The “Dolphina”

1. Belinda Ang Saw Ean J:

2. Introduction

3. [1]

   [1] This has been, in many ways, a most unsatisfactory case, as evidenced by the length of time it has taken since the first day of trial for this judgment to be released.

4. [2]

   [2] The cause of this has been the evolution of the nature of the case as it radically transformed from a fairly straightforward claim for breach of contract due to misdelivery of cargo without production of the original bills of lading into a claim for civil conspiracy, with a detour through issues of subrogation. In order to accommodate fresh evidence coming to light, fundamental assumptions being challenged and jettisoned, the opening of different trains of enquiry, and new causes of action and/or submissions being formulated in response, these proceedings have occupied four tranches:

5. (a) From 22 February to 16 March 2010 (the “first tranche”), the action was originally mounted, fought and tried on the basis of breach of contract due to misdelivery of cargo, and I reserved judgment at the conclusion of the trial. In the course of my deliberations I began to entertain serious misgivings about certain fundamental matters that had apparently been taken for granted by both parties, but this was not taken up by them when I sought clarification of my doubts in January 2011.

6. (b) By 6 June 2011 (the “second tranche”), however, I was certain that the characterisation of the action as a claim for delivery of cargo without production of bill of lading was questionable in that some significant issues (including the equitable remedy of subrogation) had been overlooked, and I invited parties to address me on them. On 18 July 2011, however, one of the parties sought to introduce important new documentary evidence which would alter the complexion of the case quite dramatically.

7. (c) From August to September 2011 (the “third tranche”), after numerous adjournments, the new documentary evidence was finally admitted and the pleadings allowed to be amended to include a new claim in conspiracy.

8. (d) The proceedings finally concluded in November 2011 (the “fourth tranche”) with the hearing of the conspiracy claim.

9. [3]

   [3] As will become apparent, these unfortunate and unsatisfactory vicissitudes are attributable to the nature of the allegations, which involve fraud and commercial roguery implicating a number of actors; to the state of the evidence, which, though substantial, was not always presented in a coherent fashion and has had to be painstakingly pieced together (and even now there are still some missing links); and to the issues of law involved, several aspects of which are quite complex.

10. Dramatis Personae

11. [4]

    [4] Before explaining what this case is all about and exploring the facts in greater detail, it is important to first record the key characters in this saga.

12. The plaintiff

13. [5]

    [5] The plaintiff is Bank of Communications Co Ltd, Hangzhou Branch, now known as Bank of Communications Co Ltd, Zhejiang Provincial Branch (“BOC”), a mainland Chinese bank that provides financial services to import and export companies, and represented in these proceedings by Ms Vivian Ang (“Ms Ang”).

14. The defendant

15. [6]

    [6] The defendant is Universal Shipping Group Inc (“Universal”), a company incorporated in Panama and the registered owner of the vessel Dolphina, represented in these proceedings by Mr Prem Gurbani (“Mr Gurbani”).

16. [7]

    [7] Universal has three directors: Kwan Ngen Wah (“Alvin Kwan”), his brother Kwan Ngen Chung (“Steve Kwan”), and Chong Kan Hiung (“K H Chong”). The two shareholders of Universal, and the beneficial owners of the Dolphina, are Alvin Kwan and Steve Kwan. As the following paragraphs will demonstrate, these two individuals own shareholdings, and occupy directorships, in a number of other entities which feature prominently in these proceedings.

17. Kwantas Oil Sdn Bhd

18. [8]

    [8] One such company is Kwantas Oil Sdn Bhd (“KOSB”), an operator of palm oil mills and a palm oil refinery plant, as well as a wholesaler and distributor of palm oil products.

19. [9]

    [9] That Universal and KOSB are closely connected is, in my view, amply borne out by the following:

20. (a) The ultimate parent company of KOSB was and is Kwantas Corporation Berhad (“KCB”), a Malaysian listed company which has also been publicly recorded in Lloyd’s Sea-Web as being the “Group Owner” of Universal, and, even as late as 22 February 2010 and 2 November 2011, Universal continues to be publicly recorded in Lloyd’s Sea-Web as a “subsidiary” of KCB.

21. (b) Alvin Kwan, Steve Kwan and K H Chong are all directors of KOSB, as well as director-shareholders of KCB (indeed Alvin Kwan and Steve Kwan are substantial shareholders of KCB, and Steve Kwan is the Managing Director thereof).

22. (c) Universal provided the sea freight requirements of KCB and its subsidiaries (which I will refer to as the “KCB Group”), and those transactions were disclosed in KCB’s 2008 Annual Report as freight charges paid to a related party (namely, Universal), “a company in which certain directors of [KCB] have interest [sic]”.

23. (d) Universal occupies a physical address at 1 Floor, Fordeco Building, Jalan Singamata, 91100 Lahad Datu, Sabah, which is identical to that of KOSB and KCB, while the domain name of Universal’s e-mail and website address – kwantas.com.my – refers to that of KOSB. Lloyd’s Sea-Web also publicly recorded Universal as having a second address at Suite 1-6-W9, 6 Floor, CPS Tower, Jalan Centre Point, 88000 Kota Kinabalu, Sabah, which is the same address that appears on Universal’s letterhead. That latter address was also clearly used by KOSB as its business address, for instance, in key documents such as the charterparty relating to the charter of the Dolphina, KOSB’s commercial invoice and letter of indemnity, a letter of credit with KOSB as beneficiary, as well as in KOSB’s banking correspondence, and furthermore was the venue of choice for meetings of the board of KCB.

24. (e) In addition to the identical addresses, even though KOSB and Universal purportedly had their own staff, some employees of the former also helped out in the office of the latter.

25. Dongma Oils and Fats (Guangzhou Free Trade Zone) Co, Ltd

26. [10]

    [10] Another company related to Universal and KOSB is Dongma Oils and Fats (Guangzhou Free Trade Zone) Co, Ltd (“Dongma”), which, inter alia, operates a palm oil refinery and other downstream installations. Dongma’s links to Universal (through KOSB) are disclosed by the facts that:

27. (a) Dongma was 51% owned by KCB at the material time.

28. (b) Alvin Kwan, Steve Kwan and K H Chong are all directors of Dongma, and Steve Kwan is in fact its “Legal Representative”.

29. (c) Wang Shi Hui (also known as Sophia Wang) (“Sophia Wang”), the assistant manager of Dongma, was a witness for Universal, and testified that she saw KOSB as Dongma’s “head office”.

30. (d) The domain name of Dongma’s e-mail and website address – “kwantas.com.cn” – like that of Universal’s (see [9(d)] above) again refers to that of KOSB.

31. Fordeco Shipping Sdn Bhd

32. [11]

    [11] Yet another associated company is Fordeco Shipping Sdn Bhd (“Fordeco”), which acted as Universal’s shipping representative, and is connected to Universal by the following facts:

33. (a) Alvin Kwan and Steve Kwan are director-shareholders of Kwan Ah Hee Holdings Ltd, which wholly owns Fordeco.

