UCO Bank v Golden Shore Transportation Pte Ltd

• Judgment Date: 14 September 2005
• Date: 14 September 2005
• Docket Number: Civil Appeal No 8 of 2005
• Court: Court of Appeal (Singapore)

UCO Bank

Plaintiff

and

Golden Shore Transportation Pte Ltd

Defendant

[2005] SGCA 42

Chao Hick Tin JA

and

Judith Prakash J

Civil Appeal No 8 of 2005

Court of Appeal

Admiralty and Shipping–Bills of lading–Bills of Lading Act–Order bills–Order bills transferred from shipper to consignee via negotiating bank without indorsement in favour of negotiating bank–Whether bills falling within definition of “bill of lading”–Whether consignee becoming lawful holder of bills–Whether consignee having title to sue on bills–Sections 1 (2), 2 (1), 5 (2) Bills of Lading Act (Cap 384, 1994 Rev Ed)

The respondent shipowner issued four bills of lading (“B/Ls”) to cover four shipments of goods carried on board the respondent's vessel. The buyer of the goods (“SOM”) was a customer of the appellant bank. Various shippers were named on the B/Ls, which were made out to the order of the appellant and specified the notifying party to be SOM and the appellant. The four shipments were financed by way of three letters of credit (“LCs”) issued by the appellant, which LCs were subject to the provisions of the Uniform Customs and Practice for Documentary Credits (1993 Revision) (“UCP 500”).

The shippers presented drafts drawn under the LCs, together with the B/Ls and other requisite shipping documents, to three different branches of the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in Hong Kong for negotiation. For this purpose, the shippers did not indorse any of the B/Ls either in blank or specifically in favour of HSBC. Thereafter, upon presentation by HSBC of the B/Ls and the other requisite documents, the appellant duly reimbursed HSBC the full amount payable under the three LCs, which in total came to US$556,514.08.

SOM did not reimburse the appellant the amount which the latter had paid to HSBC under the three LCs. Accordingly, the appellant, which had at all material times held the B/Ls in its possession, sued the respondent for failing to deliver the cargo and sought damages of US$556,514.08.

The respondent challenged the appellant's right to sue, contending that the appellant had not “become” a lawful holder of the B/Ls within s 5 (2) (a) of the Bills of Lading Act (Cap 384, 1994 Rev Ed) (“the Act”) as the B/Ls had not been transferred directly from the shipper to the named consignee. The respondent argued that, in the absence of an indorsement by the shippers to the negotiating bank, HSBC, no rights of suit were transferred to HSBC, and the appellant, in turn, was in no better a position. The respondent submitted that in the present circumstances, the person entitled to sue on each of the B/Ls was the shipper pursuant to s 2 (4) of the Act.

The senior assistant registrar held that the appellant was not the lawful holder of the B/Ls under s 5 (2) of the Act. The trial judge dismissed the appellant's appeal, concluding that the B/Ls in the hands of HSBC (neither as consignee nor as indorsee) would not fit within the definition of “bill of lading” in s 1 (2) of the Act, and could not be the means upon which rights of action could be transferred under the Act. The appellant appealed against the decision of the judge below.

Held, allowing the appeal:

(1) The four B/Ls, being “to order” B/Ls, were clearly transferable. Thus, they would be governed by the Act: at [18].

(2) Upon receipt of the four B/Ls from HSBC, the appellant had become the lawful holder of the B/Ls as it had satisfied all the requirements specified in s 5 (2) (a), namely: (a) it was in possession of the B/Ls; (b) it was the named consignee on the B/Ls; and (c) it was in possession of the B/Ls in good faith. How the named consignee obtained the B/L was not relevant provided that it was obtained in good faith. The reference in s 2 (1) (a) to “lawful” could not mean more than what was prescribed in s 5 (2), ie, that a person became a lawful holder if he had become the holder in good faith: at [31], [35], [39] to [42], [44].

(3) The trial judge had rightly pointed out that the shippers could have indorsed the B/Ls to HSBC and HSBC could have further indorsed the B/Ls to the appellant, who then would have become the lawful holder pursuant to s 5 (2) (b). However, the fact that the shippers and HSBC did not choose that route did not mean that s 5 (2) (a) could not apply; it simply meant that the shippers did not intend to change the named assignee. HSBC's independent cause of action against the appellant under the terms of the LCs did not negate the rights that vested in the appellant pursuant to s 5 (2) (a), read with s 2 (1): at [43].

