The “Yue You 902”

• Jurisdiction: Singapore
• Judge: Pang Khang Chau JC
• Judgment Date: 24 April 2019
• Date: 24 April 2019
• Docket Number: Admiralty in Rem No 105 of 2016 (Registrar's Appeal No 258 of 2017, Registrar's Appeal No 259 of 2017 and Summons No 334 of 2018) and Admiralty in Rem No 115 of 2016 (Registrar's Appeal No 260 of 2017, Registrar's Appeal No 261of 2017 and Summons No 336 of 2018)
• Court: High Court (Singapore)

The “Yue You 902” and another matter

[2019] SGHC 106

Pang Khang Chau JC

Admiralty in Rem No 105 of 2016 (Registrar's Appeal No 258 of 2017, Registrar's Appeal No 259 of 2017 and Summons No 334 of 2018) and Admiralty in Rem No 115 of 2016 (Registrar's Appeal No 260 of 2017, Registrar's Appeal No 261of 2017 and Summons No 336 of 2018)

High Court

Admiralty and Shipping — Bills of lading — Bills of Lading Act — Defendant ship owner delivering cargo against letter of indemnity without being presented bills of lading — Plaintiff bank granting loan after defendant delivered cargo — Whether bills of lading had become spent — Whether there were “prior contractual or other arrangements” — Section 2(2) Bills of Lading Act (Cap 384, 1994 Rev Ed)

Admiralty and Shipping — Bills of lading — Measure of damages for misdelivery — Carriage freight having being paid — Sale contracts providing indications of value — Defendant submitting that expert evidence nevertheless required to determine market value of cargo — Whether measure of damages would simply be market value of goods

Admiralty and Shipping — Bills of lading — Plaintiff bank receiving bills of lading before cargo was delivered but granting loan after delivery of cargo — Whether plaintiff bank consented to delivery of cargo without presentation of bills of lading — Whether plaintiff bank became holder of bills of lading in “good faith” — Section 5(2) Bills of Lading Act (Cap 384, 1994 Rev Ed)

Held, granting summary judgment in favour of OCBC:

Whether the bills of ladings had become spent

(1) Section 2(2) of the Bills of Lading Act referred to “possession of the bill no longer gives a right (as against the carrier) to possession of the goods to which the bill relates”. Despite disagreements among the leading textbooks on whether the phrase referred to the contractual right to possession of the goods or to the transfer of constructive possession of the goods, the phrase should be read as referring to the document of title function of a bill in transferring constructive possession of the goods. In any event, irrespective of whether the phrase was understood as referring to the transfer of contractual right to possession or to the transfer of constructive possession, the phrase did not create new categories of spent bills not previously known to law, and ought to be interpreted as covering the situation where a bill would at common law be regarded as spent: at [47], [48], [50], [54], [55], [57] and [74(a)].

(2) The position that delivery by a carrier to a person not entitled under the bill did not cause a bill to be spent was well established. In addition, the point that delivery to the buyer against a seller's letter of indemnity did not have the effect of bringing the matter within s 2(2) was uncontroversial: at [58], [65] and [74(b)].

(3) The defendant's submission that FGV was the person entitled to delivery under the bills was rejected. FGV had blank endorsed the bills and delivered them to the buyer through banking channels. Under the relevant contractual arrangements, it would not make sense for a seller in FGV's position to retain the ability to demand delivery as the lawful holder of the bills while the bills were physically with OCBC awaiting the buyer's acceptance: at [77].

(4) Just because neither OCBC nor Aavanti had become entitled to delivery, it did not mean that FGV would remain entitled to delivery under the bills. On first principles, a seller who had endorsed a bill and parted possession with it to obtain payment was not in a position to demand delivery under the bill as he could no longer present it. Under such circumstances, discharge of the cargo did not cause the bill to become spent. FGV was not in possession of the bills and therefore was not in a position to present the bills in exchange for delivery. FGV and Ruchi (to whom FGV requested the cargo be discharged to) were therefore not persons entitled to delivery under the bills: at [78], [79], [82] and [83].

Section 2(2)(a) of the Bills of Lading Act

(5) Even assuming the bills had become spent, OCBC had become a holder under s (2)(2)(a) “by virtue of a transaction effected in pursuance of any contractual or other arrangements” as the request and grant of the trust receipt loan was undeniably made pursuant to a facility agreement between OCBC and Aavanti entered into before Aavanti sought the loan. OCBC's grant of the trust receipt loan before Aavanti could obtain the bills was to allow Aavanti to take delivery of the bills subject to OCBC's security interest. This served a legitimate commercial purpose flowing from the sale contract between Aavanti and FGV. It was therefore not a situation of trafficking in bills of lading: at [87], [94], [96] and [97].