34. (b) Universal and Fordeco occupy the same physical address (which is the same as that of KOSB and KCB (see [9(d)] above)).

35. (c) KOSB was formerly known as Fordeco Oil Sdn Bhd.

36. (d) Universal’s shipping manager, Yong Kui Fong (“K F Yong”), who was authorised to run the commercial business of Universal, was also being employed by Fordeco.

37. Zhejiang Zhongguang Industry Co Ltd

38. [12]

    [12] A company known as Zhejiang Zhongguang Industry Co Ltd (“Zhongguang”) was a customer of BOC and a buyer of palm oil from KOSB.

39. Felda Vegetable Oil Products Sdn Bhd

40. [13]

    [13] Felda Vegetable Oil Products Sdn Bhd (“Felda”) is a Malaysian company in the business of refining crude palm oil and palm kernel oil for the oleochemical industries.

41. Ningbo Shanke Import and Export Co Ltd

42. [14]

    [14] Ningbo Shanke Import and Export Co Ltd (“Shanke”), like Zhongguang, is a customer of KOSB, and there is some suggestion that Zhongguang was a nominee buyer of KOSB’s palm oil for Shanke in relation to the events leading to these proceedings.

43. [15]

    [15] Beyond that, very little is known about Shanke, save that a Ms “Xu Feng Zheng” (also known as Xu Zheng Feng) seems to have been acting on its behalf at the material time.

44. Malayan Banking Berhad

45. [16]

    [16] Malayan Banking Berhad (“Maybank”) played a number of different roles in this case, some of which did not come to light until the third tranche of the proceedings, but it can now be said with some confidence that, at the material time, Maybank was the banker of both KOSB and Felda, but that on one occasion it was not acting on their behalf as banker or agent, but in its own right as principal.

46. These Proceedings

47. [17]

    [17] How I intend to approach the exposition of the facts and procedural history of this case is to set out the four tranches over which these proceedings took place. Within each tranche I then explain what facts were available to me (and what were missing). I also set out some of my findings in relation to the disputed facts, although legal analysis is deferred to subsequent portions of this judgment.

48. First Tranche

49. [19]

    [19] The first tranche of these proceedings appeared to be a fairly straightforward claim by BOC against Universal for breach of contract for misdelivery of cargo without production of the original bills of lading, based on the following facts.

50. Available evidence

51. (1) The Zhongguang Contract

52. [20]

    [20] On or around 16 January 2008, KOSB entered into a contract (numbered ZJZ/RPL/16118/0308) with Zhongguang, pursuant to which KOSB sold a parcel of 3,000 mt (2% more or less at the seller’s option) of Refined Bleach Deodorised (“RBD”) Palm Oelin to Zhongguang at a price of US$1,138.20 per mt (ie, a total sum of US$3,414,600.00) (the “Zhongguang Contract”).

53. [21]

    [21] As will become apparent below, there were in fact two versions of the Zhongguang Contract: the actual, real version (any references to the Zhongguang Contract should be read as referring to this version), and another version (the “Good Copy”). More will be said about the Good Copy later, but the Zhongguang Contract, in addition to those summarised at [20] above, contained the following key terms:

54. (a) Shipment was to be effected during March 2008 and before 31 March 2008.

55. (b) Payment was to be made by draft at ninety (90) days after sight by the buyer, Zhongguang, opening an irrevocable letter of credit in favour of the seller, KOSB, for 100% of the contract value seven (7) days before shipment.

56. (c) The documents required for payment under the letter of credit were, inter alia: KOSB’s signed commercial invoice and a full set of “clean on board Bill(s) of Lading made out to order and blank endorsed”.

57. [22]

    [22] KOSB’s invoice and packing list dated 16 January 2008 (the “16 January 2008 invoice”) addressed to Zhongguang for 2,999.901 mt of RBD Palm Olein was produced in evidence. The 16 January 2008 invoice bore a signature in Chinese characters which, according to Sophia Wang, was that of an employee of Dongma, who was signing on behalf of KOSB. Although ostensibly issued in relation to the Zhongguang Contract, the 16 January 2008 invoice had in my view clearly been backdated, because it listed the subject cargo as being 2,999.901 mt of RBD Palm Oelin (instead of the figure originally stipulated in the Zhongguang Contract, viz, “3,000 mt of RBD Palm Oelin (2% more or less at the seller’s option)”), when that exact figure was only known on or around 23 March 2008 when BL4 was issued. In addition, the 16 January 2008 invoice notably contained a different term of payment from the Zhongguang Contract, namely, “100% cash against documents via Buyer’s Nominated Banks”.

58. [23]

    [23] I should add at this point that another version of the invoice (bearing reference number SS/RPL 0166/08 and also ostensibly issued in relation to the Zhongguang Contract) dated 24 March 2008 (the “24 March 2008 invoice”) was produced in evidence. Apart from the difference in dates, the 24 March 2008 invoice contained several important differences from the 16 January 2008 invoice; in particular, it had been signed by KOSB’s General Manager, Christopher Chai, and the payment term was no longer “100% cash against documents via Buyer’s Nominated Banks”, but referred to a letter of credit. That reference, however, gave away the fact that the 24 March 2008 invoice had also been backdated, because the letter of credit to which it referred only existed after 6 June 2008 (see [42] and [101] below).

59. (2) The February Charterparty

60. [24]

    [24] Pursuant to a voyage charterparty dated 19 February 2008 (the “February Charterparty”), which was in the amended Vegoilvoy form together with some additional clauses, Universal chartered the Dolphina to KOSB to carry 11,500 mt of RBD Palm Oelin from Kuantan, Malaysia, to Huangpu, China.

61. (3) The Felda Contract

62. [25]

    [25] In early March 2008, KOSB bought 11,500 mt of RBD Palm Oelin (the “Cargo”) from Felda (the “Felda Contract”). It was this Cargo which was to be the subject-matter of the February Charterparty, and it was from this Cargo that the Zhongguang Contract was going to be fulfilled (see [29] below).

63. [26]

    [26] Although it was known at the time of the first tranche of the proceedings that KOSB bought the Cargo from Felda, the precise terms of the Felda Contract were not.

64. (4) The bills of lading and BL4

65. [27]

    [27] On or around 23 March 2008, the Cargo was loaded on board the Dolphina at Kuantan and Universal issued four bills of lading (bill of lading nos KTN/HPU-01 (3,000 mt), KTN/HPU-02 (3,000 mt), KTN/HPU-03 (2,500 mt), and KTN/HPU-04 (2,999.901 mt)) to Felda as the named shipper of the Cargo, all dated at Kuantan on 23 March 2008. All four bills of lading were cut the same way: Felda was named as the shipper, the Cargo was consigned “TO ORDER”, and the notify party was Dongma.

