1 Bills of lading play an essential role in trade financing. As a document of title to the goods, it is common for banks to take the bills of lading as security for the financing advanced to their customer to purchase the goods. Save for unusual or exceptional circumstances, case law has generally upheld the financing bank’s right to assert its security in the face of a defaulting customer, and to call for the delivery of the goods to which the bill of lading relates. This has serious implications for a shipowner responsible for the carriage of goods, as it is settled law that a shipowner who delivers the goods without production of the bills of lading does so at his peril and is typically liable for any consequential losses suffered by the holder of the bills of lading: see The “Star Quest” and other matters [2016] 3 SLR 1280 at [4].

2 The present case arises from the collapse of Hin Leong Trading (Pte) Ltd (“HLT”), formerly one of Asia’s top oil traders, and is one of the many pending actions by a financing bank seeking to rely on the security apparently afforded to it by bills of lading in its possession. The Plaintiff, Oversea-Chinese Banking Corporation Limited (“OCBC”), financed HLT’s purchase of a cargo that was shipped on board the Defendant’s vessel “STI Orchard” (“Vessel”) under a set of three bills of lading dated 28 February 2020 (“Bills of Lading”). HLT defaulted on its obligation to reimburse OCBC, and OCBC commenced the present suit against the Defendant, STI Orchard Shipping Company Limited, (“Owner”) for delivering the cargo to HLT without presentation of the Bills of Lading.

3 In this application, OCBC seeks summary judgment against the Owner in the sum of US$13,608,000, being the invoice value of the cargo, or alternatively, for interlocutory judgment to be entered against the Owner with damages to the assessed.

4 After hearing the parties, I have decided to grant the Owner unconditional leave to defend. The issues in this case merit further investigation, the chief of which is whether the Bills of Lading were intended to be relied on as security for OCBC’s financing in the underlying transaction. I set out my full grounds below.

5 OCBC is a Singapore bank that asserts its rights in this suit as the holder of the original Bills of Lading issued in respect of 36,016.480mt of Gasoil 10ppm Sulphur (“Cargo”) shipped on board the Vessel for carriage from Mailiao, Taiwan, to Singapore (“Voyage”). ¹

6 HLT is OCBC’s customer, and is in the business of oil trading. HLT’s oil trading business included the sale and purchase of oil, wherein it bought various grades of oil that were blended into bunker grade oil and on-sold to HLT’s customers. ²

7 The Owner is the registered owner of the Vessel. ³ At the material time, the Owner had time-chartered the Vessel to Scorpio LR2 Pool Ltd (“Scorpio”). ⁴ Scorpio in turn voyage-chartered the Vessel to the Intervener, Winson Oil Trading Pte Ltd (“Winson Oil”). ⁵

8 The Voyage itself arose out of an international sale of goods between Winson Oil and HLT. By way of a sale contract dated 19 February 2020 (“Sale Contract”), HLT purchased 780,000 barrels of Gasoil 10ppm Sulphur from Winson Oil on a Delivery Ex-Ship (DES) basis. ⁶ Payment under the Sale Contract was by an irrevocable letter of credit. ⁷ The Cargo that is the subject of the present suit constituted around one-third of the total product purchased under the Sale Contract. ⁸

9 OCBC extended trade facility financing to HLT as evidenced by the following documents:

(a) a credit facilities letter dated 17 July 2019 (“Facilities Letter”); ⁹

(b) OCBC’s Terms and Conditions for Letter of Credit (“LC T&Cs”); ¹⁰ and

(c) OCBC’s Standard Terms and Conditions governing Banking Facilities. ¹¹

10 The LC T&Cs purported to give OCBC extensive rights against HLT, including among other things, a pledge over bills of lading, the right to direct HLT to procure the indorsement of bills of lading in favour of OCBC, and the appointment of OCBC as HLT’s agent to do all acts as OCBC deems desirable to perfect its security over the financed goods. The salient terms of the LC T&Cs read as follows: ¹²

11 On the morning of 6 March 2020, HLT applied for a letter of credit from OCBC in favour of Winson Oil for the sum of US$16,500,000 (“LC Application”). Two points ought to be noted from the LC Application.

(a)  First, HLT provided OCBC with copies of: (i) the Sale Contract, and (ii) a contract dated 3 December 2019 by which HLT agreed to sell Gasoline 92 RON Unleaded to PT Pertamina (Persero) (“Pertamina”). ¹³ HLT’s staff stated that these two contracts were “[p]urchase and sales contract for LC issuance to [Winson Oil]”. Gasoline 92 RON Unleaded is a different product from the Cargo (Gasoil 10ppm Sulphur), and it appeared that HLT intended to blend the Cargo and on-sell it (as Gasoline 92 RON Unleaded) to Pertamina.

(b) Second, OCBC’s letter of credit application form allowed the customer to select the document(s) required from the seller to receive payment under the letter of credit (see Figure 1 below). ¹⁴

Figure 1: Extract of OCBC’s letter of credit application form.

