Hyphen Trading Ltd v BLPL Singapore Pte Ltd and others [2023] SGHC 302

HC/SUM 2034/2023 (“SUM 2034”) was the claimant’s application for the sale of a cargo of nickel briquettes (the “Cargo”) under O 13 r 4(1) of the Rules of Court 2021 (“ROC 2021”) and for the sale proceeds to be placed into court or alternatively in an escrow account to be agreed by the parties, pending the final determination of this originating claim, HC/ADM 14/2023 (“ADM 14”) (ie, a sale pendente lite). The Cargo is the subject of three bills of lading and presently in the custody of the first defendant, stored at Henry Bath LME warehouse in Port Klang, Malaysia. In ADM 14, questions as to which party is in possession of the true original bills of lading representing the Cargo and/or entitled to the Cargo are contested.

I dismissed SUM 2034 on 13 September 2023 and provided brief oral grounds for my decision. Based on counsel’s submissions, there appears to be no reported case concerning an application under O 13 r 4(1) of the ROC 2021, which provides for the court’s power to “order the sale of any movable property which is the subject matter of or may give rise to any issue in an action”. This was also an instance where I refused to make the order sought by the claimant. Accordingly, while there has been no appeal against my decision, I consider it useful to provide my full grounds of decision.

Facts

The parties

The claimant is Hyphen Trading Limited, a company incorporated in the United Kingdom carrying on the business of, inter alia, commodity trading. It is the claimant’s case in ADM 14 that it is and was at all material times the owner of the Cargo and the lawful holder of three genuine and original bills of lading relating to the Cargo. The bills of lading in the possession of the claimant provide for the Cargo to be shipped from Pasir Gudang in Malaysia to Nhava Sheva port, India.

The first defendant is BLPL Singapore Pte Ltd, a Singapore company engaged in the business of shipping, including chartering of ships and boats with crew. In the present case, the first defendant was the contractual carrier of the Cargo and is alleged to have issued the said bills of lading in August 2022.

The second and third defendants are Trafigura Pte Ltd and Trafigura India Pvt Ltd respectively. In ADM 14, the second and third defendants contend that it is the third defendant who is and was at all material times in possession and the lawful holder of the true, valid and binding original bills of lading and therefore, the third defendant has and had at all material times good title to the Cargo. They also contend that the bills of lading in the third defendant’s possession are the bills that the first defendant recognises as having been issued by the latter in respect of the Cargo. The bills of lading in the possession of the third defendant also provide for the Cargo to be shipped from Pasir Gudang in Malaysia to Nhava Sheva port, India, and bear the same numbers as the set of bills of lading in the claimant’s possession. However, one of the material differences between both sets of bills is that the set in the claimant’s possession names a different shipper from that in the third defendant’s possession.

Background

On 10 February 2023, the English solicitors for the second and third defendants wrote to the first defendant, claiming that the third defendant was in possession and the lawful holder of the original bills of lading for the Cargo, and requested that the first defendant not permit anyone other than the third defendant to interfere with the Cargo. This followed from the grant by the English High Court of a worldwide freezing injunction in the second and third defendants’ favour against various parties, such that those parties could not claim any interest in the Cargo.

On 19 February 2023, the claimant, referencing the aforementioned letter from the second and third defendants’ solicitors, wrote to the first defendant asserting that the claimant was the lawful holder of the original bills of lading for the Cargo and asked for the “swift release of [their] cargo”. On 20 February 2023, NAU Pte Ltd (a claims correspondent and consultant) replied to the claimant on the first defendant’s behalf, stating that the first defendant’s instructions were that the copies of the bills of lading provided by the claimant were not issued by the first defendant and that the first defendant had no knowledge of the same.

Given the apparent competing claims over the Cargo and the first defendant’s refusal to deliver the Cargo to the claimant, the claimant commenced ADM 14 on 3 March 2023 seeking, inter alia, a declaration that the claimant, as lawful holder of bills of lading representing the Cargo, is entitled to take delivery of and/or deal with the Cargo.