66. [28]

    [28] Although four separate bills of lading were issued for what were apparently four separate parcels of cargo, the Cargo was stowed in a number of cargo tanks with no segregation as to parcels, and the bills of lading themselves provided that the Cargo would not be segregated:

67. [29]

    [29] Nonetheless, the present action is concerned with bill of lading no KTN/HPU-04 (“BL4”), and it is common ground that the 2,999.901 mt of RBD Palm Oelin which formed the subject-matter of BL4 (the “BL4 Cargo”) was to be used to fulfil the Zhongguang Contract.

68. (5) The Cargo is shipped from Kuantan

69. [30]

    [30] Notwithstanding Zhongguang’s failure to open a letter of credit seven days before shipment as required under the Zhongguang Contract (see [21(b)] above), the entire Cargo of 11,500 mt of RBD Palm Oelin was shipped as undivided bulk cargo on or around 23 March 2008.

70. (6) The Cargo arrives in Huangpu and is discharged against KOSB’s letter of indemnity

71. [31]

    [31] On 25 March 2008, Fordeco, acting on behalf of Universal, appointed Jade Shipping Agency (Guangzhou) Company Limited (“Jade Shipping”) as the Dolphina’s agents in Huangpu.

72. [32]

    [32] On or around 26 March 2008, with the Dolphina arriving in Huangpu, Jade Shipping inquired of Fordeco whether the Cargo could be released to the receivers without production of the original bills of lading (including BL4, which is at the root of this dispute). This request was copied to, inter alia, Steve Kwan.

73. [33]

    [33] On 27 March 2008, KOSB as charterer issued a letter of indemnity (“LOI”) in favour of Universal, agreeing, inter alia, to indemnify Universal against all liability arising as a result of delivering the Cargo to Dongma without production of the original bills of lading. The LOI was signed by Christopher Chai, the General Manager of KOSB, and provided, inter alia, as follows:

74. [34]

    [34] KOSB obtained a similar LOI (for delivery of the Cargo to Dongma without production of the original bills of lading) from Dongma on the same day, apparently before KOSB issued its LOI to Universal.

75. [35]

    [35] On 28 March 2008, with the Dolphina already at Huangpu, Fordeco confirmed to Jade Shipping that the Cargo could be released and discharged without requiring the original bills of lading to be produced. This too was copied to, inter alia, Steve Kwan.

76. [36]

    [36] At some point, Dongma had apparently entered into an agreement with Dongguan Huanan Oils & Fats Industrial Co, Ltd (“Huanan”) for storage of the Cargo in shore tanks belonging to Huanan. There is some dispute between the parties as to the validity of this agreement, and therefore whether Huanan was storing the Cargo for Dongma, but in my view this is not material to the present action. In any event, on 30 March 2008, the Dolphina began discharging the Cargo into Huanan’s shore tanks (as nominated by Dongma) against KOSB’s LOI, and the discharge was completed by 1 April 2008 (the “Discharge Date”).

77. [37]

    [37] It does not appear that the BL4 Cargo was separated from the rest of the Cargo during the discharge into Huanan’s shore tanks. Although there was some mention of “splitting” the four bills of lading, this turned out to be for customs purposes only, and not to segregate the Cargo.

78. [38]

    [38] It is common ground that, as at the Discharge Date, neither KOSB nor Dongma had possession of the bills of lading (in particular, BL4), and it has not been suggested that the bills of lading were being held on their behalf.

79. (7) April to June 2008

80. [39]

    [39] Between April to June 2008, Huanan released the Cargo (including the BL4 Cargo) to various end-buyers in China.

81. (8) Zhongguang applies for a letter of credit from BOC with the “Good Copy” of the Zhongguang Contract

82. [40]

    [40] On 6 June 2008, BOC received Zhongguang’s application for an irrevocable letter of credit in favour of KOSB in the sum of US$3,414,600.00 (ie, the agreed price for the BL4 Cargo under the Zhongguang Contract (see [20] above)).

83. [41]

    [41] In applying for the letter of credit, Zhongguang provided BOC with a copy of the Zhongguang Contract that was marked “Good Copy”. The Good Copy was a different version of the Zhongguang Contract, for it provided that the BL4 Cargo was to be shipped during June 2008 and before 30 June 2008, whereas the Zhongguang Contract had provided that shipment was to take place during March 2008 and before 31 March 2008 (see [21(a)] above). The Good Copy was otherwise identical to the Zhongguang Contract.

84. (9) The June L/C

85. [42]

    [42] BOC issued Zhongguang a letter of credit (no LCZE 001200800924) on 6 June 2008 (the “June L/C”), but not without Zhongguang paying BOC a security deposit of 15% of the sum for which the June L/C was issued (ie, US$512,190.00), which sum was apparently provided to Zhongguang by Shanke.

86. [43]

    [43] The June L/C was expressed to be subject to the ICC Uniform Customs and Practice for Documentary Credits 600 (“UCP 600”), and among the documents that had to be presented in order to receive payment under the June L/C were:

87. [44]

    [44] HSBC Bank Malaysia Berhad (“HSBC”), Kota Kinabalu, as advising bank, advised the opening of the June L/C on 6 June 2008, the terms of which were as follows:

88. HSBC’s letter of advice also contained the following remarks:

89. [45]

    [45] The June L/C also provided instructions to the “paying/accepting/ negotiating bank” as follows:

90. [46]

    [46] In other words, anyone hoping to be paid by Zhongguang (via BOC) under the June L/C had to present to BOC (via that person’s bank) BL4 (endorsed in blank) as well as KOSB’s commercial invoice in respect of the Zhongguang Contract, within 100 days of shipment (the latest shipment date being 15 June 2008), but presentation had to take place in any case before the expiry of the June L/C on 2 July 2008. Payment under the June L/C would be made by draft ninety (90) days after sight, which was consistent with the payment term under both the Zhongguang Contract and the Good Copy (see [21(b)] and [41] above).

91. [47]

    [47] A bill of exchange dated 9 June 2008 was drawn by KOSB on BOC for payment of the sum of US$3,414,487.32 to the order of Maybank at 90 days after sight (the “June B/E”). In other words, the payee, Maybank, had to present the June B/E and the other relevant documents to the drawee, BOC, for acceptance, whereupon the maturity date (the date by which BOC was required to make payment to the order of Maybank) would be fixed at 90 days after the date of presentation of the June B/E (see A G Guest, Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes (Sweet & Maxwell, 17 ed, 2009) at paras 2-086 and 6-004).

