UCO Bank v. Golden Shore
DMC Rating Category: Developed
This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore
Unknown to UCO Bank, Golden Shore at the request of SOM issued switched bills of lading naming SOM as shipper, against SOM’s promise to obtain and surrender the original B/Ls later. SOM indorsed the switched B/Ls to various buyers and the holders of the switched B/Ls obtained delivery of the cargo from Golden Shore.
The four original B/Ls and other shipping documents were presented by the shippers to the Hongkong and Shanghai Banking Corporation Ltd ("HSBC") for negotiation of the LCs. The shippers did not indorse the original B/Ls to HSBC when they negotiated the documents, and HSBC in turn did not indorse them to UCO Bank. Thus, the B/Ls were received by UCO Bank without any indorsement. UCO Bank paid under the LCs but did not receive reimbursement from SOM. UCO Bank sued Golden Shore for failing to deliver the cargo.
Golden Shore applied to the Singapore Court to determine a preliminary question of law, namely, whether UCO Bank had title to sue under the original B/Ls. Golden Shore argued that, as the shippers did not indorse the original B/Ls to HSBC when they negotiated the documents, and HSBC in turn did not indorse them to UCO Bank, UCO Bank did not become a lawful holder of the B/Ls.
(1) The original B/Ls were "to order" bills which were transferable and were therefore governed by the Act. The nature of a B/L is determined as at the date of issue and does not change by subsequent events. The transfer of the B/Ls to HSBC without any indorsement did not change the B/Ls into non-transferable B/Ls.
(2) Once the named consignee comes into possession of the B/L, the consignee will, pursuant to s 5(2)(a) of the Act, become the lawful holder of the B/Ls even without any indorsement by the shipper. This is not limited to a direct transfer by the shipper to the consignee. There is no authority that where a B/L is received by the named consignee through a negotiating bank, s 5(2)(a) cannot apply and that, in the absence of an indorsement, the named consignee would not have the rights of suit under the B/L.
(3) A person becomes a lawful holder if he has become the holder in good faith. "Good faith" connotes honest conduct. How and from whom the named consignee obtained the B/L is not relevant provided that it was obtained in good faith. That was the case here. The object behind the Act is to transfer the right to sue from the shipper to the specified categories of persons. It is to promote international trade and to facilitate the enforcement of rights by third parties against the carrier.
(4) It is not appropriate to go behind the facts as they appear on the face of the B/L. It did not matter if the intermediary bank was a collecting bank or a negotiating bank. The position contended for by Golden Shore would only lead to uncertainty and dispute, which the English Carriage of Goods by Sea Act 1992 (on which the Singapore Act is based), was intended to avoid.
*Section 2(1)(a) of the Act reads as follows:-
Subject to the following provisions of this section, a person who becomes the lawful holder of a bill of lading shall (by virtue of becoming the holder of the bill or, as the case may be, the person to whom delivery is to be made) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract.
Section 5(2)(a) reads as follows:-
References in this Act to the holder of a bill of lading are
references to any of the following persons:
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