On 7 March 2023, the claimant filed HC/SUM 591/2023 (“SUM 591”) seeking, inter alia, an order for the preservation of the Cargo at Henry Bath LME warehouse in Port Klang, Malaysia and for the Cargo to remain in the custody of the first defendant until the final disposal of ADM 14. At the time, part of the Cargo had arrived at Nhava Sheva and was due to be discharged whilst the rest of the Cargo was then awaiting transshipment at Colombo for on-carriage to Nhava Sheva. According to the claimant, SUM 591 was taken out urgently because an Import General Manifest (“IGM”), akin to a customs declaration form, had been issued by the third defendant in respect of one of the bills of lading. This could result in the imminent discharge and delivery of that parcel of the Cargo to the third defendant at Nhava Sheva once the IGM was filed with the Indian customs authorities.

On 7 July 2023, the claimant filed the present application seeking, inter alia, an order for a sale pendente lite of the Cargo.

The parties’ cases

The claimant’s professed purpose in bringing the application in SUM 2034 was to “preserve the value of the Cargo as an interim measure pending final resolution of the [m]ain [s]uit in [ADM 14] and to mitigate losses and risks relating to the preservation of the physical Cargo”. The claimant’s case rested primarily on the following reasons:

The third defendant’s position was that the Cargo should not be sold. The third defendant contended that:

(a) the alleged market risks identified by the claimant did not justify selling the Cargo pendente lite and, in any event, the claimant had hedged its position to address such market risks. Accordingly, there was no good reason to crystallise the losses on the Cargo at this stage, particularly given the possible increase in nickel prices forecasted in 2024;

(b) the claimant’s alleged concerns about the safety of the Cargo due to risk of theft and/or fraud were misplaced;

(c) the alleged costs of storing the Cargo were relatively modest and did not amount to a significant diminution in value of the Cargo in comparison with the value of the Cargo; and

(d) the sale of the Cargo might potentially prejudice a fair and just disposal of the action.

The applicable rule

It was common ground between the parties that this application was made pursuant to O 13 r 4(1) of the ROC 2021. The predecessor to O 13 r 4(1) of the ROC 2021 was O 29 r 4(1) of the Rules of Court (2014 Rev Ed)(“ROC 2014”). Both rules are similarly worded and “identical in effect”, save that under O 13 r 4(1), the court can make an order even without an application by the parties: Singapore Rules of Court – A Practice Guide (Chua Lee Ming gen ed) (SAL Academy Publishing, 2023) (“ROC 2021 Practice Guide”) at para 13.076.

The commentaries on O 13 r 4(1) of the ROC 2021 indicate that the approach to be adopted and relevant considerations to be taken into account under the new rule are no different from those under O 29 r 4(1) of the ROC 2014; thus, case law under the predecessor rule continues to be relevant to O 13 r 4(1) of the ROC 2021: Singapore Civil Procedure 2022 (Cavinder Bull SC gen ed) (Sweet & Maxwell, 2022) (“Singapore Civil Procedure 2022”) at paras 13/4/1–13/4/2; ROC 2021 Practice Guide at paras 13.075–13.077.

Order 13 rule 4(1) provides that:

In the present application, it was not disputed that the Cargo is not perishable. Therefore, the limbs of O 13 r 4(1) of the ROC 2021 relevant to this application were (1)(b) and (1)(c) – “that property is likely to diminish in value” and “it is desirable to sell that property for any other reason”, respectively.

Factors to be considered

Ordinarily, a court may order a sale of movable property pendente lite where there is good reason for it and it is in the interests of justice to do so: The Myrto [1977] 2 Lloyd’s Rep 243 (“The Myrto”) at 260; Toh Kian Sing SC, Admiralty Law and Practice (LexisNexis, 3rd Ed, 2017) at pp 254–255.

The purpose of a sale pendente lite is to allow the court, in an appropriate case and when it is in the overall interests of justice, to convert the property which is the subject of the dispute (or as to which a question arises) into cash so that its value is not eroded while the litigation ensues. By doing so, the court can thereby avoid the injustice that might result by the property becoming either valueless or significantly reduced in value in the interval between the application and the conclusion of the proceedings.