92. [48]

    [48] The June B/E was signed by K H Chong, one of the directors of KOSB, and its text was as follows:

93. [49]

    [49] On the reverse side of the June B/E was Maybank’s endorsement as payee:

94. (10) Maybank presents BOC with the relevant documents for payment under the June L/C

95. [50]

    [50] On 9 June 2008, Maybank sent the following letter (the “presentation letter”) to BOC:

96. [51]

    [51] There were a number of noteworthy features about Maybank’s presentation letter:

97. (a) In addition to BL4 and KOSB’s commercial invoice, the June B/E was also being presented, even though it was not actually one of the required documents under the June L/C (unlike BL4 and KOSB’s commercial invoice) (see [43] above). For convenience, I will refer to the June B/E, BL4 and KOSB’s commercial invoice as “the relevant documents”.

98. (b) I have already mentioned that two invoices were ostensibly issued by KOSB in relation to the Zhongguang Contract (see [22] and [23] above), and what was being presented by Maybank on 9 June 2008 was KOSB’s 24 March 2008 invoice.

99. (c) Maybank’s presentation letter contained the following remarks:

100. (d) As a result of Maybank’s presentation of both the June B/E as well as the other relevant documents, some of these remarks were referable to the June B/E while others were referable to the June L/C. The first remark referred to the endorsement on the reverse side of the June B/E (see [49] above), the second and third remarks were standard UCP 600 terms referable to the June L/C (see [43] above) and the final remark related once again to the June B/E – it has already been explained that presentation of the bill of exchange for acceptance was required to fix the maturity date (see [47] above), and given that it was presented on 9 June 2008, the maturity date was therefore 9 September 2008, and Maybank’s presentation letter directed BOC to pay US$3,414,487.32 to American Express Bank Ltd (“Amex”).

101. (e) Maybank’s presentation letter stated that BL4, KOSB’s commercial invoice and the June B/E were “for negotiation/payment”.

102. [52]

     [52] On 11 June 2008, BOC received by courier the relevant documents specified in Maybank’s presentation letter, and they were found on their face to comply with the terms of the June L/C. I should say that, by this point in time, the reverse side of BL4 carried three endorsements: an endorsement in blank by Felda, an endorsement by Maybank to KOSB, and an endorsement in blank by KOSB. It has always been common ground that that was the order in which the endorsements took place, but as none of these endorsements was dated, the grave difficulty I have had in this case has been in deciding when and the circumstances in which these various endorsements were executed, on which my views have changed as between the first and third tranches of the proceedings as a result of the new evidence which emerged.

103. [53]

     [53] On the same day (11 June 208), the relevant documents were sent by BOC to Zhongguang, which, by endorsing BOC’s document entitled “Notice for Payment under L/C”, confirmed that it had received the relevant documents presented on 11 June 2008, examined them and instructed and authorised BOC to make payment under the June L/C to the presenting bank (ie, Maybank), and to debit its account with BOC. BOC duly accepted the June B/E and its obligation thereunder to pay the sum of US$3,414,487.32 to Maybank crystallised.

104. (11) BOC is left in the lurch

105. [54]

     [54] After BOC’s acceptance of the June B/E (11 June 2008) but before payment on the maturity date (9 September 2008), however, BOC ran into a number of problems.

106. [55]

     [55] On 13 June 2008, Zhongguang returned the relevant documents to BOC, citing financial difficulties. Although the evidence of when and how BL4 was returned to or recovered by BOC is inconsistent, in my view, nothing turns on this as there is no doubt that BOC was and is in physical possession of the full set of BL4.

107. [56]

     [56] Following Zhongguang’s refusal to take up the relevant documents, BOC despatched its representatives to Huangpu to demand delivery of the BL4 Cargo from Jade Shipping. At Huangpu, BOC’s representatives were eventually informed by Dongma (which information was later confirmed by Jade Shipping), to their consternation, that the BL4 Cargo had been released and discharged by the Discharge Date (1 April 2008), without production of BL4. BOC thus realised that the BL4 Cargo had been shipped in March 2008, and not June 2008, and that the BL4 Cargo had long been dispersed.

108. [57]

     [57] On 16 June 2008, BOC understandably commenced legal proceedings in China against Zhongguang and all its guarantors, but, at the time of the proceedings, BOC had apparently not made any successful recovery in China.

109. [58]

     [58] On 17 June 2008, BOC also desperately sent a SWIFT message to Maybank informing it that the transactions in connection with the June L/C were suspected of being fraudulent, and demanded that Maybank stop or cancel any ongoing or outstanding export finance regarding KOSB. Unfortunately, Maybank replied stating that it had already paid KOSB on 10 June 2008, and that Maybank was holding BOC to its acceptance of the June B/E and its obligations thereunder.

110. [59]

     [59] On 3 July 2008, BOC commenced the present in rem proceedings against the Dolphina, claiming to sue as lawful holder of BL4 for misdelivery of the BL4 Cargo to Dongma without proper production of BL4. On 20 July 2008, the Dolphina was arrested in Singapore, and Universal furnished security in the sum of US$4.4 million for BOC’s claim.

111. [60]

     [60] Despite the grim situation, BOC nonetheless honoured its obligations under the June B/E, and paid US$3,414,487.32 at Maybank’s order to Amex on 9 September 2008.

112. Parties’ arguments in the first tranche

113. [61]

     [61] I now come to the arguments of the parties during the first tranche of the proceedings, which I briefly set out so that the subsequent turn of events leading to the second, third and fourth tranches may be made sense of.

114. [62]

     [62] A preliminary issue dividing the parties was whether the contract of carriage contained in or evidenced by BL4 was governed by English law (as BOC contended) or by Malaysian law (as Universal contended). I resolved this issue in BOC’s favour for the reasons I explain below (see [113] to [132]).

115. [63]

     [63] In relation to the substantive merits, Ms Ang for BOC was essentially arguing that, by virtue of the facts set out above, BOC was entitled to BL4 and the BL4 Cargo, that it was a term of the contract of carriage evidenced by or contained in BL4 that Universal would only deliver the BL4 Cargo against the production of BL4, and that by failing to do so, Universal was in breach of contract. Although a cause of action in conversion had also been pleaded by BOC, Ms Ang conceded that she was relying on the contractual claim alone.

116. [64]

     [64] Mr Gurbani for Universal sought to meet BOC’s breach of contract claim primarily on the basis that BOC had not acquired any rights of suit against Universal, because BL4 had been “spent” (ie, incapable of transferring rights of suit in relation to the contract of carriage) as at the Discharge Date because the BL4 Cargo had by then already been delivered to the person entitled to it. This argument depended on, inter alia, establishing who was entitled to the BL4 Cargo at the Discharge Date, which in turn depended on establishing when the various endorsements of BL4 (see [52] above) had taken place, and it also drew upon the case of London Joint Stock Bank Limited v British Amsterdam Maritime Agency Limited [1908-1911] KB 571 (“London Joint Stock”).