(6) The “transaction” in s 2(2)(a) referred to the physical process by which the bill was transferred, while “contractual or other arrangements” referred to the reason or cause for the transfer. The phrase “in pursuance of” should be read as an ordinary English phrase, not to be encrusted with legal concepts. This reading entailed a broad approach to causal connection, with the consequence that it was not necessary for OCBC to be a party to the relevant “contractual or other arrangements”. Thus, even if the facility agreement were not relied upon, OCBC could rely on the sale contract between FGV and Aavanti as the prior contractual or other arrangement: at [88] to [91] and [95].

Good faith

(7) The meaning of “good faith” in s 5(2) of the Bills of Lading Act should take reference from its meaning in the law of sale of goods. The term should be clear and capable of unambiguous application, which militated against leaving the scope of “good faith” under the Bills of Lading Act open-ended: at [103] to [105].

(8) A holder of a bill held it in good faith for the purpose of s 5(2) if he became its holder honestly. The phrase “other improper means” in UCO Bank v Golden Shore Transportation Pte Ltd[2006] 1 SLR(R) 1 at [40] referred only to improper means involving dishonesty: at [103], [106] and [108].

(9) There was no basis to construe “good faith” in s 5(2) more broadly to serve as a gatekeeper against transfers of bills to obtain a bare right of suit against the carrier, as this mischief was already addressed by s 2(2): at [107].

(10) On the facts, there was no evidence that OCBC had actual knowledge that the cargo had already been discharged. However, even assuming OCBC already knew that the cargo had been discharged, its decision to grant the trust receipt loan cannot be said to constitute dishonest conduct. OCBC had provided valuable consideration in the form of the loan and had received the bills from the seller through banking channels. This was a good indication that the bills could not have been spent bills in OCBC's hands. As far as OCBC was concerned, the bills were by all appearances effective and valid documents of title. Aavanti had also requested a trust receipt loan, which amounted to a representation that the bills could meaningfully be pledged as security. The undisputed facts demonstrate that OCBC had acted honestly: at [112] to [117].

Defences of consent and estoppel

(11) The defence of consent implied that something was said or done by the plaintiff which affected the mind of the master of the ship, which could have induced the defendant to conclude that the plaintiff had consented and encourage the defendant to make delivery without production of the bills. In the present case, the defendant accepts there were no communications between OCBC and it prior to the discharge. It is also common ground that the loan (which OCBC's alleged consent was expressed through) was granted only after the discharge of the cargo was complete: at [121] and [122].

(12) The grant of the trust receipt loan could not be construed as ex post facto consent to, or ratification of, the misdelivery. Moreover, the defendant's reaction to OCBC's claim was to institute its own claim against FGV under FGV's letter of indemnity. It was quite clear that when the defendant had discharged the cargo it believed that its potential liability was covered by the letter of indemnity, and not because it believed it no longer had liabilities under the bill due to consent on OCBC's part: at [123].

Quantum of damages

(13) Where freight had been paid, the measure of damages would simply be the market value of the goods. Expert evidence was not required as there were two relevant indications of the value of the goods in the form of the sale contracts between Aavanti and Ruchi, and FGV and Aavanti: at [139] to [142].

Case(s) referred to

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

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

Bank Negara Malaysia v Mohd Ismail [1992] 1 MLJ 400 (refd)

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

Berge Sisar, The [2002] 2 AC 205 (refd)

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

Calvin Klein, Inc v HS International Pte Ltd [2016] 5 SLR 1183 (refd)

Concentrate Engineering Pte Ltd v United Malayan Banking Corp Bhd [1990] 1 SLR(R) 465; [1990] SLR 514 (distd)

David Agmashenebeli, The [2003] 1 Lloyd's Rep 92 (not folld)

Delfini, The [1990] 1 Lloyd's Rep 252 (folld)

East West Corp v DKBS 1912 [2002] 2 Lloyd's Rep 182, HC (Eng) (folld)

East West Corp v DKBS AF 1912 A/S [2003] QB 1509, CA (Eng) (folld)

Erin Schulte, The [2013] 2 Lloyd's Rep 338, HC (Eng) (not folld)

Erin Schulte, The [2015] 1 Lloyd's Rep 97, CA (Eng) (folld)

Future Express, The [1992] 2 Lloyd's Rep 79 (refd)

Glyn Mills Currie & Co v The East and West India Dock Co (1882) LR 7 App Cas 591 (refd)

Goh Chok Tong v Chee Soon Juan [2003] 3 SLR(R) 32; [2003] 3 SLR 32 (refd)

He-Ro Chemicals Ltd v Jeuro Container Transport (HK) Ltd [1993] 2 HKC 368 (folld)

JP Choon Pte Ltd v Lal Offshore Marine Pte Ltd [2016] SGHC 115 (refd)

Lee Hsien Loong v Singapore...