As evident from the application form, if OCBC’s customer requires the seller to present bills of lading to obtain payment under the letter of credit, these bills of lading are to be “made out to order of [OCBC]” [emphasis added]. However, when HLT submitted its completed letter of credit application form, none of the boxes in Figure 1 were selected. Instead, HLT specified in additional instructions to OCBC that the seller (ie, Winson Oil) was to present bills of lading issued or indorsed to the order of HLT. ¹⁵

12 At 6.18pm on 6 March 2020, OCBC issued an irrevocable letter of credit in favour of Winson Oil for the sum of US$16,500,000 (“Letter of Credit”). ¹⁶ Payment for the Cargo under the Letter of Credit was to be made against the presentation of, inter alia, Bills of Lading issued or indorsed to the order of HLT. ¹⁷ It was also provided that if the Bills of Lading were not available, a letter of indemnity issued by Winson Oil to HLT on the terms set out in the Letter of Credit could be presented for payment instead. The salient terms of the Letter of Credit read as follows: ¹⁸

13 On 12 March 2020, the Singapore branch of ING Bank N.V. (“ING Bank”), who was Winson Oil’s advising bank in the transaction, presented the following documents to OCBC for payment under the Letter of Credit: ¹⁹

(a) Winson Oil’s provisional invoice for the sum of US$13,608,000;

(b) a notice of readiness to discharge dated 5 March 2020 tendered by the Vessel at Singapore; and

(c) a letter of indemnity dated 10 March 2020 (“Payment LOI”) in lieu of the original Bills of Lading. The relevant portion of the Payment LOI reads as follows: ²⁰

14 Later that same day (ie, 12 March 2020), OCBC issued an import bill notification to HLT to inform the latter of the receipt of the documents presented under the Letter of Credit. ²¹ In the same notification, OCBC sought HLT’s confirmation that it would accept the documents presented by completing and signing an instruction form attached thereto. HLT completed and signed the instruction form, and requested OCBC to grant it a trust receipt loan from 3 to 28 April 2020 for the sum of US$13,608,000 that was due under the Letter of Credit. ²² Trust receipt financing from OCBC is governed by an additional set of terms, which are set out in the Master Trust Receipt Agreement dated 19 June 2001 (“Master Trust Receipt Agreement”). ²³ The salient terms of the Master Trust Receipt Agreement read as follows: ²⁴

15 On 3 April 2020, OCBC acceded to HLT’s request, and assigned an internal reference number ‘TR5CF02003549’ for the trust receipt loan to HLT (“Trust Receipt Loan”). ²⁵ On the same day, OCBC paid the sum of US$13,608,000 to ING Bank under the Letter of Credit. ²⁶

16 The Cargo was delivered to HLT between 5 and 6 March 2020 at Tanjung Pelapas, Malaysia, via ship-to-ship discharge to the vessel “Chang Bai San” upon the invocation of cl 28 of the voyage charterparty between Scorpio and Winson Oil (“Voyage Charterparty”). ²⁷ Clause 28 read as follows: ²⁸

17 In essence, this clause allowed Winson Oil to order the Vessel to a port other than that specified in the Bills of Lading and to deliver the Cargo without production of the Bills of Lading, provided Winson Oil furnished Scorpio with an acceptable letter of indemnity on the latter’s P&I Club’s terms.

18 Pursuant to cl 28 of the Voyage Charterparty, Winson Oil instructed the Vessel to discharge and deliver the Cargo to HLT at Tanjung Pelapas, Malaysia (instead of Singapore, the discharge port specified in the Bills of Lading) without presentation of the original Bills of Lading. ²⁹ These instructions were accompanied by a letter of indemnity issued by Winson Oil (“Letter of Indemnity”), and conveyed up the charterparty chain from Scorpio to the Owner. ³⁰ Under the Letter of Indemnity, Winson Oil would be liable for the consequences of its request to discharge the Cargo without presentation of the Bills of Lading at Tanjung Pelapas, Malaysia. The relevant parts of the Letter of Indemnity read as follows: ³¹

19 On 10 April 2020, HLT appointed financial and legal advisors to advise and assist it in a debt restructuring exercise. ³² Shortly thereafter, on 14 April 2020, HLT informed its bank lenders of its precarious financial position, with total liabilities in the region of US$4.05bn and assets of only around US$714m. ³³ On the same day (ie, 14 April 2020), OCBC wrote to HLT alleging various events of default under the Facilities Letter, and demanding immediate payment of the Trust Receipt Loan granted in respect of the Letter of Credit: ³⁴

20 On 27 April 2020, HLT was placed under interim judicial management by the General Division of the High Court. Thereafter, on 11 May 2020, OCBC issued a demand to Winson Oil via SWIFT message to deliver the original Bills of Lading to OCBC. In issuing this demand, OCBC acted as the agent of HLT pursuant to the terms of the LC T&Cs (see [10] above). The SWIFT message read as follows: ³⁵

21 Winson Oil complied with OCBC’s demand, and on 22 June 2020, delivered the original Bills of Lading to OCBC in full cancellation of the Payment LOI. ³⁶ The Bills of Lading received by OCBC were, as provided for under the Letter of Credit (see [12] above), indorsed to the order of HLT.