(4) As for the respondent's submission that the shippers could have sued on behalf of the appellant under s 2 (4) of the Act, first, it was difficult to see how the shippers were to sue if they were not in possession of the B/Ls and had been paid for their shipments. Second, and more importantly, s 2 (4) was not applicable to the present situation. That provision applied where the rights of suit had been vested in another person pursuant to s 2 (1). On the respondent's contention, the rights of suit would remain with the shippers, as there was no proper indorsement: at [45].

[Observation: The object behind s 2 (1) of the Act was to transfer the right to sue of the shipper (who was the original party to the contract of carriage as reflected in the B/L) to those categories of persons set out therein. It was to promote international trade and to facilitate the enforcement of rights by third parties against the carrier. Both the LC and the B/L (as defined in the Act) were essential devices to promote international trade. The court should not unnecessarily introduce restrictions which would have the opposite effect: at [40] and [44].]

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

APL Co Pte Ltd v Voss Peer [2002] 2 SLR (R) 1119; [2002] 4 SLR 481 (distd)

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

CP Henderson & Co v The Comptoir D'Escompte De Paris (1873) LR 5 PC 253 (distd)

East West Corporation v DKBS 1912 [2002] 2 Lloyd's Rep 182, HC (distd)

East West Corporation v DKBS 1912 [2003] QB 1509; [2003] 1 Lloyd's Rep 239, CA (refd)

Golden Shore Transportation Pte Ltd v UCO Bank [2004] 1 SLR (R) 6; [2004] 1 SLR 6 (refd)

Rafaela S, The [2004] QB 702 (distd)

Bills of Lading Act (Cap 384,1994 Rev Ed)ss 1 (2), 2 (1), 5 (2) (consd);ss 1 (1),2 (4),5 (2) (a),5 (2) (b)

Rules of Court (Cap 322,R 5, 2004 Rev Ed)O 14r 12

Carriage of Goods by Sea Act1992 (c 50) (UK)

Kenneth Tan SC (Kenneth Tan Partnership), Bazul Ashhab and Ramesh Tiwari (T S Oon & Bazul) for the appellant

Toh Kian Sing and John Seow (Rajah & Tann) for the respondent.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This was an appeal against the decision of the High Court dismissing the appeal of the appellant against the decision of the senior assistant registrar striking out the appellant's action against the respondent based on four bills of lading (“B/L” or “bill” as may be appropriate). The ground for striking out was that the appellant did not have the right to sue on the B/Ls. We heard and allowed the appeal on 27 July 2005, thus restoring the action for further hearing. We now give our reasons.

The background

2 The appellant is the Singapore branch of an Indian bank. The respondent is the owner of the vessel, Asean Pioneer (“the Vessel”), which issued four B/Ls, dated 22 to 31 December 2000, to cover four shipments of Sarawak round logs carried on board the Vessel from East Malaysia to Kandla, India. The shippers named on each of the four B/Ls were Shin Yang Trading Sdn Bhd, Millenwood Sdn Bhd, The Sarawak Company (1959) Sdn Bhd and Rapid Wealth Sdn Bhd respectively. All the four B/Ls were made out to “the order of UCO Bank” and the notifying party was specified to be “SOM and UCO Bank”. “SOM” is the abbreviation for “SOM International Pte Ltd”, a Singapore company.

3 At all material times, SOM was a customer of the appellant. The four shipments were financed by way of three letters of credit (“LCs”) issued by the appellant, which LCs were subject to the provisions of the Uniform Customs and Practice for Documentary Credits (1993 Revision) (“UCP 500”).

4 The Vessel arrived at Kandla, India, on 15 January 2001. However, unbeknown to UCO, SOM had arranged with the respondent to issue switched bills of lading (“switched B/L”) for the four shipments, with SOM being named as the shipper. The respondent did not retrieve the original B/Ls before issuing the switched B/Ls. Apparently, SOM promised the respondent that it would obtain and surrender the original B/Ls later. As security, SOM provided a letter of indemnity to the respondent. Shortly thereafter, SOM indorsed the switched B/Ls over to various buyers and the eventual holders of the switched B/Ls obtained delivery of the cargo from the respondent.

5 In the meantime, the shippers presented drafts drawn under the LCs, together with the four original B/Ls and other requisite shipping documents, to three different branches of the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in Hong Kong for negotiation. For this purpose, the shippers did not indorse any of the original B/Ls either in blank or specifically in favour of HSBC. Thereafter, upon presentation by HSBC of the B/Ls and the other requisite documents, the appellant duly reimbursed HSBC the full amount payable under the three LCs, which in total came to US$556,514.08.

6 Accordingly, the appellant, which had at all material times held the original B/Ls in its possession, sued the respondent for failing to deliver the cargo and sought damages of US$556,514.08. SOM had not...