117. Unavailable evidence and unanswered questions

118. [65]

     [65] I am compelled to observe that Universal’s argument, as I have just described it, was substantially without evidential support during the first tranche of the proceedings, and rested on rather extravagant presuppositions and logical leaps which ignored material gaps in the evidence. I do not wish to dwell on this matter because it was eventually superseded by the events which I describe below, but it must be said that a frustrating amount of energy was therefore expended in an attempt to follow Mr Gurbani’s arguments, only to discover that they resulted in dead-ends. I note, furthermore, that this lack of evidence was not accidental, as none of the following individuals, who clearly possessed a great deal of material knowledge, was called to give evidence on behalf of Universal:

119. (a) Steve Kwan, who had been copied into e-mail correspondence relating to the shipment and discharge of the Cargo without production of the bills of lading, swore almost all the affidavits on behalf of Universal in relation to BOC’s application for summary judgment and the other interlocutory matters, and it is clear to me that he played a key role in this entire affair.

120. (b) KOSB’s General Manager, Christopher Chai, was another major character in the events leading up to these proceedings but whose evidence was conspicuously absent.

121. (c) As the person who was apparently involved in the charter of the Dolphina and who was generally authorised to handle Universal’s commercial business (see [11(d)] above), K F Yong’s evidence would also have been obviously relevant.

122. Instead of these possible candidates, however, Universal furnished Alvin Kwan and Sophia Wang as witnesses of fact, both of whom were of remarkably little assistance.

123. [66]

     [66] The former professed to be in overall charge of Universal but displayed very little knowledge of the company and its affairs to support his claim. For instance, he testified that Universal has two directors, when in fact it has three (see [7] above). In addition, Alvin Kwan himself admitted that he possessed no direct personal knowledge about the facts of the case and his evidence was thus entirely unhelpful.

124. [67]

     [67] The other factual witness, Sophia Wang, was an employee of Dongma, and her role in all this was somewhat peripheral.

125. [68]

     [68] In short, nothing was heard from the persons who, at least on the face of the documentary evidence, quite clearly possessed actual knowledge of the sale and shipment of the Cargo in March 2008, and I have no doubt that, given the close connection between them, Universal could have called someone appropriate from KOSB to testify on its behalf had it wanted to, especially given that Universal was invoking the terms of KOSB’s LOI, and that it was therefore KOSB’s funds which were at stake in these proceedings.

126. [69]

     [69] As a result, I was left with very little oral evidence with which to make sense of the documentary evidence (or to be more precise, the documentary evidence that was available to me), resulting in the following unanswered questions casting a pall over my deliberations:

127. (a) The circumstances surrounding, and the events following, Zhongguang’s failure to open a letter of credit at the time required by the Zhongguang Contract: one would have thought that such an obligation would have been a condition of the Zhongguang Contract, so why did KOSB not terminate the Zhongguang Contract but instead continue to perform by shipping the BL4 Cargo?

128. (b) The significance of KOSB’s 16 January 2008 invoice containing a different payment term from the Zhongguang Contract, and the circumstances surrounding the creation and backdating of KOSB’s 24 March 2008 invoice: what was the explanation for these discrepancies?

129. (c) The terms of the Felda Contract: had Felda been paid by KOSB for the Cargo, and if so, how and when?

130. (d) What was the reason for Maybank’s endorsement of BL4 to KOSB?

131. (e) The circumstances surrounding the creation of the Good Copy: who was responsible for it and what induced them to do it?

132. (f) The significance of BOC approving the opening of the June L/C by reference to the Good Copy rather than the Zhongguang Contract: what were the implications of this, if any?

133. [70]

     [70] Although BOC was clearly aware of some of these matters as well (for instance, it argued that the Good Copy had been created to conceal the fact that the BL4 Cargo had already been shipped), it too was ultimately stymied by the lack of evidence, and could not make much of them. Given that BOC’s claim was essentially for breach of contract, it could not legitimately pursue other lines of enquiry. Unfortunately, however, this meant that in some respects BOC was barking up the wrong tree, by relying on certain false assumptions, such as the validity of KOSB’s endorsement of BL4, which was a matter that troubled me greatly from an early stage of the proceedings.

134. [71]

     [71] As I have said, Mr Gurbani was arguing that BL4 had been spent as of the Discharge Date (see [64] above). KOSB must have known that the BL4 Cargo had been discharged as of the Discharge Date, because KOSB had requested that Universal make delivery against its LOI of 27 March 2008 (see [33] and [35] above). Yet, no point was being taken by Ms Ang in relation to the fact that KOSB had, after the Discharge Date, gone ahead to endorse BL4 in blank, thereby treating it (and intending that it be so treated) as a subsisting, negotiable document of title capable of transferring rights of suit. This peculiarity was exacerbated by the fact that KOSB’s LOI obliged it to surrender BL4 to Universal once it was in KOSB’s hands. Thus, it seemed to me seriously questionable whether KOSB’s endorsement of BL4 in blank had been bona fide and was valid, as the parties (and especially BOC) seemed to have assumed.

135. [72]

     [72] On 28 January 2011, I therefore invited the parties to consider the validity and effect (if any) of KOSB’s endorsement of BL4 in blank, in the following terms:

136. [73]

     [73] Perhaps predictably, Mr Gurbani submitted that KOSB’s endorsement was irrelevant to Universal’s defence, as KOSB and Universal were separate legal entities, and that KOSB’s conduct could not bind Universal (which had not acquiesced in them) in any way. Surprisingly, however, Ms Ang also took the position that KOSB’s endorsement of BL4 in blank was irrelevant to BOC’s claim, submitting, inter alia, that the only significance of the matters I had raised was the prospect of a cause of action by Universal against KOSB under KOSB’s LOI of 27 March 2008.

137. [74]

     [74] I was not at all satisfied with these responses, and I cannot help observing that an enormous amount of the time and effort that was subsequently expended to explore these matters and formulate the true controversies could have been saved had the parties been more concerned about these troubling details from an early stage of the litigation.

138. Key matters overlooked

139. [75]

     [75] I soon began to uncover other matters which, to my dismay, had been glossed over, and in order to explain them it is necessary for me to elaborate how I viewed the evidence during the first tranche of the proceedings.

140. (1) Maybank as pledgee of BL4?

141. [76]

     [76] As I have said, one of the relevant issues was who was entitled to the BL4 Cargo on the Discharge Date, which turned on when and in what circumstances the various endorsements on BL4 had taken place (see [64] above). I knew that Universal had issued BL4 to Felda on or around 23 March 2008 (see [27] above), and I knew that Maybank presented BL4 to BOC on 9 June 2008 (see [50] above). What, then, happened to BL4 in between and how were the various endorsements on BL4 to be accounted for?

142. [77]

     [77] On the less than ideal state of the evidence at the time, I considered there to be two possible scenarios.

