When is a bill of lading not a bill of lading?

If something looks like a duck, but doesn’t swim like a duck or quack like a duck, then there’s a fair chance it may not actually be a duck. A salutary decision last Friday from Singapore made just this point about bills of lading. You can’t simply assume that a piece of paper headed “Bill of Lading” and embodying the kind of wording you’re used to seeing in a bill of lading is anything of the sort if the circumstances show that the parties had no intention to treat it as one.

The Luna [2021] SGCA 84 arose out of the OW Bunkers debacle, the gift that goes on giving to commercial lawyers with school fees to pay. In brief, Phillips was in the the business of acquiring and blending fuel oil in Singapore, and then supplying it to bunkering companies that would ship it out in barges to ocean-going vessels in need of a stem. One of those companies was the Singapore branch of OW. Phillips sold barge-loads of bunkers to OW on fob terms, with ownership passing to OW when the oil went on board the barge, payment due in 30 days and – significantly – not so much as a smell of any retention of title in Phillips.

When OW collapsed in 2014 owing Phillips big money, Phillips, having given credit to the uncreditworthy, looked around for someone else to sue. Their gaze lighted on the barge-owner carriers. For each barge-load, the latter had issued a soi-disant bill of lading to Phillips’s order with the discharge port designated rather charmingly as “Bunkers for ocean going vessels or so near as the vessel can safely get, always afloat”. The modus operandi, however, had been somewhat at odds with everyday bill of lading practice. The bunkers had in normal cases been physically stemmed within a day or so; OW (while solvent) had paid Phillips after 30 days against a certificate of quantity and a commercial invoice; and the bill of lading had remained at all times with Phillips, and no question had ever arisen of any need to present it to the carriers to get hold of the goods it supposedly covered.

On OW’s insolvency Phillips totted up the bunkers sold by it to OW and not paid for, took the relevant bills of lading out of its safe, and on the basis of those documents formally demanded delivery of the oil from the issuing carriers. When this was not forthcoming (as Phillips knew perfectly well it would not be) Phillips sued the carriers for breach of contract, conversion and reversionary injury, and arrested the barges concerned.

Reversing the judge, the Singapore Court of Appeal dismissed the claim. The issue was whether these apparent bills of lading had been intended to take effect as such, or for that matter to have any contractual force at all. Whatever the position as regards the matters that could be regarded when it came to interpretation of a contract, on this wider issue all the underlying facts were in account. Here the practice of all parties concerned, including the acceptance that at no time had there been any question of the carriers demanding production of the bills before delivering a stem to a vessel, indicated a negative answer.

Having decided that there could be no claim under the terms of the so-called bills of lading, the court then went on to say – citing the writings of a certain IISTL member – there could equally be no claim for conversion or reversionary injury.

This must be correct. Further, given the tendency of businesses to issue documents without being entirely sure of their nature or import, the result in this case needs noting carefully by commercial lawyers throughout the common law world.

A note of caution may also be in order, however, as regards carriers. You must still be careful what documents you do issue. True, the carrier in The Luna escaped liability because all parties accepted that the so-called bill of lading didn’t mean what it seemed to say (indeed, it doesn’t seem to have meant very much at all). But imagine that a bill of lading issued in these circumstances which ends up in the hands of a bank or other financier who is not aware of the circumstances and who in all innocence lends against it. The betting there must be that, as against the financier, the carrier issuing it would take the risk of being taken at its word. And this could be a very expensive risk, particularly since the chances of it being covered by any normal P&I club are pretty remote. Carriers, you have been warned.

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