Article

Factual Summary: Applicant obtained three commercial letters of credit from the Singapore branch of an Indian Bank for four shipments from East Malaysian ports to Kandla, India. The letters of credit each stated that "negotiations under this credit are unrestricted."

Carrier issued four Bills of Lading covering the four shipments carried on board the vessel, consigned to the order of Issuer, who, together with Applicant, was listed as the notify party. Seller/Shipper/Beneficiary presented the original Bills of Lading with other required documents to Negotiating Bank at their Kowloon Branch, Bintulu Branch, and Miri Branch. Negotiating Bank negotiated the drafts, but did not endorse the original Bills of Lading. Negotiating Bank presented the documents to Issuer, who duly honored and took them up.

Applicant had arranged with Carrier to issue a "switch bill of lading" for the four shipments, listing itself as the Shipper, and naming Applicant's sub-buyers as the consignees. Carrier did so without first retrieving the original Bills of Lading on Applicant's written undertaking to return the original Bill of Lading. Applicant endorsed the switch bills which the end-receivers presented to Carrier and obtained delivery of the goods.

When Applicant failed to reimburse Issuer, Issuer sued Carrier on the original Bills of Lading which it held, alleging that the Carrier had delivered the goods without production of the original bills, which had been in Issuer's possession at the time that the goods were discharged in India.

The trial court dismissed the action, ruling that Issuer lacked standing to sue. On appeal, remanded for a hearing on the merits.


Legal Analysis:

1. Bill of Lading, endorsement; Bill of Lading, title; Bill of Lading, negotiation: The appellate court noted that Section 5(2)(a) of the Bills of Lading Act (Cap 384, 1994 Rev Ed) provided "[a] person who is the consignee of a B/L and is in possession of the bill shall thereby become the lawful holder of the bill, so long as he comes into possession of the bill in good faith." The appellate court defined good faith as to "connote honest conduct", relying on The Aegean Sea [1998] 2 Lloyd's Rep 39.

Carrier argued that "the shipper must transfer the B/L directly to the named consignee" in order to gain title to the goods. However, the appellate court refused to follow this line of reasoning, stating it would only lead to "uncertainty and dispute" if courts "look behind a BL to determine who is entitled to delivery", citing Bandung Shipping Pte Ltd v. Keppel TatLee Bank Ltd [2003] 1 SLR 295; [2003] 1 Lloyd's Rep 619. The appellate court ruled that the Bills of Lading were capable of transfer at the time of issue, and therefore "bills of lading" for purposes of the Act and that "upon receipt of the four Bills of Lading from HSBC, [Issuer] had become the lawful holder of the four bills as it had satisfied all the requirements specified in S[ection] 5(2)(a)" since the B/L was consigned to its order and therefore has the right to sue the carrier for breach of contracts of carriage.

[JEB/jw]

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