143. [78]

     [78] The first was that no financing was required in respect of the Felda Contract, and Felda was simply waiting to be paid by KOSB. As I did not know the terms of the Felda Contract (see [26] above), and because there was no evidence to the contrary, I assumed that Felda had not been paid by KOSB, and that, due to the large sums of money involved, KOSB would pay by way of a letter of credit. Based on Mr Gurbani’s statement from the Bar that Maybank was Felda’s bank and collecting agent (in addition to being KOSB’s bank), I considered that Felda had, at some point in time before June 2008, endorsed BL4 in blank and passed it to Maybank to hold as collecting agent until such time as KOSB was ready to pay Felda by way of a letter of credit. By 6 June 2008, KOSB would have known that Zhongguang had opened the June L/C with BOC (of which KOSB was the beneficiary) (see [44] above). On 9 June 2008, Maybank would then have presented BL4 (along with KOSB’s 24 March 2008 invoice and the June B/E) to BOC as required under the June L/C, endorsing it to KOSB around that time. Likewise around that time, KOSB would have endorsed BL4 in blank. On this scenario, as at the Discharge Date, Felda would have been entitled to the BL4 Cargo.

144. [79]

     [79] The second scenario again assumed that Felda had not been paid by KOSB, but also assumed that financing was required in respect of the Felda Contract, and that BL4 was pledged to Maybank as security for trade financing. Either Felda or KOSB could have been the pledgor, with the movement of BL4 differing as between the two possibilities:

145. (a) If Felda had been the pledgor, Felda would have pledged BL4 to Maybank, endorsing BL4 in blank as it did so. Maybank as pledgee would have held on to BL4 until KOSB was ready to make payment in respect of the Felda Contract, which would have been around 9 June 2008 after Zhongguang had applied for the June L/C. Maybank, as pledgee, would then have endorsed BL4 to KOSB and KOSB would then have endorsed it in blank.

146. (b) If KOSB had been the pledgor, Felda would have endorsed BL4 in blank and Maybank would have held it as Felda’s collecting agent, pending payment from KOSB. KOSB would have obtained trade financing from Maybank (as KOSB’s banker) to pay Felda, pledging BL4 to Maybank in the process. Upon paying Felda, KOSB would have received BL4 from Maybank (as Felda’s collecting agent), with Maybank for some reason endorsing BL4 to KOSB. KOSB would then have returned BL4, endorsed in blank, to Maybank.

147. The second scenario would have had the consequence that, as at the Discharge Date, Maybank would have been entitled as pledgee to the BL4 Cargo.

148. [80]

     [80] What puzzled me, however, was Maybank’s endorsement of BL4 to KOSB. Only if Felda had pledged BL4 to Maybank could the endorsement satisfactorily be explained, because Maybank would have been endorsing BL4 in its own right qua pledgee of BL4. In any other situation, however, Maybank would have been acting as collecting agent for Felda, in which case it had no business endorsing BL4 in its own name.

149. (2) Maybank not acting on behalf of and as agent for KOSB

150. [81]

     [81] What was even less explicable was the seemingly common ground that, regardless of how the various endorsements ended up on BL4, on 9 June 2008, Maybank was in possession of BL4 and presented it (as well as the other relevant documents) to BOC on behalf of and as agent for KOSB (the beneficiary under the June L/C). To my mind, this was an incorrect view of the evidence (such as it was), and it did not become less so merely because both parties shared it (see Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd [2008] 1 SLR(R) 375 at [9] and Pacific Recreation Pte Ltd v S Y Technology Inc [2008] 2 SLR(R) 491 (“Pacific Recreation”) at [32]).

151. [82]

     [82] In my opinion, two things had not been adequately appreciated.

152. [83]

     [83] First, under the terms of the Zhongguang Contract, KOSB was giving Zhongguang 90 days’ worth of credit (see [21(b)] above). On the evidence, Zhongguang did not take steps towards making payment until 6 June 2008, when the June L/C was opened. The June L/C, however, contemplated a further 90-day period of credit (“Drafts at: At 90 days after sight…”) (see [44] above), which meant that KOSB was not going to be paid in respect of the Zhongguang Contract till at least 9 September 2008 – some 6 months after shipment. One would expect, therefore, that as an unpaid seller, KOSB must have been extremely concerned about this state of affairs, especially given the KCB Group’s policy on trade credits and control over receivables, set out in KCB’s financial statements for the financial year ending 30 June 2008, in the following terms:

153. [84]

     [84] Second, given the June L/C’s instructions to the “paying/accepting/negotiating bank” (see [45] above), HSBC’s letter of advice expressing the June L/C to be “[a]vailable with” or “by” “[a]ny bank” “[b]y negotiation” (see [44] above), as well as Maybank’s statement in its presentation letter that it was presenting BL4, KOSB’s 24 March 2008 invoice and the June B/E “for negotiation/payment” (see [50] above), it was clear to me that the June L/C was a negotiation credit, that is, a credit in which the issuing bank’s undertakings are directed to any bank which becomes a bona fide holder of the bill of exchange and the other documents stipulated by the credit (A Malek QC and D Quest, Jack: Documentary Credits (Tottel Publishing, 4 ed, 2009) at para 2.20).

154. [85]

     [85] In my view, the appropriate inference to be drawn from the foregoing observations, and which neither party seemed inclined to draw, was that KOSB, perhaps because of the KCB Group’s strict control over outstanding receivables, negotiated the June L/C and the other relevant documents (ie, BL4 and KOSB’s 24 March 2008 invoice) to Maybank, endorsing BL4 in blank as it did so, and that when Maybank presented the relevant documents to BOC on 9 June 2008, it was not doing so on behalf of and as agent for KOSB (the beneficiary of the June L/C), but as principal in its own right, intending thereby to itself obtain payment from BOC when the draft matured. As R King, Gutteridge and Megrah’s Law of Banker’s Commercial Credits (Europa Publications, 8 ed, 2001) (“Gutteridge”) at para 4-100 observes, a negotiation credit is:

155. Gutteridge continues at para 4-102:

156. Similarly, E McKendrick, Goode on Commercial Law (LexisNexis, 4 ed, 2009) at p 1070 describes a negotiation credit as:

157. [86]

     [86] In light of the foregoing, I was certain, therefore, that regardless which of the two scenarios I have described at [78] and [79] above represented the true state of affairs, KOSB must have negotiated the June L/C to Maybank in early June 2008, endorsing BL4 as it did so, and that Maybank therefore could not have been acting on behalf of and as agent for KOSB when Maybank presented the June B/E and the other relevant documents under the June L/C to BOC on 9 June 2008, but was rather acting as principal in its own right.

158. Second tranche

159. [87]

     [87] While I could not in good conscience have acceded to a version of the facts which the parties were not disputing but which I believed to be wrong, neither would it have been in the interests of justice for me to have rendered a decision without first hearing what the parties had to say about my views. Accordingly, on 6 June 2011 I informed the parties that in the absence of evidence to the contrary, I was likely to find that, inter alia:

160. (a) BL4 had been held by Felda or Maybank (whether as collecting agent or pledgee) up to about 9 June 2008 and that at some earlier point Felda had endorsed BL4 in blank to Maybank.