22 On 15 December 2020, OCBC applied in HC/SUM 5587/2020 (“SUM 5587”) for an order that HLT indorse the Bills of Lading in favour of OCBC. ³⁷ OCBC and HLT’s judicial managers reached an agreement on the terms of the draft order to be made in SUM 5587, and on 15 February 2021, Kannan Ramesh J ordered HLT to indorse the Bills of Lading in favour of OCBC without prejudice to “the rights acquired by any person to the Bills of Lading, the goods in relation to the Bills of Lading and/or sale proceeds thereof prior to the making of this Order”. ³⁸ On 17 February 2021, HLT by its judicial managers indorsed the Bills of Lading in favour of OCBC. ³⁹

23 On the morning of 18 February 2021, OCBC commenced the present action against the Owner for loss and damage suffered by the misdelivery of the Cargo. ⁴⁰ Later on the same day (at 9.22pm), OCBC emailed the Owner to demand delivery of the Cargo, and to seek information on its whereabouts. ⁴¹ There was no response, and on 1 March 2021, OCBC emailed the Owner to put it on notice that OCBC was holding it fully liable for the misdelivery of the Cargo. ⁴²

24 On 4 March 2021, the Vessel called at Singapore, and OCBC effected service of the in rem writ issued in this action pursuant to O 70 r 10A of the revoked Rules of Court (2014 Rev Ed) as in force immediately before 1 April 2022 (“Rules of Court”). ⁴³

25 The service of the writ precipitated a series of proceedings in England and in Singapore between the parties in the charterparty chain on the furnishing of security to prevent the Vessel’s arrest.

(a) On 8 April 2021, the Owner obtained an ex parte interim mandatory injunction in the English High Court to compel Winson Oil to put up security for OCBC’s claim against the Owner. ⁴⁴

(b) On or about 22 April 2021, the Owner provided security for OCBC’s claim by way of a letter of undertaking from Steamship Mutual Underwriting Association (Europe) Limited (“LOU”). ⁴⁵

(c) On 6 May 2021, Scorpio obtained a mandatory injunction in the English High Court compelling Winson Oil to provide replacement security to OCBC on terms which provide for the release and cancellation of the LOU. ⁴⁶

(d) On 7 June 2021, and pursuant to an application by Scorpio, Chua Lee Ming J similarly ordered Winson Oil to provide replacement security for OCBC’s claim against the Owner. ⁴⁷

26 OCBC has not received any replacement security to date, and is still holding on to the LOU furnished by the Owner. ⁴⁸

27 OCBC filed the present application for summary judgment pursuant to O 14 r 1 of the Rules of Court. For the purposes of the application, OCBC relies only on the cause of action for breach of the contract of carriage. ⁴⁹ OCBC seeks final judgment for the sum of US$13,608,000, which is the invoice value of the Cargo under the Sale Contract. In the alternative, OCBC seeks interlocutory judgment, with damages to be assessed.

28 OCBC pitches its case as a straightforward one in misdelivery. OCBC submits that it acquired rights of suit as the lawful holder of the Bills of Lading, and is entitled to call for delivery of the Cargo. ⁵⁰ Since there is no dispute that the Owner delivered the Cargo to HLT without production of the Bills of Lading, OCBC argues that it has a prima facie claim against the Owner for breach of contract, to which there are no real or bona fide defences. ⁵¹

29 On the other hand, the Owner and Winson Oil submit that the Owner should be granted unconditional leave to defend, on three main grounds that demonstrate a fair probability of bona fide defences against OCBC’s claim.

(a) First, OCBC did not become the holder of the Bills of Lading in good faith. ⁵²

(b) Second, the Bills of Lading were spent by the time they were indorsed to OCBC. ⁵³

(c) Third, OCBC consented, authorised, or acquiesced to the delivery of the Cargo without presentation of the Bills of Lading. ⁵⁴

30 The parties also submitted on the law governing the Bills of Lading. The contest between OCBC, on the one hand, and the Owner and Winson Oil, on the other, was whether Singapore law or English law applied. ⁵⁵ This in turn determined the applicable legislation governing the rights under the Bills of Lading – either Singapore’s Bills of Lading Act 1992 (2020 Rev Ed) (“Bills of Lading Act”) or the UK’s Carriage of Goods by Sea Act 1992 (c 50) (“COGSA 1992”). The Owner and Winson Oil also adduced English law opinions from Sir Richard John Pearson Aikens (“Sir Aikens”) and Mr Charles Debattista (“Mr Debattista”) respectively. In response, OCBC argues that expert evidence on English law is unnecessary in this case, even if English law applied. ⁵⁶

31 For completeness, I should add that the Owner and Winson Oil had raised defences relating to the quantum of OCBC’s claim. ⁵⁷ These defences will not be considered in this judgment, which will focus instead on the issues impacting liability.

32 The principles relating to summary judgment are well settled. It suffices for me at this juncture to highlight a few general points.

33 To obtain summary judgment, the plaintiff must first show that he has a prima facie case for summary judgment. If the plaintiff meets this threshold, the defendant then bears the tactical burden to show that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial: see The “Yue You 902” and another matter [2020] 3 SLR 573 (“The ‘Yue You 902’”) at [19]. In admiralty in rem proceedings, this tactical burden may also be discharged by an intervener, who is permitted to set up any and such defences that the defendant shipowner could have set up had it elected to defend the action itself: see The “Soeraya Emas” [1991] 2 SLR(R) 479 at [32]–[42].

34 Aside from granting summary judgment, the Court may grant a defendant leave to defend the claim, or part of the claim, either unconditionally or on such terms such as to the giving of security: see O 14 rr 3–4 of the Rules of Court.