In exercising its undoubtedly wide discretion on whether to order a sale of movable property pendente lite, the court may take, and has taken into account the following non-exhaustive factors, insofar as they are relevant to the facts and circumstances of a particular case (see Emilia Shipping Inc v State Enterprise for Pulp and Paper Industries [1991] 1 SLR(R) 411 (“Emilia Shipping”) at [27]–[30]; Five Ocean Corp v Cingler Ship Pte Ltd (PT Commodities & Energy Resources, intervener) [2016] 1 SLR 1159 (“Five Ocean”) at [62]; The Myrto at 260, 261; Unicorn Lines (Pty) Ltd v MV Michalis S 1990 (3) SA 817 (D) (“Unicorn Lines”) at 821; Banco Do Brasil SA v Alexandros G Tsavliris (The) [1987], 12 FTR 278 (TD) at [44]–[48]):

(a) whether (and if so, to what extent) the value of the property is likely to diminish or be eroded due to the deterioration in the quality/condition of the property, even if the property is not strictly perishable;

(b) whether (and if so, to what extent) the accruing costs and expenses in storing and maintaining the property is likely to eat into and reduce its value (ie, whether the property is a wasting asset);

(c) whether any alternative security or undertaking is forthcoming from any party, including the property owner, to bear the expenses/costs of preserving the same pending the outcome of the proceedings;

(d) whether the property has been abandoned;

(e) the sum total of claims relative to the value of the property, taking into account any reduction or diminution in value; and

(f) whether there are third parties whose interests would be adversely affected if a sale is not ordered.

Assessment of the relevant factors in the present case

Whether the market value of the Cargo was likely to diminish

The claimant asserted that (a) the Cargo was likely to be less desirable because it was de-warranted (ie, it no longer had the imprimatur of the London Metal Exchange or “LME” for short), (b) that one could not be certain that the demand for nickel would not decrease even further by the end of this action, and (c) that due to “diminishing buyer prospects and market risks”, it would be commercially sensible to sell the Cargo now. Further, the value of de-warranted nickel would only diminish with time, over and beyond the market price of nickel at any given point in time.

However, these amounted to bare assertions, which the claimant did not provide any supporting evidence for.

On the other hand, the third defendant adduced some evidence of market value and price forecasts from the Bloomberg Commodity Price Forecasts for Nickel, which indicated that the price of nickel was expected to increase slightly in 2024. This forecast was, of course, by no means conclusive. Markets, being markets, are inevitably plagued by some degree of uncertainty. In my view, as far as the available evidence on the future market value of nickel was concerned, it was at best either neutral or slightly in favour of the third defendant.

The fact remained, however, that the claimant, as the party seeking the sale of the Cargo pendente lite, bore the burden of showing that the market value of the Cargo was likely to diminish, if it so chose to rely on this factor to make its case. However, the claimant did not provide the court with any satisfactory evidence in this regard. Neither was this a state of affairs that a court could take judicial notice of.

In the circumstances, the claimant failed to make good its case that a sale should be ordered under O 13 r 4(1)(b) because the “property is likely to diminish in value”. I turn then to consider if, under O 13 r 4(1)(c), “it is desirable to sell that property for any other reason”, having regard to the other factors mentioned at [20] above.

Whether the accruing costs and expenses in storing and maintaining the Cargo was likely to reduce the value of the property

Detention and preservation order

As summarised at [9] above, on 7 March 2023, the claimant sought and obtained ORC 1013 from the court to preserve the Cargo at Henry Bath LME warehouse in Port Klang and for the Cargo to remain in the first defendant’s custody until the final disposal of ADM 14. To recapitulate, para 4 of ORC 1013 provided as follows:

Quantum of expenses to be incurred, as compared against current value of the Cargo

For the purposes of determining the value of the Cargo, I accepted the third defendant’s submission that a suitable proxy for and/or indication of the market value of the Cargo is the LME settlement price, represented by the cash seller’s price (offer) plus a premium. This was not challenged by the claimant. Taking the LME settlement price as at 17 July 2023 (ie, US$20,710 per tonne) and the premium in a nickel sale offer dated 8 July 2022 exhibited in the claimant’s affidavit (of US$65 per tonne) , the value of the Cargo (weighing a total of 504.776MT) as at 17 July 2023 was US$10,486,721.40.