161. (b) Maybank in turn endorsed BL4 to KOSB and KOSB then negotiated the June L/C to Maybank, endorsing BL4 in blank as it did so.

162. (c) On 9 June 2008, Maybank acting as principal sent BL4 and the other relevant documents to BOC for negotiation and payment under the June L/C.

163. I should add that I was still operating on the assumption that either one of the two scenarios I have described at [78] and [79] above represented the true state of affairs, ie, Felda had not been paid by KOSB and Maybank had quite possibly financed the Felda Contract.

164. [88]

     [88] On the basis of these proposed findings, I invited submissions from the parties on the following issues:

165. (a) The validity and effect of KOSB’s endorsement of BL4 in blank in light of what KOSB knew at the time (see [71] above).

166. (b) Whether BOC was subrogated to the rights of Felda or Maybank.

167. (c) Whether there was any need for BOC to revive its claim in conversion.

168. The reason I asked for submissions on the latter two issues was because, in my view, either Felda (on the first scenario) or Maybank (on the second scenario) would have been entitled to the BL4 Cargo on the Discharge Date, and Universal would likely have been liable to one of them in conversion for discharging the BL4 Cargo without requiring production of BL4, and furthermore I entertained the possibility that BOC might have been subrogated to the rights of either Felda or Maybank on the authority of some of the statements made by Channell J in London Joint Stock, a case on which Mr Gurbani had relied strongly (see [64] above).

169. [89]

     [89] In response to my directions of 6 June 2011, BOC tendered its submissions on 11 July 2011. In essence, Ms Ang argued that KOSB’s endorsement of BL4 was ineffective, that BOC was subrogated to the rights of Maybank and/or Felda, and that BOC also had a cause of action in conversion. These submissions were made on the assumption (which I also entertained) that Maybank had likely financed the Felda Contract (ie, the second scenario at [79] above). More importantly, BOC had all along assumed (as had I) that BL4 had been in circulation within the banking system until about early June 2008 (probably after the June L/C had been opened) when it apparently came into KOSB’s possession and was endorsed in blank by KOSB. After Ms Ang tendered her submissions, however, on 18 July 2011 Universal belatedly asked for directions to introduce thirty new documents from KOSB in evidence to show, inter alia, that Maybank had not in fact financed the Felda Contract at all, and that BL4 had come out of circulation much earlier, in early April 2008.

170. Third tranche

171. The new documentary evidence is admitted

172. [90]

     [90] Universal’s new documentary evidence from KOSB was clearly relevant and necessary for the just and fair disposal of the issues, and it was admitted without much difficulty, since Ms Ang was not challenging the authenticity and contents of the new documents, which included, inter alia:

173. (a) The terms of the Felda Contract (the Felda Contract was in fact two separate contracts, but nothing turns on this), signed by Christopher Chai.

174. (b) A bill of exchange dated 23 March 2008 drawn by Felda on KOSB payable to the order of Maybank (the “March B/E”).

175. (c) A collection order which revealed that Maybank was in receipt of the March B/E and the relevant documents (including BL4) by 1 April 2008, and that Maybank’s instructions to its Sabah branch were to deliver the relevant documents against payment.

176. (d) A collection order dated 2 April 2008 from Maybank’s Sabah branch to KOSB which revealed that Maybank’s Sabah branch was ready to present the relevant documents (including BL4) to KOSB. In the same document, Maybank asked KOSB for signed authorisation to debit the latter’s account to settle the March B/E.

177. (e) KOSB’s authorisation (signed by Steve Kwan and K H Chong) on a copy of the collection order, allowing Maybank to debit its current account (to pay Felda for the Cargo purchased by KOSB under the Felda Contract), which Maybank did on 4 April 2008.

178. (f) KOSB acknowledged receipt of the relevant documents (including BL4) on 4 April 2008.

179. (g) A “Documentary Collection and/or Negotiation Form” dated 9 June 2008, signed by Steve Kwan and K H Chong.

180. (h) An e-mail exchange dated 2 August 2011 between Sophia Wang and one Chong Thien Wu (“T W Chong”), the Operations Manager of KOSB, wherein T W Chong sought clarification of “any correspondence from… Zhongguang regarding the change of shipment month from 31 Mar 2008 [t]o 30 Jun 2008…”, to which Sophia Wang replied that, “Ningbo [ie, Shanke] Ms.Xu [ie, Xu Feng Zheng] advised to amend shipment… so that bank could open [letter of credit]… Other item remain [sic] unchanged”.

181. Significance of the new documentary evidence

182. [91]

     [91] The admission of the new documentary evidence meant that a number of inaccurate assumptions held during the first tranche of the proceedings could now be corrected, and that many of the unanswered questions I highlighted at [69] above were now capable of being cautiously, if not confidently, explained.

183. (1) Wrong assumptions corrected

184. [92]

     [92] It is now known, for instance, that contrary to my views in the first tranche (see [79] above), no financing was required from Maybank in respect of the Felda Contract, and that KOSB paid Felda for the Cargo on 4 April 2008 from its own funds. The movement of BL4 was therefore completely different from what BOC and I had initially envisioned:

185. (a) Whereas it was previously thought that Felda had endorsed BL4 in blank any time in or before early June 2008, it is now known that Felda had in fact endorsed BL4 in blank much earlier, on or before 1 April 2008.

186. (b) Whereas it was previously thought that, between 23 March 2008 to early June 2008, BL4 was being held either by Felda, by Maybank qua Felda’s collecting agent, or by Maybank qua pledgee, it is now known that Felda only held BL4 up to about 1 April 2008, before sending it to Maybank qua Felda’s collecting agent, and that Maybank in that capacity only held BL4 up to about 2 or 3 April 2008.

187. (c) Whereas it was previously thought that Maybank had endorsed BL4 to KOSB in early June 2008 (either as Felda’s collecting agent or as pledgee in its own right), it is now known that Maybank in fact endorsed BL4 to KOSB on or before 2 April 2008. It would therefore appear that Maybank endorsed BL4 in its capacity as Felda’s collecting agent, although why it should have done that remains a mystery to me.

188. (d) Most importantly, whereas it was previously thought that BL4 had always been in circulation in the banking system from 23 March to early June 2008, it is now known that it had in fact come out of circulation on 4 April 2008 when it was received from Maybank by KOSB, and that KOSB then seems to have retained BL4 up to early June 2008. I do not accept that BL4 ever left KOSB’s possession between 4 April and early June 2008: in particular, I do not accept that BL4 ever found its way back to Universal during this period (see [109] below).