35 The process of determining whether to grant summary judgment, unconditional leave, or conditional leave to defend is a single composite exercise, depending on the overall picture which emerges to the court: see Akfel Commodities Turkey Holding Anonim Sirketi v Townsend, Adam [2019] 2 SLR 412 (“Akfel”) at [41].

(a) Where the court forms the view that there is no issue or question in dispute which ought to be tried or there is no other reason for a trial of that claim, judgment should be entered: see Akfel at [42].

(b) Conversely, if the court is satisfied that the plaintiff has shown a prima facie case for judgment but is also satisfied that the defendant has demonstrated a fair probability of a bona fide defence, unconditional leave should be granted: see Akfel at [41].

(c) However, if what the defendant has shown does not amount to a fair probability of a bona fide defence, but only that the defence raised is not hopeless, the court should impose a condition on the grant of leave to defend, as some demonstration of commitment on the defendant’s part to the claimed defence is warranted: see Akfel at [41] and [46]. This is subject to the qualification that it is not appropriate for the court to order further security as a condition, where the plaintiff is already fully secured for the whole of its claim together with interest and costs: see The “Jarguh Sawit” [1997] 3 SLR(R) 829 at [53]–[54]. Such an issue may arise in admiralty in rem proceedings (such as the present case), where security is provided for the plaintiff’s claim (see [25]–[26] above).

36 With the above principles in mind, the overarching issue of whether summary judgment should be granted may be approached in three parts. I deal first with the law governing the Bills of Lading, and the necessity of expert evidence to determine the issues in this application. I will next consider whether OCBC has established a prima facie case for summary judgment. Finally, I will consider the defences raised, and decide, based on the overall picture which emerges, whether I should grant summary judgment, unconditional leave, or conditional leave to defend.

37 There is no explicit reference in the Bills of Lading to the governing law. However, the front of the Bills of Lading contains general words of incorporation, which read as follows: ⁵⁸

38 Where an incorporation clause refers to, but does not identify a charterparty, the court will assume that the reference is to any charter under which the goods are carried: see The SLS Everest [1981] 2 Lloyd’s Rep 389 at 391–392; The “Epic” [2000] 2 SLR(R) 240 at [30]–[33]. Thus, the words of incorporation in the Bills of the Lading should be construed to refer to the Voyage Charterparty, which is the relevant charter under which the Cargo was carried from Mailiao, Taiwan to Tanjung Pelapas, Malaysia.

39 The general words of incorporation in the Bills of Lading, with the reference to “all the terms whatsoever of the said Charter except the rate and payment of freight specified therein”, are wide enough to incorporate cl 9 of the Voyage Charterparty, which provides for “ENGLISH LAW TO APPLY”: ⁵⁹ see The “Dolphina” [2012] 1 SLR 992 at [128]–[132].

40 Thus, based on the materials before me, cl 9 of the Voyage Charterparty was incorporated into the Bills of Lading. This amounted to an express choice of English law as the governing law. OCBC’s claim for breach of the contract of carriage is therefore governed by English law and COGSA 1992.

41 A party wishing to prove the content of foreign law can do so by adducing raw sources of foreign law as evidence, or by adducing the opinion of an expert on foreign law: see Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal [2008] 2 SLR(R) 491 (“Pacific Recreation”) at [54]. However, where misdelivery and the rights under COGSA 1992 are concerned, I echo the sentiments of Choo Han Teck JC (as he then was) in Swiss Singapore Overseas Enterprises Pte Ltd v Navalmar UK Ltd [2003] 1 SLR(R) 688 at [6] (articulated albeit in a different context involving the UK Contracts (Rights of Third Parties) Act 1999) that evidence from an English law expert is not necessary, and it would be sufficient to adduce the relevant English decisions or secondary materials: see Pacific Recreation at [57]–[59]; ss 40, 59(1)(b) and 59(2) of the Evidence Act 1893 (2020 Rev Ed).

42  To begin with, Singapore’s Bills of Lading Act was adopted from, and is in pari materia with, the UK’s COGSA 1992: see Bandung Shipping Pte Ltd v Keppel TatLee Bank Ltd [2003] 1 SLR(R) 295 (“Bandung Shipping”) at [14]; Tan Lee Meng, Law on Carriage of Goods by Sea (Academy Publishing, 3rd Ed, 2018) at para 07.016. COGSA 1992 was initially applicable in Singapore by virtue of s 5 of the Civil Law Act (Cap 43, 1988 Rev Ed) (“Civil Law Act”). When s 5 of the Civil Law Act was repealed in 1993 by the Application of English Law Act (Cap 7A, 1994 Rev Ed), the latter legislation provided for the continued application of COGSA 1992 in Singapore. In 1994, COGSA 1992, as applied in Singapore, was revised and renamed the Bills of Lading Act.

43 As such, the law concerning Singapore’s Bills of Lading Act is largely similar, if not identical to, the law relating to the UK’s COGSA 1992. Counsel and the Singapore courts alike have not had difficulty grappling with arguments and issues relating to COGSA 1992, without the assistance of an opinion from English law experts: see, for example, The “Dolphina” at [155]–[180].

44 At the hearing before me, counsel for the Owner and Winson Oil accepted that Singapore law and English law are the same, insofar as it concerns OCBC’s rights of suit under the Bills of Lading. Accordingly, while I have considered the views expressed by Sir Aikens and Mr Debattista, I do not find these English law opinions necessary or determinative of the issues in this application, and will not be referring to them in any detail in my judgment.

