This case is factually rather curious, but the legal points arising from it are of interest to those involved in trade financing, securities, and generally, anyone who deals in security and movable property.
JSW sold coal to Kamachi, and chartered a vessel from Oldendorff to deliver the coal. Valency, the claimant, financed Kamachi’s purchase of coal, and opened an LC with HSBC. Valency applied to HSBC to take possession of the Bills of Ladings (BLs) on trust receipt terms vis-a-vis HSBC. JSW subsequently discounted the LC and received payment. The coal was delivered to India. Unicorn was appointed discharge port agent for the vessel, and over several months discharged part of the coal from the ship following various instructions from JSW and Oldendorff. Such discharge was done without Valency’s consent, and without the BLs against letters of indemnity. Valency then sued JSW, Oldendorff and Unicorn in the tort of conversion.
In Valency International Pte Ltd v JSW International Tradecorp Pte Ltd [2026] SGCA 1, the CA dealt with two main issues which disposed of the appeal.
First, the CA held that there was no causation proven to even establish that acts of conversion had occurred.
The gist of conversion is inconsistency with the owner’s rights in the property. However, it is one thing to have a subjective intent to challenge the owner’s rights or even a bare denial of title, and another thing to actually do something which violates those rights. On the facts, while JSQ and Oldendorff gave instructions to Unicorn to discharge the coal, that per se is not conversion. The relevant physical act is Unicorn’s issuing of delivery orders and discharging the coal. However, on the evidence, it is not proven that the instructions CAUSED the actual discharge of the coal. This is because those instructions, construed in the context, was not taken to mean that Unicorn was to discharge the coal without Valency’s instructions. Unicorn lied to Valency about the balance coal amount, suggesting that it knew it still needed Valency’s instructions before issuing the delivery orders. What complicates the facts is that JSW and Oldendorff issued release instructions at various times. It’s not clear which Unicorn would have purportedly chosen to follow. Moreover, Unicorn had release the coal progressively over 2 months, and not all at once.
The curious way that Valency had to pursue its case in this manner was probably due to the fact that for some reason, its previous attempts to recover against the buyer in India had failed and its claim against the contractual carrier had been time barred (as carriage contracts typically stipulate a short time bar).
Second, the CA held that Valency had no standing to sue in conversion at all. The right to sue in conversion lies with the person who has actual possession or immediate right to possession. However, Valency possessed the BLs under the trust receipt terms. This meant that Valency held the BLs as the bank’s agent and not as principal. Only the bank had standing to sue.
To elaborate, generally, a pledge over assets involves the pledgee (here, the bank) acquiring ‘special property’ in the goods. The pledgor (here, Valency) receiving the BLs from the bank on trust receipt did not mean that the special interest in the BLs or coal were surrendered by the bank. The trust receipt terms construed in context meant that when the BLs were redelivered to Valency, it was solely for Valency to take delivery of or sell the coal to repay the sums owing under the trust receipt loan to the bank. Under the trust receipt terms, Valency became the bank’s agent in relation to the BLs and coal. Thus, the bank retained the special property in the coal. The bank did not intend, under the relevant terms, to pass any right of possession of the goods to Valency. Thus, even though Valency physically had the BLs, it did not grant Valency any right to sue in conversion.
This interesting case raises the need to carefully dissect the factual grounds for mounting the relevant cause of action against the proper parties. Practical considerations may shape the legal strategy but if the legal bases are inadequate then the legal strategy would have to be seriously reconsidered.
Further, the case highlights the need for paying attention to possible achilles’ heels of the legal-evidential case, in this case, the issue of causation as it were. It appears that this issue was also only picked up by the relevant parties late in the day after trial and during closing submissions. Not much was canvassed on this, it seems.
As regards financing and securities, it is worth thinking about the legal risks and practical recourse of commodity traders and financiers in the context of such arrangements and demurrage disputes.
#Litigation #SingaporeLaw #Disputes