduct after the breach (which could be explained on the basis of estoppel or some other legal principles) implicitly represented unequivocally that it would not make a claim for damages that depended on an assertion of misdelivery? Would acceptance of part of the sale proceeds bar Agritrade from suing the defendant for misdelivery under the respective bills of lading? At the court’s direction, the acceptance of partial payment (see [3] above) was discussed in this connection by counsel. The defendant did not raise estoppel...

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2 books & journal articles
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