45 It is settled law that an order bill of lading entitles the lawful holder to call for delivery of the goods covered by that bill: see BNP Paribas v Bandung Shipping Pte Ltd (Shweta International Pte Ltd and another, third parties) [2003] 3 SLR(R) 611 (“BNP Paribas”) at [24]–[26]. The duty imposed on the shipowner under the bill of lading contract is to deliver the goods, on production of the bill of lading, to the person entitled under the bill of lading: see Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 at 586. Delivery without production of the bill of lading constitutes a breach of contract, and a shipowner who delivers the goods to a person other than the lawful holder of the bill exposes himself to the risk of liability to the holder: see BNP Paribas at [24]. The bill of lading remains effective until the goods are delivered to the person entitled under the bill of lading, and it follows that a lawful holder is entitled to sue for breach of contract committed prior to the time it became the lawful holder: see BNP Paribas at [30].

46 In the present case, the Bills of Lading were signed by the Master of the Vessel, ⁶⁰ and are order bills that were specially indorsed to OCBC (see [22] above; Bandung Shipping at [18]–[20]). The Owner did not deliver the Cargo to OCBC when the latter demanded delivery in February 2021, as holder of the Bills of Lading (see [23] above). Evidently, this was not possible as the Cargo had been delivered to HLT close to a year earlier by the Owner without production of the Bills of Lading and against the Letter of Indemnity issued by Winson Oil (see [16]–[18] above).

47 Given the above, it cannot be seriously disputed that OCBC has raised a prima facie case for summary judgment. The tactical burden thus shifts to the Owner or Winson Oil to show that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial.

48 I now consider the three main defences raised by the Owner and Winson Oil against OCBC’s claim for breach of contract.

49 I begin with the defence that OCBC did not become the holder of the Bills of Lading in good faith. To frame the discussion on this issue, I first set out how the question of good faith impacts the transfer of the rights of suit under the Bills of Lading.

50 On the facts of this case, OCBC would be the lawful holder of the Bills of Lading, and acquire the rights of suit thereunder, if it proves either of the following:

(a) That OCBC was in possession of the Bills of Lading: (i) as a result of the completion of an indorsement by delivery, and (ii) in good faith: see s 2(1)(a) read with s 5(2)(b) of COGSA 1992; The “Aegean Sea” [1998] 2 Lloyd’s Rep 39 at 59–60.

(b) Alternatively, if the Bills of Lading are spent (ie, possession of the Bills of Lading no longer gives a right, as against the Owner, to possession of the Cargo), that OCBC was in possession of the Bills of Lading:

(i) as a result of the completion of an indorsement by delivery;

(ii) in good faith; and

(iii) pursuant to a contractual or other arrangement made before the time when the Bills of Lading became spent.

(See s 2(2)(a) read with s 5(2)(c) of COGSA 1992; The “Erin Schulte” [2015] 1 Lloyd’s Rep 97 at [53]–[58]; The “Yue You 902” at [87]–[99].)

51 In either situation, OCBC must establish (a) completion of an indorsement by delivery, and (b) good faith, to show that it acquired the rights of suit. Before turning to address the parties’ arguments on good faith, I do not think OCBC faces any difficulty proving the requirement of completion of an indorsement by delivery. As explained by Moore-Bick LJ in The “Erin Schulte” (at [28]), “completion of an indorsement by delivery requires the voluntary and unconditional transfer of possession by the holder to the indorsee and an unconditional acceptance by the indorsee”. There is no suggestion here that this did not take place when the judicial managers of HLT indorsed the Bills of Lading to OCBC on 17 February 2021 (see [22] above).

(1) Parties’ Arguments on Good Faith

52 According to the Owner and Winson Oil, the Bills of Lading were not intended to be relied on by OCBC as security when it financed HLT’s purchase of the Cargo. ⁶¹ Instead, OCBC knew that the Cargo would be blended and on-sold to Pertamina, and OCBC looked instead to the sale proceeds that HLT was to hold on trust for OCBC under the Trust Receipt Loan. As such, OCBC cannot be said to have become the holder of the Bills of Lading in good faith, as it is now bringing a contrived claim against the Owner due to the financial collapse of HLT.

53  In response, OCBC argues that it had contractual rights under the LC T&Cs to require HLT to indorse and deliver the Bills of Lading to it, for which OCBC had given valuable consideration by issuing the Letter of Credit. ⁶² The exercise of such rights by OCBC was not, and could not be, dishonest. OCBC is thus entitled to sue in respect of the Cargo as pledgee and lawful holder of the Bills of Lading.

(2) My Decision

54 After careful consideration of the competing arguments and the materials before me, I find that there is indeed a triable issue on whether OCBC was in possession of the Bills of Lading in good faith. The arguments on good faith threw up several matters that I am unable to meaningfully determine on the affidavit evidence before me, such as the financing and security arrangements between OCBC and HLT. These matters ought to be investigated at trial, where the judge will have the benefit of the discovery, interrogatory and cross-examination processes. I set out my detailed reasons in the paragraphs that follow, but I emphasize at the outset that nothing I say here should be taken to pre-empt the outcome of the trial.

55 When OCBC extended financing to HLT, the underlying arrangements suggest that OCBC did not intend to take security through a pledge of the Bills of Lading, and therefore, the Cargo.