(a) the costs of storing the Cargo at Henry Bath LME warehouse in Port Klang was US$60.46 per day;

(b) the claimant renewed its marine cargo insurance policy covering the Cargo for the period April 2023 to March 2024 at a cost of US$33,349.60 per quarter;

(c) an insurance premium payable per month applied to the Cargo to cover the storage in an LME warehouse; this was calculated at 0.0114% of the value of the Cargo per month. The costs of insuring the Cargo for June 2023 was US$1,134.05; and

(d) the cost of hedging against market price fluctuations was approximately US$651.84 per month.

As I noted above at [19], the principal purpose of ordering a sale of movable property pendente lite under O 13 r 4(1) of the ROC 2021 is to avoid the injustice that might result from goods becoming of no value or significantly reduced in value in the interval between the application and the conclusion of the substantive proceedings. Ms Khng undertook a comparative analysis of a number of the reported decisions to demonstrate why a sale should not be ordered in the present case. I would highlight two decisions – Emilia Shipping and Five Ocean respectively.

Whether there was alternative security or undertaking to bear the costs of preserving the Cargo

Whether there were third parties whose interests might be adversely affected

On the present facts, there were no third parties whose interests would be adversely affected if a sale of the Cargo was not ordered. The Cargo was safely stored at Henry Bath LME warehouse pursuant to ORC 1013.

Risk of theft and/or fraud in relation to the Cargo

The claimant contended that given the uncertainties and doubts surrounding the Cargo, a sale of the Cargo would “eliminate any risk of further theft or fraudulent dealings.” The claimant referred to a news report which reported on a fraud that had occurred in an LME warehouse in Rotterdam and sought to extrapolate that to a risk of fraud in LME warehouses generally. The incident at the LME warehouse in Rotterdam involved bags of stones being passed off as nickel briquettes.

At the hearing before me, Ms Tan for the claimant was adamant about the risk of theft and/or fraud in relation to the Cargo. However, the evidence presented was speculative at best. One example of fraud in an LME warehouse in Rotterdam does not a summer make.

Further and more pertinently, after the Cargo was stored in the Henry Bath LME warehouse in Port Klang pursuant to ORC 1013, the Cargo was checked and verified by the claimant to be nickel, as opposed to scrap metal, stones or some other inferior material. No evidence was provided that even suggested that the warehouse was insecure or unsafe. When the claimant applied for the preservation and detention order, the Henry Bath LME warehouse in Port Klang was nominated by the claimant itself as a secure location to preserve the Cargo. There was thus no basis upon which the court could order the sale of the Cargo pendente lite, certainly not on the back of speculative and unfounded fears of a risk of theft and/or fraud. I had no hesitation rejecting this as a reason to order the sale.

Alleged prejudice to the third defendant

The third defendant also argued that the sale of the Cargo might potentially prejudice a fair and just disposal of the action. Ms Khng submitted that there might be a need, sometime in the future and before the trial, to inspect the Cargo again to assist in the fair and just disposal of the competing claims to the Cargo in ADM 14; that obviously could not be done if the Cargo were in the meantime ordered to be sold.

I was not convinced that there was such a risk of prejudice. First, the Cargo had already been inspected and was currently in the warehouse in tagged and numbered bags. Second, if there was any need to re-inspect, test or retain samples of the Cargo prior to the Cargo being sold, the court would, assuming that it was minded to order the sale of the Cargo pendente lite, have the power to make appropriate orders before any sale was completed. Thus, even if there was any potential prejudice to the third defendant, it could be appropriately neutralised.

Other factors

The claimant contended that if a sale pendente lite was not ordered, potential buyers might be reluctant to buy the Cargo later as they would be aware that the Cargo was the subject of court proceedings. I had difficulty understanding the logic of this argument. As things stood, any sale of the Cargo would require the sale proceeds to be paid by the buyer into court. That itself would likely alert any buyer to the fact that the Cargo was the subject of court proceedings. I hence did not place any weight on this argument.

Conclusion

For the reasons set out above, I was of the view that no good reason had been demonstrated by the claimant as to why a sale of the Cargo should be ordered pending the trial of the action in ADM 14. Based on the evidence presented to me, I could not justifiably come to a conclusion that ordering a sale of the Cargo pendente lite in this case would be in the interests of justice. I therefore dismissed the claimant’s application.

Finally, I record my appreciation to both Ms Tan and Ms Khng for their helpful and clear submissions, and the assistance they rendered to the court at the hearing of this application.