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08 May 2013
In Owners Of Cargo Laden On Board The Vessel 'Istana VI' v Owners Of Vessel 'Filma Satu' the plaintiff had purchased three parcels of crude palm oil in bulk from Kantor Pemasaran Bersama (KPB) on free-on-board terms. The cargo was loaded onto Istana VI, a vessel owned by the defendant. At the time, a charterparty agreement was entered into with Summerwind Trading Pre Ltd.
The plaintiff claimed that in accordance with bills of lading issued by the defendant and in the plaintiff's possession as a lawful endorse, as well as shipping instructions issued by the plaintiff to the defendant, the cargo was to be carried to and discharged at Yantai, China. However, the cargo was discharged not at Yantai, but at Port Klang, Malaysia.
The plaintiff further claimed that the defendant had discharged the cargo to a third party, Mewah Oils Sdn Bhd, without producing the original bills of lading, on the instructions of the charterer (Summerwind) and by reason of the issuance of a letter of indemnity therefrom. Summerwind had intended to purchase the plaintiff's cargo of crude palm oil bound for China and utilise it for shipment to Port Klang instead of Yantai, in order to fulfil certain contractual obligations.
Summerwind was unable to amend its letters of credit on time and thus required the defendant's assistance to stipulate on the bill of lading that the discharge port was Yantai, although the parties (ie, Summerwind and the defendant) were aware that the destination under the charterparty agreement was Port Klang.
The charterers undertook to provide the defendant with a letter of indemnity to 'cover' the change in destination from China to Malaysia. The plaintiff, in a claim as the owner of the cargo, commenced an action against the defendant for delivery of the cargo, or alternatively to recover damages for the loss of the cargo.
In its defence the defendant contended that:
A number of issues arose for consideration by the court, including whether:
When examining the date on which property in the cargo passed from KPB to the plaintiff, the court found that the cargo belonged to or was owned by the plaintiff at the time at which it was discharged into Mewah's bonded shore tanks. The court ruled that the plaintiff, as the owner of the cargo, was entitled to maintain the action in tort in relation to 'misdelivery' for conversion. The plaintiff therefore possessed title to sue.
The court further ruled that the plaintiff possessed title to sue in contract under the Bill of Lading Act as a lawful endorse in possession of the bill of lading.
The court heard arguments from the defendant in which it stated that there was a distinction in fact and in law between 'discharge' and 'delivery'. According to the defendant, although the cargo was discharged into the bonded shore tanks at Port Klang, the cargo was never delivered to Mewah. The court found this distinction illusory.
The court referred to a judgment of the Singapore High Court in The Nordic Freedom, where the court utilised the term 'discharge' interchangeably with 'delivery'. The facts in The Nordic Freedom bore considerable similarity to the facts in the case at hand. More importantly, the court ruled that discharge or delivery must be made against the production of original bills of lading. The court argued that discharge, delivery or release of the cargo at the behest of the carrier, albeit under the terms of a charterparty, did not obviate the shipowner's liability to the owner of the cargo.
The court concluded that it was no answer to the plaintiff's owner's claim for the cargo to maintain that there was discharge but no effective delivery to a third party, when such discharge was effected without production of bills of lading.
After considering the body of evidence before it, the court further opined that it could not conclude or infer from the circumstances existing at the material time that the plaintiff had in any manner consented or acquiesced to the discharge of the cargo in Port Klang to Mewah. In order for its actions to amount to acquiescence or consent or acceptance of this fact, the court reasoned that the plaintiff would have had to know in the first place that the cargo was being discharged in Port Klang and not Yantai. It would also have had to know that the possession of cargo belonging to it both in law and in fact was being given to Mewah. The court observed that in the course of the trial, no evidence had been adduced or put to the witnesses that would warrant such an inference being drawn.
The defendant contended that it was not liable for the loss suffered by the plaintiff because Mewah had obtained possession of the cargo by allegedly procuring the release of the cargo from the Royal Customs Department by fraudulent means.
The defendant also raised the issue of causation and contended that the chain of causation was broken by intervening acts on the part of Mewah and the plaintiff, which resulted in the cargo coming into the possession of Mewah. Mewah was allegedly said to have utilised irregular means to procure customs approval for the release of the cargo from its own bonded shore tanks, while the plaintiff, it was contended, failed to present the bills of lading so as to secure possession of the cargo. The defendant contended that it had no control over both these events, which it maintained comprised the substantive cause for the plaintiff's loss.
The plaintiff contended otherwise - namely, that it was the defendant's act in discharging the cargo without production of the original bills of lading that gave rise to the loss it had suffered. The fact that Mewah was then alleged to have irregularly procured possession of the cargo with respect to the customs did not detract from the fact that the cargo was made available to Mewah by the defendant and Summerwind.
The court agreed with the plaintiff and ruled that this subsequent act on the part of Mewah could not be said to be the cause of the plaintiff's loss, as such loss was caused by the discharge or delivery of the cargo in Port Klang to the receiver without production of the original bills of lading. In other words, but for the discharge of the cargo into Mewah's bonded shore tanks at the behest of Summerwind without bills of lading, the loss would not have occurred. The court held that the act of discharging cargo belonging to the plaintiff into the hands of a third party at a different destination to that contracted for under the bill of lading was the cause of the loss.
The plaintiff had also pleaded its case action in bailment against the defendant, which comprised an alternative basis for its claim. The court opined that the bill of lading amounted to an acknowledgement of the defendant's bailment of the cargo described in the bill of lading. As such the defendant's duty with respect to the cargo was to store it safely on board the vessel and discharge it at the stated destination (ie, the defendant was the bailee of the plaintiff's cargo). The court found that the defendant had failed in carrying out its duties as bailee.
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