Commentary

All bunker barges fly the Singaporean flag except The Arowana Milan, which fly the Malaysian flag. The cargo bunker was then onward delivered to various ocean going vessels designated by the Buyers.

The Seller had not received any payment from the Buyers when the above delivery of bunkers completed. This is because it is colloquially a ‘take first pay later’ transaction.[2]

Due to the insolvency of the O.W. Bunker and its subsidiaries, the Seller is not able to recover payment owed by the Buyers. The Seller then tried to recover the payment from the BBO through this legal action.

Bills of Lading[3] and Certificate of Quantity

VT prepared and furnished Vopak bills of lading (BL) after cargo bunkers were loaded on board the 6BB. The BL named The Seller as the shipper, and to its order.[4] When the 6BB delivered the cargo bunker to their respective ocean going vessels, such deliveries were performed without the ocean going vessels producing the original BL. The Seller then wanted BBO to return all cargo bunkers loaded on board the 6BB to him based on the fact that he was the holder of the BL.

It seems that no destination port was mentioned in the BL.[5] In addition, date of the charterparty to be filled was typed-written in with the phrase “payable as agreed”, which obviously suggest that no incorporation of any charterparty was intended. As such, the BL cannot be relied upon as contractual documents as the function of bill of lading in relation to contract of carriage was not fulfilled. There is no charterparty for the BL to evidence its existence!

The certificate of quantity (CQ) is a critical document in the sale of bunker contract. The CQ is needed for the Seller to ask Buyers for payment. The credit period for payment is 30 days. If no CQ is available on or before the payment due date, Seller needs to provide Buyers with a letter of indemnity (LOI) in order to obtain payment from Buyers. Therefore, if the cargo bunker is already loaded aboard the 6BB and no CQ was available to the Seller, will the Buyers forbid the 6BB from onward delivery to the ocean going vessels? Nonetheless, it is not the question of ‘will’, but more on the question of ‘can’. It is because under MPA rule, no bunker barges are to be used to store petroleum cargo. This may not apply to The Arowana Milan. So, even if the Buyers forbid the 6BB from onward delivery of cargo bunker to the ocean going vessels, the Buyers cannot do so without violating MPA rule!

Throughout my ocean going sailing career, I had never received any bill of lading pertaining to bunkering operations which I in turn had to show any bunker barges as ‘ticket’ for them to fill up the bunker tanks of my vessels.[6] Putting my experience aside, I opine that bunker buyers may not even be aware[7] of the existence of the BL in this case.

In the bunker trade, bunker barges usually load cargo bunker only when they know that they have to onward deliver it immediately to the designated ocean going vessels after loading from oil terminal. It is a ‘touch and go’ business. If there is no ocean going vessels to receive bunker fuel from the bunker barge, ie no business, no bunker barge owners will still load up their barges to wait for business in case there is potentially one coming. As mentioned above, this is not allowed in Singapore port limit under the MPA rule.

Again, it is because of the insolvency of O.W. Bunker A/S and its subsidiaries, the Seller is now waving[8] the BL to claim delivery of the bunkers from the BBO in a situation he knew he will not before do when carrying out such trading with the Buyers. So, the existence of the BL was probably for the former purpose?

Ownership of Bunker Barges in question

Some of the bunker barges were under charter. One of the key personnel during bunker operations is the Cargo Officer. He is the servant of the bunker barge owner. If under charter, the charterer will provide their own cargo officer. The cargo officer safeguards the interest of his owner and this might not include the BL in this case.

On Bailment and Conversion

Based on the terms of the sale of bunker contract, the possessory interest had passed to the Buyers upon loading.[9] It was an FOB contract, hence, the risk passed to the Buyers the moment the cargo bunkers passed the 6BB’s manifold connections. The language of the LOI was in past tense that warrants the passing of possession of bunkers from the Seller to the Buyers. The LOI also indicates that the Buyers agreed to accept delivery of the cargo bunkers even before being provided with the CQ and when payment would not have been due. That would only be possible if possession had been transferred to the Buyers upon loading. And this continues to allow the Buyers’ immediate disposal of the cargo bunkers to the ocean going vessels through the 6BB. Since the 6BB took instructions from the Buyers to onward deliver the cargo bunkers to ocean going vessels, and the Buyers had rightfully in possession of the cargo bunkers, the BBO is not in breach of bailment and conversion as asserted by the Sellers.

The BBO succeeded in all the above primary defences. The judge continued to make some quick observations on the BBO’s:

• BBO asserted that it is not customary to produce BL in the local bunker industry. His Honour disagreed with the BBO’s assertion based on custom as evidence of custom is admissible only to explain mercantile expressions and to add incidents, or to annex usual terms and conditions which are not inconsistent with the written terms between the parties; it cannot change the intrinsic character of the document.[10]

• BBO asserted that the Seller is estopped to say that delivery of cargo bunker is only possible after BL is produced under the carriage contract. BBO had provided a bona fide defence in establishing the elements of an estoppel by acquiescence through past occurrence where BL were issued for cargo bunkers shipped aboard three of the 6BB. The cargo bunkers were onward delivered without production of BL.

• The signing of the BL by the chief officers rather than the master, or cargo officer, also bearing the vessels’ stamps does not support BBO’s defence on the issue on lack of authority. This is because on the issue on authority, we would have to bring in the law of agency. Vessel’s stamp does portray the existence of authority, and the chief officer might have the apparent authority in signing the BL. Also, as far as my knowledge on the bunker industry goes, the cargo officer is at times perceived to be someone who can override the master in commercial matters.[11]

Conclusion

In the local bunker industry, BL in the bunker trade as in the present case, may not serve as either contractual documents or documents of title. This is due to the nature of the bunker trade where cargo bunkers loaded aboard bunker barges have to be quickly disposed to the receiving ocean going vessels. Hence, it is not suitable to create a charterparty relationship since the BL issued at the material could serve one of its functions. The BL in this case was signed merely as receipts only and could not fully function as bills of lading per se.

______________________________