In this case, the Singapore court ruled that not all documents titled “Bill of Lading” function as documents of title to goods, although they traditionally do so.  In determining whether a bill of lading is a document of title, its substance and nature must be examined and given effect.

Background

The case involved bills of lading issued in respect of the sale of bunker fuel (“bunkers”) by Phillips 66 International Trading Pte Ltd. (“Seller”) to subsidiaries of OW Bunker A/S (“Buyers”).  Typically, buyers of bunkers resell the bunkers to their own customers before paying the seller.

As part of the sale to the Buyers, the Seller generated several documents in respect of the bunkers, including a document issued in triplicate titled “Bill of Lading” (“Vopak BLs”). The Vopak BLs were required to be signed and stamped by the master of the vessels which were used to deliver the bunkers (“Vessels”) and would remain with the Seller until it receives payment for the bunkers.  After OW Bunker A/S became insolvent in 2014,the Seller’s invoices for the bunkers were left unpaid.  

The Seller tried to rely on the Vopak BLs in its possession to bring a misdelivery claim against the owners/charterers of the Vessels for delivering the bunkers to the Buyers’ customers.  The Singapore Court of Appeal considered whether the Vopak BLs were true bills of lading that gave the Sellers the right of suit for misdelivery of cargo.  

Decision

The court held that the Vopak BLs were not contracts of carriage or documents of title.  In reaching its decision, the court adopted a substance-over-form approach to determine if the parties intended for the Vopak BLs to have contractual force and to operate as documents of title.

In particular, the court observed that:

(a) under the sales contracts for the bunkers, title to and possession of the bunkers passed to the Buyers upon their loading on the Vessel and the Vopak BLs did not facilitate the sale and purchase of the bunkers;

(b) the Seller knew that the Buyers would deliver the bunkers to its own customers shortly after the bunkers were loaded on the Vessel even though the Seller retained the Vopak BLs; in other words, the Vopak BLs did not enable the Buyers to take delivery of the cargo by presenting the document or restrict the Buyers’ ability to do the same;

(c) the Seller did not need to present the Vopak BLs to receive payment from the Buyers; and

(d) the underlying sale contracts between the Seller and the Buyers did not refer to any bill of lading.

Therefore, the Vopak BLs were found to be not true bills of lading as they did not serve the purposes a bill of lading is expected to serve –specifically, to operate as (i) a carrier’s receipt to acknowledge the shipment of goods to a certain place via a certain vessel; (ii) a record of the terms of the contract of carriage; and (iii) a document of title to the goods.

Key Takeaways

The decision highlights that the substance, and not the form, of a bill of lading is important.  Parties that wish to incorporate a bill of lading into a contractual relationship should ensure that the underlying contract expresses the intent for the bill of lading to have contractual force and to operate as a document of title.  While the case focuses on the maritime industry, it serves as a reminder to both floating and fixed warehouse operators to exercise care and consider the risks involved in the issuance of documents intended to function as documents of title.

For More Information

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Disclaimer: This article is for general information only and does not constitute legal advice.