Court of Appeal, Singapore

Chao Hick Tin JA, Judith Prakash J

27 July 2005; 14 September 2005

KEYWORDS

Bill of Lading – Misdelivery – Action by buyer’s bank, as holder of bill of lading, against shipowner – Bill issued to order of buyer’s bank – No indorsement of seller-shipper to seller’s bank or of seller’s bank to buyer’s bank required – No direct transfer of bill from the seller to the buyer’s bank required – Buyer’s bank the lawful holder – Buyer’s bank entitled to maintain action against shipowner

FACTS AND DECISION

This case involved four shipments of logs from a Malaysian port to an Indian port, payment by way of letters of credit. The buyer arranged its bank to issue the letters of credit. The sellers shipped the cargoes. The shipowner issued bills of lading to the order of the buyer. Seemingly, the sellers were the shippers and accordingly named in the bills of lading. The sellers presented the bills to the sellers’ bank together with the other required documents, which the bank forwarded to the buyer’s bank for payment. There was no indorsement by the sellers to the seller’s bank. There was also no indorsement by the seller’s bank to the buyer’s bank. The buyer’s bank paid. Subsequently, the buyer defaulted in reimbursement to the buyer’s bank and bill was retained by the buyer’s bank. The buyer’s bank claimed delivery of the goods, as the holder of the bills, from the shipowner. The shipowner was not able to deliver, as there was a misdelivery. Thus, the buyer’s bank sued the shipowner. The shipowner applied to strike out the claim, claming that the buyer’s bank was not a lawful holder because the bills were not indorsed by the shippers to the sellers’ bank and were not on-indorsed by the sellers’ bank to the buyers bank, alternatively the bills were not directly delivered by the shippers to the buyer’s bank. The court dismissed the application, holding that that there was no necessity to so indorse or to make a direct transfer from the shippers, as the named consignee (with ‘to order’ addition) was the buyer’s bank. The court also acknowledged the commercial practice of such indorsement, that the court said was not necessary.

In fact, such an indorsement would have no legal effect. If the buyer’s bank transferred the bill to the buyer or any other, then such an indorsement by the buyer’s bank and transfer of the bill by the buyer’s bank would have been required.

The court pointed out that the three conditions required to satisfy s. 5(2)(a) were that (a) the cargo claimant, in this case the buyer’s bank, was in possession of the bill, (b) it was the named consignee on the bill, and (c) it was in possession of the bill in good faith, all of which were satisfied in this case. The court said that what s. 2(a)(a) meant by ‘lawful’ holder is that the holder had come into possession of the bill ‘in good faith’ and satisfied the s. 5(2) requirements. The court also pointed out that any action available to the buyer’s bank against any other party in this connection is not a bar to an action by the buyer’s action against the shipowner under the bills of lading.

Overview by ARUN KASI