(a) A pledge of the bills of lading would only constitute a pledge of the goods, if the possession of the bills of lading constitutes a constructive possession of the goods themselves: see Peter Ellinger & Dora Neo, The Law and Practice of Documentary Letters of Credit (Hart Publishing, 2010) at p 108. Hence, to enjoy the security conferred by a pledge, a bank that finances the shipment of goods by a letter of credit must ensure that the bills of lading are made out to the bank’s order or indorsed in blank. Otherwise, the transfer of the bills of lading to the bank would be ineffective to constitute a pledge, as the bank does not gain constructive possession of the underlying goods. Accordingly, the bank’s right to sell the goods to meet the financing would be prejudiced: see Sir Richard Aikens et al, Bills of Lading (Informa Law, 3rd Ed, 2020) (“Aikens, Bills of Lading”) at para 8.35.

(b) When OCBC issued the Letter of Credit on 6 March 2020, it acceded to HLT’s request for the Bills of Lading to be issued or indorsed to HLT’s order (see [12] above). This was in spite of OCBC’s letter of credit application form which provided, by default, that bills of lading required for presentation were to be made out to the order of OCBC (see [11(b)] above).

(c) Subsequently, when OCBC granted the Trust Receipt Loan to HLT on 3 April 2020, it also did not arrange for the Bills of Lading to be indorsed to OCBC’s order or indorsed in blank.

(d) In other words, it was open to OCBC when it financed the purchase of the Cargo to create a pledge through the deposit of properly indorsed bills of lading. It did not do so, and this fact alone distinguishes the present case from other decisions where summary judgment was entered in favour of the financing bank: see The “Yue You” 902 at [9]; The “Navig8 Ametrine” [2022] SGHCR 5 at [5], [9] and [12].

56 On the contrary, the underlying arrangements suggest that OCBC looked instead to the proceeds of HLT’s sale to Pertamina as collateral.

(a) OCBC granted a Trust Receipt Loan to HLT from 3 to 28 April 2020 for the sums due under the Letter of Credit, which were governed by the terms of the Master Trust Receipt Arrangement (see [14] above).

(b) In general, trust receipt financing involves the release of the bills of lading by the financing bank to the customer for the latter to sell the documents or the goods, in return for the customer’s undertaking to hold the sale proceeds on trust for the bank to cover the amount advanced. While a trust receipt protects the bank against the customer’s insolvency, it does not protect the bank from the customer’s dishonesty in selling the goods and disposing of the sale proceeds otherwise than in accordance with the terms of the trust receipt. As explained by Michael Bridge, Benjamin’s Sale of Goods (Sweet & Maxwell, 11th Ed, 2021) at para 18-504:

(c) OCBC knew, or at the very least was put on notice, that HLT intended to blend the Cargo and on-sell it as Gasoline 92 RON Unleaded to Pertamina (see [11(a)] above). Given that Gasoline 92 RON Unleaded is a different product from the Cargo, the Bills of Lading could not have been used as documents of title for the sale to Pertamina; new bills of lading would have to be issued by HLT. These new bills of lading would then be sold for OCBC to recover the sums advanced under the Letter of Credit. Hence, it is arguable that the effect of the Trust Receipt Loan was to authorise HLT to: (i) sell the blended cargo to Pertamina (using new bills of lading issued by HLT), and (ii) hold the sale proceeds on trust for OCBC to secure the amount advanced.

(d) In making the observations above, I should also highlight that the circumstances surrounding HLT’s sale to Pertamina is a critical piece missing from this puzzle. It is unclear whether HLT’s sale to Pertamina even took place, and if it did, what has become of the sale proceeds. This is relevant because while a trust receipt can protect OCBC against HLT’s insolvency, it does not protect OCBC from any dishonesty on HLT’s part in selling the blended cargo and disposing of the sale proceeds (see [56(b)] above).

57 My views on the financing and security arrangements between OCBC and HLT are corroborated by the affidavit of Mr Lim Oon Kuin (“Mr Lim”) dated 17 April 2020, which was filed in support of HLT’s application in HC/OS 405/2020 for six months’ moratorium relief pursuant to s 211B of the Companies Act (Cap 50, 2006 Rev Ed). ⁶³

(a) Mr Lim was the managing director and founder of HLT, and he had, in his affidavit, enumerated a list of HLT’s secured creditors and the corresponding security held by these creditors.

(b) Notably, Mr Lim did not list pledges of bills of lading as the security held by OCBC. Instead, Mr Lim described OCBC’s security in the following terms: ⁶⁴

(c) However, Mr Lim did identify banks that had taken pledges of bills of lading as security for their financing. For example, in respect of ING Bank, Mr Lim described its security in the following terms: ⁶⁵

58 OCBC did try to perfect its “security”, by having the Bills of Lading delivered to it and indorsed in its favour. However, OCBC only took such steps after it was informed of HLT’s financial difficulties on 14 April 2020 (see [19]–[22] above). By that time, the Cargo had been discharged from the Vessel, and apparently blended into a new product for on-sale to Pertamina under the Trust Receipt Loan (see [56(c)] above). Under these circumstances, I question whether it is even possible to create a security interest in the Bills of Lading in the manner sought by OCBC, if it was not in the commercial contemplation of the parties and in fact contrary to the arrangement agreed upon. For completeness, I do not think the order of court dated 15 February 2021 (see [22] above) for HLT to indorse the Bills of Lading to OCBC changes the above analysis. This is because it was made without prejudice to the rights acquired by any person to the Bills of Lading (such as the Owner) prior to the making of the order.

