UCO Bank v. Golden Shore

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DMC/SandT/05/52
UCO Bank v Golden Shore Transportation Pte Ltd [2005] SGCA 42
Singapore Court of Appeal: Chao Hick Tin JA, Judith Prakash J.: 14 September 2005
Kenneth Tan Partnership/TS Oon and Bazul for UCO Bank
Rajah & Tann for Golden Shore
CARRIAGE OF GOODS BY SEA –TITLE TO SUE UNDER BILLS OF LADING – MEANING OF HOLDER AND "GOOD FAITH" UNDER SINGAPORE BILLS OF LADING ACT 1994– WHETHER CONSIGNEE A HOLDER WITHOUT ENDORSEMENT IN ITS FAVOUR
Summary
Where bills of lading come into the possession of a party to whose order they are made out, that party has the right to sue the carrier under the Singapore Bills of Lading Act 1994. It does not matter that the bills were first handed by the shipper to an intermediary bank and that the bills were not endorsed by the shipper or the intermediary bank, as long as the shipper had not endorsed and transferred the bills to anyone else

DMC Rating Category: Developed

Facts
Golden Shore was owner of the vessel "Asean Pioneer" which issued four bills of lading ("B/Ls") to cover four shipments of Sarawak round logs from East Malaysia to Kandla, India. SOM, a Singapore company, purchased the cargo from various Malaysian companies, who were named shippers on the four B/Ls. SOM was a customer of UCO Bank, who issued letters of credit ("LCs") for the shipments. All four B/Ls were made out to "the order of UCO Bank".

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.

Judgment
It was held by the Court of Appeal that UCO Bank was a holder of the original B/Ls under the Bills of Lading Act 1994 ("the Act")* and had title to sue.

(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.

Comment
The Court of Appeal recognized that it was open to the shippers to indorse and deliver the original B/Ls to HSBC even though they were initially made out to the order of UCO Bank. This would have amounted to an amendment of the named consignee, which the shippers were entitled to do. The shippers and HSBC did not take this route.

*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: 
(a) 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;

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