The “STI Orchard”

• Jurisdiction: Singapore
• Judge: Navin Anand AR
• Judgment Date: 23 May 2022
• Docket Number: Admiralty in Rem No 16 of 2021 (Summons No 5040 of 2021)
• Court: High Court Appellate Division (Singapore)

The “STI Orchard” (Winson Oil Trading Pte Ltd, intervener)

[2022] SGHCR 6

Navin Anand AR

Admiralty in Rem No 16 of 2021 (Summons No 5040 of 2021)

General Division of the High Court

Admiralty and Shipping — Bills of lading — Delivery without presentation of bills of lading — Whether bank became holder of bills of lading in “good faith” — Whether bills of lading were spent — Whether bank consented to delivery of cargo without presentation of bills of lading

Admiralty and Shipping — Bills of lading — General words of incorporation — Whether choice of law clause incorporated into bill of lading

Civil Procedure — Summary judgment — Bank seeking summary judgment against shipowner for misdelivery of cargo — Whether triable issues raised

Held, granting unconditional leave to defend:

(1) Where an incorporation clause referred to, but did not identify a charterparty, the court would assume that the reference was to the charter under which the goods were carried. The Cargo was carried under a voyage charterparty, and the general words of incorporation in the Bills of Lading incorporated the English law clause in the voyage charterparty. OCBC's claim for breach of the contract of carriage was governed by English law and UK's Carriage of Goods by Sea Act 1992 (c 50) (UK) (“COGSA 1992”): at [38] to [40].

(2) Evidence from an English law expert was not necessary where misdelivery and the rights under COGSA 1992 were concerned, and it would be sufficient to adduce the relevant English decisions or secondary materials. Singapore's Bill of Lading Act 1992 (2020 Rev Ed) was in pari materia with COGSA 1992, and counsel and the Singapore courts alike had not had difficulty grappling with arguments and issues relating to COGSA 1992: at [41] to [44].

(3) The underlying financing arrangements suggested that OCBC did not intend to take security through a pledge of the Bills of Lading. OCBC acceded to HLT's request for the Bills of Lading to be issued or indorsed to HLT's order when OCBC issued the letter of credit to pay for the Cargo, and did not arrange for the Bills of Lading to be indorsed to its order or in blank when it subsequently granted the trust receipt loan to HLT. OCBC knew or was put on notice that HLT intended to blend the Cargo and on-sell it as a different product, where new bills of lading would have to be issued by HLT. It was therefore arguable that the effect of the trust receipt loan was to authorise HLT to sell the blended cargo using new bills of lading, and to hold the sale proceeds on trust for OCBC to secure the amount advanced: at [55] and [56].

(4) The term “good faith” in s 5(2) of COGSA 1992 connoted honest conduct, and precluded a situation where possession was obtained unlawfully or by other improper means: at [59].

(5) There was a triable issue on whether OCBC was in possession of the Bills of Lading in good faith. OCBC only took steps to have the Bills of Lading delivered to it and indorsed in its favour after it was informed of HLT's financial difficulties, by which time the Cargo had been discharged from the Vessel and apparently blended into a new product for on-sale. It was arguable that OCBC did not meet the threshold of honest conduct because: (a) it did not look to the Bills of Lading as security at the time it financed HLT's purchase of the Cargo; and (b) it was now attempting to bring a claim on such purported security: at [54], [58] and [60].

(6) A bill of lading would be spent where the person who received the delivery of the goods subsequently became the holder of the bill of lading, as the bill of lading's status as the symbol of the goods was exhausted when the symbol was united with the goods. The Bills of Lading became spent on 17 February 2021 when HLT became the holder of the Bills of Lading for the purpose of indorsing the same to OCBC, as the Bills of Lading were transferred to the person who was entitled to and had earlier obtained delivery of the Cargo: at [64].

(7) But for the issue of good faith, OCBC would have the rights of suit under the Bills of Lading pursuant to s 2(2)(a) read with s 5(2)(c) of COGSA 1992. The transfer of the Bills of Lading to OCBC was pursuant to the credit facilities letter, which was entered into before the Bills of Lading became spent on 17 February 2021: at [65] to [67].

(8) The defence of consent sought to excuse the shipowner's breach of the contract of carriage in delivering the goods without production of the bills of lading. The essence of the defence was that the holder of the bills of lading gave instructions to the shipowner (or was deemed to have done so) which were acted on by the shipowner, such that the holder now could not complain about the breach. The defence of consent could cover instructions from a person who was not the holder of the bills of lading at the time of delivery but subsequently became the holder. However, the defence of consent was hard to prove: at [70] to [72].

(9) Although there were facts that strongly militated against a finding of consent, such as the absence of communications between OCBC and the Owner at the material time and the commencement of proceedings by the Owner against Winson Oil under the letter of indemnity, the defence was not clearly unarguable on the facts. The Cargo was delivered by the Owner on Winson Oil's instructions between 5 and 6 March 2020, and OCBC granted the trust receipt loan on 3 April 2020 in circumstances where it knew or was put on notice that the Cargo would be blended by HLT and on-sold as a different product. Accordingly, whether the trust receipt loan amounted to OCBC's ex post facto consent to, or ratification of, Winson Oil's instructions to the Owner to deliver the Cargo without production of the Bills of Lading was a matter that should be investigated at trial: at [73] and [74].