59 The term “good faith” in s 5(2) of COGSA 1992 was held by Thomas J in The “Aegean Sea” (at 60) to connote honest conduct. The Court of Appeal in UCO Bank v Golden Shore Transportation Pte Ltd [2006] 1 SLR(R) 1 agreed with Thomas J’s formulation of “good faith”, and further commented that “good faith” obviously precluded a situation “where possession is obtained unlawfully, or by other improper means”: see [39]–[40].

60 In light of the rather unique circumstances of this case, I find it is at least arguable that OCBC did not meet the threshold of honest conduct because: (a) it did not look to the Bills of Lading as security at the time it financed HLT’s purchase of the Cargo, and (b) it is now attempting to bring a claim on such purported security. OCBC’s title to sue is not beyond doubt, and the Owner should be granted unconditional leave to defend based on this issue alone.

61 The next defence raised by the Owner and Winson Oil is that the Bills of Lading are spent and do not transfer any rights of suit to OCBC. In response, OCBC submits that even if the Bills of Lading are spent, it can rely on s 2(2)(a) read with s 5(2)(c) of COGSA 1992 to acquire the rights of suit against the Owner.

62 As previously mentioned (at [50(b)] above), even if the Bills of Lading are spent, OCBC will have rights of suit if it is in possession of the Bills of Lading: (a) as a result of the completion of indorsement by delivery, (b) in good faith, and (c) pursuant to a contractual or other arrangement made before the time when the Bills of Lading became spent. The first requirement is not an issue (see [51] above); I have concluded in the preceding section that the second requirement of good faith should be decided at trial.

63 Accordingly, assuming OCBC can cross the hurdle of good faith, there are two issues arising in respect of this defence:

(a) first, whether the Bills of Lading are spent, and if so, when that occurred; and

(b) second, whether OCBC is in possession of the Bills of Lading pursuant to a contractual or other arrangement made before the time when the Bills of Lading became spent.

(1) Whether the Bills of Lading are Spent

64 In my view, the Bills of Lading became spent on 17 February 2021, when HLT received the Bills of Lading in order to endorse them in favour of OCBC.

(a) A bill of lading is only spent when delivery is effected to the person entitled to the goods: see The “Yue You 902” at [69]. In circumstances where the person who received the delivery of the goods subsequently becomes the holder of the bill of lading, the bill of lading would also be spent. This is because the bill of lading’s status as the symbol of the goods is exhausted when the symbol is united with the goods: see The “Yue You 902” at [70], citing Barber v Meyerstein (1870) LR 4 HL 317 at 333.

(b) In the present case, the Cargo was delivered to HLT between 5 and 6 March 2020 (see [16] above). Although HLT was not in possession of the Bills of Lading at the time of delivery, it subsequently possessed the Bills of Lading on 17 February 2021 for the purpose of indorsing the same to OCBC. By this time, and prior to their indorsement to OCBC, the Bills of Lading had been indorsed to the order of HLT, making HLT the party entitled to the Cargo (see [21] above). Thus, when HLT became the holder of the Bills of Lading on 17 February 2021, the Bills of Lading became spent as they were transferred to the person who was entitled to and had earlier obtained delivery of the Cargo.

(2) Contractual or other arrangement

65 The next issue is whether OCBC was in possession of the Bills of Lading pursuant to a contractual or other arrangement made before the Bills of Lading became spent. To determine this, the approach is to simply identify the arrangement, if any, pursuant to which the bills of lading were transferred: see The “Erin Schulte” at [56]. This is a factual inquiry. In BNP Paribas at [31] and The “Yue You 902” at [94], the relevant “contractual or other arrangement” was identified by the Singapore court in obiter to be the facility agreement between the bank and its customer.

66 In the present case, I accept OCBC’s argument that the transfer of the Bills of Lading to OCBC was made pursuant to the Facilities Letter, which was subject to the LC T&Cs.

(a) OCBC exercised its rights under the LC T&Cs to act as HLT’s agent, and demand that Winson Oil deliver the Bills of Lading to OCBC (see [20] above). This resulted in the transfer of the Bills of Lading from Winson Oil to OCBC.

(b) Thereafter, HLT, by its judicial managers, indorsed the Bills of Lading to OCBC, which according to OCBC, was also done pursuant to the terms of the Facilities Letter. ⁶⁶

67 Accordingly, the transfer of the Bills of Lading to OCBC was pursuant to the Facilities Letter, which was entered into before the Bills of Lading became spent on 17 February 2021. Had it not been for the issue of good faith, I would have found that OCBC had the rights of suit under the Bills of Lading pursuant to s 2(2)(a) read with s 5(2)(c) of COGSA 1992.

68 Finally, I consider the defence that OCBC consented, authorised, or acquiesced to the delivery of the Cargo without presentation of the Bills of Lading. For ease of reference, I will refer to this as the defence of consent.

69 Preliminarily, it should be noted that the defence of consent assumes that OCBC had acquired the rights of suit under the Bills of Lading. As such, if OCBC is unable to prove the issue of good faith at trial, the defence of consent need not be considered at all.

