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Of Switch Bills of Lading

Jagan - March 18, 2024 - 0 comments

We had written earlier on this topic and our earlier articles can be seen at Bills of Lading – Issues & Switch Bills of Lading – Revisited. Also, we would recommend a paper on Managing the risks of Switch Bills of Lading by Dr Miriam Goldby

  1. The Singapore High Court recently gave a judgement on a claim centered on a Switch Bill of Lading (The “Jeil Crystal ”[2024] SGHC74). The Claim was made under Contract, Tort and Bailment. The judgement is an illuminating read and would recommend all shipping practitioners to go through the same to understand the implications relating to Switch Bills.
  2. The illuminating paras in which the various duties are listed in the judgement are:
    1. Contractual Duty: Para 75i
    2. Tortious Duty: Para 80ii, 81iii & 84iv.
    3. Bailment: Para 88v, 89vi & 90vii.
  3. Our view is that this matter should never have been litigated. However, the fact is that when there is a big hole, parties will naturally consider options available to reduce their exposure and in which case, surrounding parties, such as the Owners in this case would also be targeted.
  4. Given that the practice of issuing Switch Bills will not end, Owners/Operators must maintain the same caution as Owners/Operators had done in this case, i.e. only issue a Switch Bill once the first set has been surrendered. The practice has however been to seek a copy of the Switch Bill prior to the surrender of the first set, say for custom purposes. However, provision of even a copy of the Switch when the first set of Bills of Lading is live is fraught with dangers given that in some jurisdictions, once the manifest has been filed, it becomes difficult for the original holders to assert their rights of Ownership on the cargo. This being the case, we would recommend that Carriers revisit their standard operating procedures and only consider issuing a copy of the Switch when they have the first set in their custody.

i. To conclude this section, if there was any contractual duty on the defendant, it was to refrain from issuing the Switch BLs until and unless the First Set BLs were surrendered to and cancelled by the defendant. That duty was, if at all, owed only to (a) whoever was the lawful holder in possession of the First Set BLs as the party with rights of suit under the contract of carriage…
As to the first question, it is my view that any duty of care would only have arisen at the point the Switch BLs were being issued and released. It is at that point in time that the defendant needed to ensure that it did not, by issuing the Switch BLs, act in a way detrimental or prejudicial to the rights and interests of the holders of the First Set BLs. In my judgment, it would not be fair or reasonable to hold, on the facts of this case, that the defendant was under a tortious duty of care at a point in time earlier than its contractual obligation. To hold otherwise would, in the circumstances of this case, confer upon the plaintiff a more advantageous right than would be available to it in contract – that would not be a just or reasonable outcome.
As to the second question, the answer is evidently ‘no’. For one, the defendant ensured that the Switch BLs were issued and put into circulation only after the First Set BLs were surrendered and cancelled/marked “null and void….
Leaving aside the question of whether such a duty of care was indeed owed to the plaintiff as the trade financier, the pleaded duty of care is “to take reasonable care in the custody and care of the Cargo”. In my view, this refers to the physical care of the Cargo (ie, ensuring that the Cargo is not damaged or stolen). It does not suggest that the duty extends to informing the plaintiff and/or obtaining the consent of the plaintiff to the switch of the bills of lading. In my view, that is a bridge too far for the plaintiff.
In my view, there is no legal basis for the plaintiff’s claim in bailment. The law is clear that the duties of a bailee arise out of the voluntary assumption of possession of another’s goods: East West Corpn v DKBS AF 1912 A/S and another; Utaniko Ltd v P & O Nedlloyd BV [2003] 3 WLR 916 at [24]. The contract of carriage as evidenced by bills of lading is “a combined contract of bailment and transportation under which the shipowner undertakes to accept possession of the goods from the shipper, to carry them to their contractual destination and there to surrender possession of them to the person who, under the terms of the contract, is entitled to possession of them from the shipowners”: Barclays Bank v Commissioners of Customs and Excise [1963] 1 Lloyd’s Rep 81 at 88–89. As a general rule of bailment law, only persons to whom the bailee has attorned can enforce the bailee’s duties as such; however, “[t]he contribution of the law merchant had been to recognize the attornment as transferrable and therefore the indorsement and delivery of the bill of lading as capable of transferring the endorser’s right to the possession of the goods to the endorsee”: Borealis AB (formerly Borealis Petrokemi AB) v Stargas Limited and others [2001] 2 WLR 1118 at [18].
vi. It follows that upon the plaintiff’s endorsement and delivery of the First Set BLs to GP Global on 25 June 2020, any duty owed by the defendant qua bailee to the plaintiff had thereafter evaporated. As explained at [66]–[67] above, the plaintiff relinquished all rights and interests in the Cargo and/or the First Set BLs when it endorsed and delivered the First Set BLs to GP Global without any reservation of its rights or arrangements to remotely indicate that the plaintiff continued to retain (or wished to retain) an interest in the Cargo or the First Set BLs
vii. Accordingly, the defendant could not have breached any of its duties as bailee when it allegedly “failed to produce or account for the Cargo” to the plaintiff on 10 August 2020, that date being when the plaintiff wrote to the Master of the Vessel and the defendant to, among other things, demand that the defendant not proceed with the discharge of the Cargo without the plaintiff’s written consent (see [23] above)

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