Case(s) referred to

Aegean Sea, The [1998] 2 Lloyd's Rep 39 (folld)

Akfel Commodities Turkey Holding Anonim Sirketi v Townsend, Adam [2019] 2 SLR 412 (folld)

Bandung Shipping Pte Ltd v Keppel TatLee Bank Ltd [2003] 1 SLR(R) 295; [2003] 1 SLR 295 (refd)

Barber v Meyerstein (1870) LR 4 HL 317 (refd)

BNP Paribas v Bandung Shipping Pte Ltd [2003] 3 SLR(R) 611; [2003] 3 SLR 611 (refd)

Cherry, The [2003] 1 SLR(R) 471; [2003] 1 SLR 471 (folld)

Dolphina, The [2012] 1 SLR 992 (folld)

Epic, The [2000] 2 SLR(R) 240; [2000] 3 SLR 735 (refd)

Erin Schulte, The [2015] 1 Lloyd's Rep 97 (refd)

Forsa Multimedia Ltd v C&C Logistics (HK) Ltd [2011] HKCU 254 (refd)

Habibullah Mohamed Yousuff v Indian Bank [1999] 2 SLR(R) 880; [1999] 3 SLR 650 (folld)

Jarguh Sawit, The [1997] 3 SLR(R) 829; [1998] 1 SLR 648 (refd)

Navig8 Ametrine, The [2022] SGHCR 5 (refd)

Neptra Premier, The [2001] 2 SLR(R) 754; [2002] 2 SLR 124 (refd)

Nika, The [2021] 1 Lloyd's Rep 109 (refd)

Pacific Recreation Pte Ltd v S Y Technology Inc [2008] 2 SLR(R) 491; [2008] 2 SLR 491 (refd)

SLS Everest, The [1981] 2 Lloyd's Rep 389 (refd)

Soeraya Emas, The [1991] 2 SLR(R) 479; [1992] 1 SLR 33 (refd)

Star Quest, The [2016] 3 SLR 1280 (refd)

Swiss Singapore Overseas Enterprises Pte Ltd v Navalmar UK Ltd [2003] 1 SLR(R) 688; [2003] 1 SLR 688 (refd)

Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 (refd)

UCO Bank v Golden Shore Transportation Pte Ltd [2006] 1 SLR(R) 1; [2006] 1 SLR 1 (folld)

Yue You 902, The [2020] 3 SLR 573 (refd)

Facts

The plaintiff, Oversea-Chinese Banking Corporation Ltd (“OCBC”), extended trade facility financing to its customer, Hin Leong Trading (Pte) Ltd (“HLT”). HLT purchased a cargo of gasoil (“Cargo”) from the intervener, Winson Oil Trading Pte Ltd (“Winson Oil”), which OCBC financed under a credit facilities letter and a trust receipt loan. The defendant, STI Orchard Shipping Company Ltd (“Owner”), was the registered owner of the vessel STI Orchard (“Vessel”) that carried the Cargo from Mailiao, Taiwan, to Singapore. The bills of lading issued for the carriage (“Bills of Lading”) were indorsed to the order of HLT.

Between 5 and 6 March 2020, the Vessel delivered the Cargo to HLT without the presentation of the Bills of Lading and against a letter of indemnity issued by Winson Oil. On 27 April 2020, HLT was placed under interim judicial management. OCBC demanded and received the original Bills of Lading from Winson Oil on 22 June 2020. On 17 February 2021, HLT's judicial managers indorsed the Bills of Lading in favour of OCBC pursuant to an order of court.

OCBC commenced a claim against the Owner for misdelivery of the Cargo and applied for summary judgment. The Owner and Winson Oil, seeking unconditional leave to defend, raised three main defences: (a) OCBC did not become the holder of the Bills of Lading in good faith; (b) the Bills of Lading were spent by the time they were indorsed to OCBC; and (c) OCBC consented to the delivery of the Cargo without presentation of the Bills of Lading. There was a preliminary issue on whether the Bills of Lading were governed by Singapore law or English law.

Legislation referred to

Application of English Law Act (Cap 7A, 1994 Rev Ed)

Bills of Lading Act 1992 (2020 Rev Ed)

Civil Law Act (Cap 43, 1988 Rev Ed) s 5

Companies Act (Cap 50, 2006 Rev Ed) s 211B

Evidence Act 1893 (2020 Rev Ed) ss 40, 59(1)(b), 59(2)

Rules of Court (2014 Rev Ed) O 14 r 1, O 14 r 3, O 14 r 4, O 70 r 10A

Carriage of Goods by Sea Act 1992 (c 50) (UK) ss 2(1)(a), 2(2)(a), 5(2)(b), 5(2)(c)

Contracts (Rights of Third Parties) Act 1999 (c 31) (UK)

Kenny Yap, Ho Pey YannandDouglas Lok Bao Guang (Allen & Gledhill LLP) for the plaintiff;

Kenneth Tan SC (Kenneth Tan Partnership) (instructed), Daryll Richard NgandAng Kaili (Virtus Law LLP) for the defendant;

Bazul Ashhab Bin Abdul Kader, Prakaashs/oPaniar Silvam, Tan Yu HangandLevin Lin Lok Yan (Oon & Bazul LLP) for the intervener.

23 May...