(1) General Principles

70 The defence of consent seeks to excuse the shipowner’s breach of the contract of carriage in delivering the goods without production of the bills of lading. The defence of consent captures a range of possible circumstances, but the essence is that the holder of the bills of lading gave instructions to the shipowner (or is deemed to have done so) which were acted on by the shipowner, such that the holder cannot now complain about the breach: see The “Cherry” and others [2003] 1 SLR(R) 471 (“The ‘Cherry’”) at [27]. The defence of consent may be established through any one of the following:

(a) Express consent in the form of written instructions from the holder to the shipowner to release the goods without production of the original bills of lading: see Forsa Multimedia Limited v C&C Logistics (HK) Limited [2011] HKCU 254 at [22].

(b) Acquiescence, in the form of inactivity under such circumstances that the holder’s assent to the release of the goods without production of the original bills of lading may be reasonably inferred from it: see The “Neptra Premier” [2001] 2 SLR(R) 754 at [38].

(c) Actual authority from the holder for a third party to take delivery of the goods without production of the original bills of lading: see The “Nika” [2021] 1 Lloyd’s Rep 109 at [26].

71 The defence of consent covers instructions emanating from a person who was not the holder of the bills of lading at the time of delivery but subsequently became the holder. As a matter of principle, I see no reason why a person should be allowed to resile from his earlier instructions that led to the shipowner’s breach. I further find support for this proposition from the obiter remarks in The “Cherry”.

(a) The case arose from a shipment of a cargo of oil, which was to be carried on the appellants’ vessel from Kuwait to blending facilities in Fujairah owned and operated by an entity known as Metro. In December 1997, the respondents issued instructions for the vessel to discharge the cargo into the blending facilities at Fujairah. Unbeknown to the respondents, the vessel only discharged part of the cargo in Fujairah, with the rest of the cargo being carried to Singapore. The respondents subsequently became the holder of the bills of lading in February 1998, and sued the appellants for having breached their obligation under the bills of lading to deliver the entire cargo at Fujairah.

(b) The Court of Appeal in obiter stated that the defence of consent would have been demonstrated in respect of the cargo delivered at Fujairah without production of the bills of lading. The Court explained (at [27]):

72 In general, the defence of consent is hard to prove. As succinctly explained in Aikens, Bills of Lading (at paras 8.48–8.49):

(2) My Decision

73 To begin with, there are facts that strongly militate against a finding of consent. It is undisputed that there were no communications between OCBC and the Owner at the material time. Further, the Owner’s own reaction to OCBC’s claim was to institute proceedings against Winson Oil under the Letter of Indemnity, and to compel Winson Oil to put up security for OCBC’s claim. This suggests that the Owner discharged the Cargo because it believed its potential liability under the Bills of Lading for misdelivery was covered by the Letter of Indemnity, and not because it believed that it had no liability due to any perceived consent on OCBC’s part: see The “Yue You 902” at [123].

74 However, I do not consider the defence to be clearly unarguable on the facts of this case. The Cargo was delivered by the Owner on Winson Oil’s instructions between 5 and 6 March 2020, and OCBC granted the Trust Receipt Loan on 3 April 2020. When OCBC granted the Trust Receipt Loan, it knew or was put on notice that the Cargo would be blended by HLT, and on-sold as a different product to Pertamina. The circumstances surrounding the Trust Receipt Loan suggest that OCBC looked to the proceeds of HLT’s sale to Pertamina, rather than the Bills of Lading, as the collateral to secure the amount advanced to HLT (see [56] above). Accordingly, whether the Trust Receipt Loan amounted to OCBC’s ex post facto consent to, or ratification of, Winson Oil’s instructions to the Owner to deliver the Cargo without production of the Bills of Lading is a matter that should be investigated at trial.

75 In arriving at my view, I recognise that the courts in BNP Paribas (at [59]) and The “Yue You 902” (at [123]) both rejected attempts by the shipowners to infer consent, authority or ratification on the part of the financing bank arising from the trust receipt arrangements in those cases. However, these decisions were premised on the finding that the bills of lading had been pledged by the customer to the financing bank as security, and that they were required in the on-sale that was on documents against payment (D/P) terms: see BNP Paribas at [29], [44]–[46], [59]–[60]; The “Yue You 902” at [116]. It is thus unsurprising that the court did not construe the trust receipt arrangement to operate in an unrestricted manner that would prejudice or affect the financing bank’s pledged rights. The present case is clearly distinguishable since: (a) OCBC did not have a pledge over the Bills of Lading when the Trust Receipt Loan was granted (see [55] above), and (b) the Bills of Lading could not be used in the on-sale to Pertamina.

76 Consequently, I find that the defence of consent also warrants unconditional leave being granted to the Owner.

77 Ultimately, the power to grant summary judgment is intended only to apply to cases where there is no reasonable doubt that a plaintiff is entitled to judgment: see Habibullah Mohamed Yousuff v Indian Bank [1999] 2 SLR(R) 880 at [21]. Given the many unanswered questions I have on OCBC’s claim, I am not persuaded that this threshold has been met. The Owner shall be granted unconditional leave to defend, as I am satisfied that there is a fair probability of a bona fide defence.

78 On the issue of costs, I order that the costs of this application shall be in the cause.

79 In closing, it remains for me to thank counsel for their helpful submissions, from which I have derived much assistance in the preparation of this judgment.