It is settled law that a carrier who delivers goods without production of the bill of lading is typically liable for any consequential losses suffered by the bill of lading holder. In the course of prosecuting its claim against the carrier, the bill of lading holder may seek to obtain summary judgment without trial on the basis that there is plainly no defence to its claim.

In the recent case of The “STI Orchard” [2022] SGHCR 6 where the plaintiff bank (“Plaintiff”) sought summary judgment against the defendant shipowner (“Defendant”), the General Division of the High Court of Singapore granted the Defendant unconditional leave to defend the Plaintiff’s claim for misdelivery. A key issue identified by the Court was whether the bills of lading were intended to be relied on as security for the Plaintiff’s financing in the underlying transaction.

Brief facts and the parties’ arguments

The Plaintiff financed the purchase of a cargo by Hin Leong Trading (Pte) Ltd (“HLT”) that was shipped on board the Defendant’s vessel “STI ORCHARD” under a set of three bills of lading (“B/Ls”). HLT defaulted on its obligation to reimburse the Plaintiff, and the Plaintiff commenced a suit against the Defendant for delivering the cargo to HLT without presentation of the B/Ls.

For the purpose of its summary judgment application, the Plaintiff relied only on the cause of action for breach of the contract of carriage. The Plaintiff argued that its claim was a straightforward one in misdelivery, and there was no dispute that the Defendant delivered the cargo to HLT without production of the B/Ls.

 The Defendant argued that it should be granted unconditional leave to defend on three main grounds: (a) the Plaintiff did not become holders of the B/Ls in good faith; (b) the B/Ls were spent by the time they were indorsed to the Plaintiff; and (c) the Plaintiff consented to the delivery of the cargo without presentation of the B/Ls.

The Court’s decision

Good faith

The Court found that when the Plaintiff extended financing to HLT, the underlying arrangements suggested the Plaintiff did not intend to take security through a pledge of the B/Ls (and therefore the cargo). In this regard:

a. the Plaintiff did not ensure that the B/Ls were made out to its order or indorsed in blank.

b. instead, the Plaintiff acceded to HLT’s request for the B/Ls to be issued or indorsed to HLT’s order when the Plaintiff issued its letter of credit.

c. further, the Plaintiff did not arrange for the B/Ls to be indorsed to its order or indorsed in blank when it subsequently granted the trust receipt loan to HLT (for the sum due under the Plaintiff’s letter of credit) for HLT to finance its purchase of the cargo.

On the contrary, the Court found that the underlying arrangements suggested that the Plaintiff looked instead to the proceeds of HLT’s sale to HLT’s buyer as collateral.

a. the Plaintiff knew or was put on notice that the cargo would be blended by HLT, and on-sold to HLT’s buyer as a different product. In this regard, new bills of lading (and not the B/Ls) would have to be issued by HLT as documents of title for the sale to HLT’s buyers.

b. the cargo (documented under new bills of lading) would then be sold for the Plaintiff to recover the sums advanced under its letter of credit.

c. as such, it was arguable that the effect of the trust receipt loan was to authorise HLT to (i) sell the blended cargo to HLT’s buyer (using new bills of lading issued by HLT); and (ii) hold the sale proceeds on trust for the Plaintiff to secure the amount advanced.

The Plaintiff tried to “perfect” its security by having the B/Ls delivered to it and indorsed in its favour. However, this was only done after the Plaintiff was informed of HLT’s financial difficulties, and by which time the cargo had already been discharged from the “STI ORCHARD”.

Therefore, the Court found it was arguable the Plaintiff did not meet the threshold for good faith because it had not originally intended to take security through a pledge of the B/Ls, and only subsequently attempted to bring a claim on such purported security.


The Court also found that it was arguable the Plaintiff consented to the delivery of the cargo without presentation of the B/Ls. This was because when the Plaintiff granted HLT a trust receipt loan, the Plaintiff knew or was put on notice that the cargo would be blended by HLT, and on-sold to HLT’s buyer as a different product (which would require new bills of lading to be issued.

In arriving at this finding, the Court distinguished the facts of the present case from previous decisions where no consent was to be inferred from the financing bank arising from trust receipt arrangements.

a. the finding in previous decisions was that the bills of lading had been pledged by the customer to the financing bank as security, and that they were required in the on-sale as documents against payment terms.

b. in the present case (i) the Plaintiff did not have a pledge over the B/Ls when the trust receipt loan was granted; and (ii) the B/Ls could therefore not be relied upon by the Plaintiff in the on-sale to HLT’s buyer.


Lenders in trade finance arrangements should ensure that bills of lading are indorsed to their order or in blank if they intend to rely on the bills of lading as security for financing of their customers’ purchase of goods.

Reed Smith is in a Formal Law Alliance (FLA) with Singapore law practice Resource Law LLC. The FLA significantly expands Reed Smith’s offering in Singapore and our ability to service our clients’ legal requirements in handling multi-jurisdictional transactions, disputes, and cross border work involving Singapore law and the Singapore courts. The full service offering of the FLA includes advisory, transactional, corporate, and dispute resolution expertise in all of Singapore’s core industries and practices, including energy and natural resources, shipping, financial industries, insurance, regulatory, restructuring and life sciences.