Introduction

It is well-settled that a modern bill of lading serves three functions:

1.       a receipt by the carrier acknowledging the shipment of goods on a particular vessel for carriage to a particular destination;

2.       a memorandum of the terms of the contract of carriage; and

3.       a document of title to the goods.

In commercial practice, however, the title “bill of lading” may also be used loosely in documents that do not function as such. The recent Singapore case of The Luna and another appeal [2021] SGCA 84 shed light on how the Court determines whether a document titled “bill of lading” in fact operates as a contract of carriage and document of title. 

Facts

The Respondent is a trader and supplier of bunker fuel. The trading process includes storing and blending fuel oil in storage tanks and then selling the product from Vopak Terminal. The bunkers are sometimes sold on a FOB (free-on-board) basis for delivery to bunker barges. The Respondent’s customers will then on-sell the bunker fuel loaded on board these bunker barges to ocean-going vessels in Singapore. The Appellants include a demise charterer and owners of a number of bunker barges (the “Bunker Barges”) used to supply bunker fuel to other vessels.

By three sale contracts (the “Sale Contracts”) in September and October 2014, the Respondent sold several parcels of bunkers to the subsidiaries of OW Bunker (the “Buyers”). The Sale Contracts incorporated the Respondent’s General Terms and Conditions for Sales of Marine Fuel February 2013 and provided that payment of the bunkers would only become due upon the expiry of 30 days after the certificate of quantity (“CQ”) date.

Pursuant to the Sale Contracts, the Buyers nominated the Bunker Barges for loading of the bunkers at Vopak Terminal. Vopak Terminal generated several documents in respect of the bunkers upon loading, including a CQ and a document issued in triplicate titled “Bill of Lading” (the “Vopak BLs”). The Vopak Terminal would send the CQ, the Vopak BLs and other documents to the Respondent shortly after the completion of each loading. The Respondent’s practice was to courier the original CQ to the Buyers and keep the Vopak BLs itself until payment was received. At the same time, the Bunker Barges delivered the bunkers to various ocean-going vessels within several days from the date of loading without production of the original Vopak BLs.

In November 2014, OW Bunker became insolvent and the Buyers defaulted on payment. The Respondent then demanded delivery of the bunkers from the Appellants based on the Vopak BLs and separately arrested the Bunker Barges.

The High Court Judge found that the Vopak BLs had contractual force as bills of lading and the Appellants had undertaken to the Respondent to deliver only against presentation of the Vopak BLs. The Appellants appealed. 

Main issue

The main issue on appeal is whether the parties had intended for the Vopak BLs to have contractual force and to operate as documents of title.

The Singapore Court of Appeal’s decision

The Singapore Court of Appeal (“SGCA”) held that in ascertaining the existence of contract, as opposed to interpretation of a contract, the Court is not bound by the parol evidence rule and is entitled to take into account all the relevant circumstances of the case in order to draw the appropriate inferences as to what the parties had objectively intended by the issuance of the Vopak BLs.

The SGCA noted a number of features in respect of the Sale Contracts:

1.       the Buyers were given a 30-day credit period by the Respondent in which they would on-sell the bunkers and use the sale proceeds to pay the Respondent;

2.       title and possession of the bunkers passed to the Buyers upon loading;

3.       following the loading of the bunkers on board the Bunker Barges, it was the Buyers and not the Respondent who would give instructions to the Appellants to deliver the bunkers to ocean-going vessels;

4.       the deliveries were made very shortly after loading and before the expiry of the 30-day credit period, such that any attempt by the Respondent to regain possession or demand delivery of the bunkers would be futile; and

5.       there is a conspicuous absence of any references to bills of lading.

The SGCA inferred from the abovementioned features that the Respondent and the Buyers could not have intended for the Buyers to be able to lawfully deal with the bunkers only upon presentation of an original Vopak BL. It is thus clear between the Respondent and the Buyers that the Vobak BL was a non-essential document with no contractual force or effect as a contract of carriage or as a document of title and did not and could not serve the traditional functions of a bill of lading.

Furthermore, the Vopak BLs did not specify a port of discharge, an essential term for a typical bill of lading. The absence of a port of destination thus reflected that the Vopak BLs were not intended to function as contracts of carriage or documents of title. Deliveries to multiple ocean-going vessels were also contemplated. The SGCA therefore concluded that the Vopak BLs were not typical bills of lading and did not operate as contracts of carriage nor documents of title even though it is titled “Bill of Lading”. The appeal is thus allowed. 

Takeaway

The case of The Luna illustrates the Court’s holistic approach in ascertaining whether a “bill of lading” is in fact a contract of carriage and document of title. In particular, it highlighted the relevance of the underlying contractual arrangements to such determination. The decision also reflects that a bill of lading in its genuine sense may not be compatible with the common practice of the bunkering industry. Sellers who want to protect their interests with security will have to revisit and revise their current arrangements.