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Note: the judgment of the Court of
Appeal in this case has now been published. The decision in favour of Glencore
at first instance was upheld, except in respect of the claim in conversion. To
access the note of the Court of Appeal judgment, click here
DMC/SandT/15/02
Glencore International AG v. Owners of the "CHERRY"
Singapore High Court: Kan Ting Chiu J.: April 2002
Allen & Gledhill, for Glencore
Rajah & Tann, for the "Cherry"
Discharge of oil without production of bill of lading:
conversion: title to sue: holder of bill of lading: meaning of
"possession" in section 5 of the Bills of Lading Act (Cap 384):
whether time charterers were the agents of the plaintiff voyage charterers
Summary
Glencore were purchasers of a cargo of oil and voyage-chartered
the "Cherry" from its seller, Metro, to carry the oil from Kuwait to
Fujairah. Metro had time-chartered the vessel from her owners, the Defendants.
At Fujairah, the Shipowners complied with Metro’s instructions on discharge
without production of the bills of lading. Only part of the oil was discharged.
The balance remained on board and was carried to Singapore without Glencore’s
knowledge or consent. Glencore sued as holder of the bills of lading and for
conversion of the oil which was not discharged. The Shipowners argued that
Glencore did not have title to sue either as holder of the bills of lading or in
conversion. Alternatively, the Shipowners argued that they had complied with the
instructions of Metro’s officers at Fujairah and that Metro was Glencore’s
agents. The defences were rejected by the High Court of Singapore who gave
judgment for Glencore.
This Case Note was contributed by Ang &
Partners, the
Website’s International Contributors for Singapore
DMC Rating Category:Developed
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Facts
This case involved the consolidated trial of three actions
arising from the shipment of fuel oil from Kuwait to the United Arab Emirates on
three vessels. The claimants were Glencore International AG of Switzerland
("Glencore") and the Defendants in each action were the respective
owners of the vessels, the "Cherry", the "Epic" and the
"Addax".
Metro Trading International ("Metro") had bought the
oil consignments from Kuwait Petroleum Corporation ("KPC") on FOB
Kuwait terms and sold them to Glencore on back-to-back terms. The three vessels
were time-chartered by their respective owners to Metro and were
voyage-chartered by Glencore from Metro to carry the oil from Kuwait to Fujairah
(United Arab Emirates), where Metro operated storage facilities.
The "Cherry" judgment reflected facts and issues
common to all three actions.
The bill of lading for the "Cherry" shipment was
issued on 3 December 1997 to the order of Glencore’s bank, which issued the
letter of credit. The bank paid under the letter of credit upon presentation of
the bills of lading. On 2 February 1998, Glencore instructed the bank to have
the bills forwarded and endorsed the bills of lading to the order of Credit
Lyonnais, London, with further instructions for Credit Lyonnais to forward and
endorse the bills in blank to Glencore UK Ltd ("Glencore UK"). The
bills were so endorsed and forwarded to Glencore UK on 5 February 1998.
Glencore as voyage charterers gave instructions to Metro on 4
December 1997 to discharge the oil off Fujairah into vessels and/or shore tanks
"as instructed by Metro local representative". The instructions named
Glencore as receivers. On the same day, Metro as time-charterers instructed the
operators of the "Cherry" to discharge the cargo without production of
the original bill of lading as per Metro’s orders, at Fujairah.
The Shipowners complied with Metro’s instructions on discharge
without production of the bills of lading, but only part of the oil was
discharged. The balance remained on board and was carried to Singapore without
Glencore’s knowledge or consent and there disposed of. The Shipowners said
that this was done on the instructions of Metro’s officers at Fujairah. In
February 1998, Metro collapsed and took no part in the legal proceedings.
Arguments
Glencore claimed that the Shipowners were obliged under the
bills of lading to discharge the entire "Cherry" cargo at Fujairah,
and alternatively, that the Shipowners were liable in tort for conversion of the
oil.
Amongst other defences raised, the main arguments relied on by
the Shipowners were as follows:-
- Glencore had no title to sue on the bills of lading as they were not
holders as defined in the Bills of Lading Act (Cap 384) ("the
Act");
- Glencore had no title to sue in conversion as they did not have the
immediate right of possession of the oil when the alleged conversion took
place in December 1997; and
- The Shipowners were not in breach of contract because they had delivered
part of the cargo to Metro at Fujairah and carried the balance to Singapore,
all in accordance with the instructions of Metro in their capacity as agents
for Glencore.
The relevant section of the Singapore Bills of Lading Act
(section 5.2) is modelled on the UK Carriage of Goods by Sea Act of 1992 and
reads as follows:
"References in this Act to the holder of a bill of lading
are references to any of the following persons, that is to say
- a person with possession of the bill who, by virtue of being the person
identified in the bill, is the consignee of the goods to which the bill
relates;
- a person with possession of the bill as a result of the completion, by
delivery of the bill, of any indorsement of the bill or, in the case of a
bearer bill, of any other transfer of the bill;
- a person with possession of the bill as a result of any transaction by
virtue of which he would have become a holder falling within paragraph (a)
or (b) above had not the transaction been effected at a time when possession
of the bill no longer gave a right (as against the carrier) to possession of
the goods to which the bill relates;
and a person shall be regarded for the purposes of this Act as
having become the lawful holder of a bill of lading wherever he has become the
holder of the bill in good faith.
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Judgment
1. The judge noted that Section 5 of the Act refers to a holder
of a bill of lading as a person with possession of the bill, but the Act does
not define what possession is. He accepted the comment in Carver on Bills of
Lading (1st ed) at para. 5-017 that actual possession may be held
by one person and constructive possession held by another. He therefore held
that "possession" is not confined to physical possession and the
rights of the holder under the Act cannot be diminished because it had arranged
for the bill to be kept by its agent which had no separate interest in it. On
the facts, the judge found that Glencore UK had received the bills of lading as
the agent of Glencore International, with no interest in it of their own.
Consequently, Glencore were the holder of the bill of lading for the purposes of
the Act (and had title to sue in contract).
2. The judge found that Glencore also had title to sue in tort
for conversion. Although it is generally accepted that for a person to sue in
conversion, he must have actual possession or the immediate right of possession
of the goods at the time of conversion, the judge held that this rule is not
inflexible. The title to sue in conversion may be transferred from a preceding
party, and it was so transferred to Glencore when the bills of lading were
endorsed to them by the banks.
3. The judge found that Metro were not Glencore’ agents at
Fujairah. When Glencore issued instructions for the Shipowners to discharge the
oil off Fujairah "as instructed by Metro local representative",
Glencore were not constituting the Metro representatives their agents for
issuing or changing discharge instructions. They were directing the Shipowners
to work with those representatives to carry out their discharge instructions. It
was not the role of the storage coordinator to determine whether or how much of
the oil to discharge when a vessel arrived at Fujairah. The judge also rejected
the Shipowners’ related arguments that the instructions given to them by Metro
were given by Metro as agents acting on behalf of and within the scope of the
authority conferred by their principal, Glencore, or that Glencore had clothed
Metro with the appearance of ownership of the cargo.
Comments
The Shipowners have filed an appeal.
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