189. (e) Whereas it was previously thought that KOSB had endorsed BL4 in blank in early June 2008, it is now clear that the endorsement took place between 4 April and early June 2008. I remain of the view (see [86] above), however, that KOSB must have negotiated the June L/C to Maybank in early June 2008, and I am inclined to think that KOSB’s blank endorsement of BL4 was part of that process and therefore probably took place in early June 2008 (see [101] below), for I can think of no reason why KOSB would endorse BL4 in blank before that date, since there is no evidence that any other negotiation or transfer of BL4 was in contemplation (save for KOSB’s promise under its LOI to return BL4 to Universal, but KOSB would not have needed to endorse BL4 for that purpose).

190. (2) Unanswered questions explained

191. [93]

     [93] In addition, as a result of the new evidence, I am now in a position to make some sense of what must have happened in the critical months of March, April and June 2008 to have led to the present proceedings.

192. [94]

     [94] As I still have not been furnished evidence as to what happened to the Zhongguang Contract after Zhongguang failed to open a letter of credit seven days before shipment as required, I find that the Zhongguang Contract continued to subsist and that, for reasons best known to it, KOSB allowed the BL4 Cargo to be shipped on or around 23 March 2008, despite Zhongguang not having opened the letter of credit.

193. [95]

     [95] Sometime around 23 March 2008, the BL4 Cargo was quantified at 2,999.901 mt, and the 16 January 2008 invoice (which reflected that quantity) must then have been issued and backdated (see [22] above). Sophia Wang’s oral testimony was to the effect that the 16 January 2008 invoice had been prepared by Dongma for customs purposes only, though she also testified that that another invoice would be issued by Dongma’s “head office” (ie, KOSB) for the purposes of opening a letter of credit, though the contents of both invoices would be the same. I am not entirely convinced that the 16 January 2008 invoice was only for customs purposes, and in the absence of further evidence to the contrary, I am prepared to infer that the payment term in 16 January 2008 invoice was different from that found in the Zhongguang Contract because by the time the former was issued, Zhongguang had not opened a letter of credit as required and the BL4 Cargo had already been shipped, and that a plausible and reasonable explanation for the difference in payment terms is that KOSB and Zhongguang must have agreed to vary the mode of payment in respect of the BL4 Cargo to “100% cash against documents via Buyer’s Nominated Banks” (which also perhaps explains why KOSB did not terminate the Zhongguang Contract and allowed the BL4 Cargo to be shipped and delivered on 90-day credit terms, as K H Chong’s evidence in the fourth tranche suggested). As there is no evidence, however, that any of the other terms of the Zhongguang Contract had been varied, KOSB was still obliged to give Zhongguang 90 days’ worth of credit, and when the Cargo (including the BL4 Cargo) was shipped in March 2008 on board the Dolphina KOSB was therefore probably still expecting to be paid for the BL4 Cargo, though in the absence of further evidence I am unable to say what payment date was in contemplation.

194. [96]

     [96] As KOSB had yet to pay Felda for the Cargo by the Discharge Date, it was not then in possession of the bills of lading, hence the recourse by both Dongma and KOSB to their respective LOIs in order that Universal would discharge the Cargo. After KOSB paid Felda on 4 April 2008, however, it came into possession of BL4, and thereafter retained it while, I infer, awaiting payment from Zhongguang in respect of the BL4 Cargo. In the meantime, to the knowledge and probably with the consent of KOSB, the Cargo (including the BL4 Cargo) was steadily being released from Huanan’s shore tanks to the various end-buyers.

195. [97]

     [97] The e-mail exchange between Sophia Wang and T W Chong revealed that Shanke had apparently initiated the creation of the Good Copy, in order that BOC would approve Zhongguang’s application for the June L/C, presumably to pay KOSB in respect of the Zhongguang Contract and the BL4 Cargo. On this basis, I am prepared to infer that around early June 2008, it must have transpired that cash payment by Zhongguang to KOSB was not going to be possible, and that a decision was then made that Zhongguang would open a letter of credit with BOC (ie, the June L/C). This appears to have been a reversion to the mode of payment prescribed under the Zhongguang Contract (albeit highly delayed), but whether that was truly what had been agreed between KOSB and Zhongguang is somewhat immaterial: in my view the true motivation for opening the June L/C was to protect KOSB’s commercial interests by transferring its loss onto an unsuspecting third party financial institution like BOC.

196. [98]

     [98] I find that there was quite clearly bad faith and fraud involved in the opening of the June L/C, on the basis of what I consider to be the following overwhelming evidence:

197. (a) In order to open the June L/C, Zhongguang had to provide BOC with a copy of the Zhongguang Contract. This was obviously a problem, since it is most unlikely that BOC would have approved the June L/C had it known that it was financing a transaction that had been completed months earlier, and that it would in all probability have no recourse to the BL4 Cargo in the event that it was not reimbursed by Zhongguang. Consequently, the Zhongguang Contract had to be doctored.

198. (b) The e-mail exchange between Sophia Wang and T W Chong indicates that the Good Copy was not the result of some administrative oversight or innocent error (not that I considered such a thing likely in any event), but a premeditated and deliberate effort orchestrated with the singular purpose of inducing BOC’s approval of the opening of the June L/C.

199. (c) The e-mail exchange also indicates quite strongly that there was complicity between Zhongguang and KOSB in the creation of the Good Copy.

200. (d) Even apart from the e-mail exchange, however, are the facts that the Good Copy was signed by KOSB’s General Manager, Christopher Chai (and not some minor functionary), and impressed with Zhongguang’s company seal (which, I am prepared to infer, was done by Zhongguang’s legal representative, who would typically be the keeper of the company seal). The evidence in fact goes considerably further than this, because there is a copy of the Good Copy with only Christopher Chai’s signature, demonstrating that the Good Copy must have been prepared and signed by KOSB before being passed to Zhongguang for its execution.

201. I conclude and I find as a fact that the Good Copy was executed by KOSB and Zhongguang, on the advice Xu Feng Zheng of Shanke, for the express purpose of duping BOC into approving the opening of the June L/C. The Good Copy was undeniably a sham document, as that term is classically understood, because it was intended by KOSB and Zhongguang to give to third parties (in particular, BOC) “the appearance of creating between [them] legal rights and obligations different from the actual legal rights and obligations… which [they] intend to create” (Snook v London & West Riding Investments Limited [1967] 2 QB 786 at 802 (per Diplock LJ)); as between them KOSB and Zhongguang continued to operate on the basis of the Zhongguang Contract.

202. [99]

     [99] At one point in his submissions that BOC did not acquire any rights of suit against Universal in relation to BL4, Mr Gurbani faintly suggested that BOC must have known that the BL4 Cargo had been shipped on or around 23 March 2008 and that it was not going to be shipped in June 2008 (as provided for in the Good Copy), because, inter alia, BOC allowed, in Mr Gurbani’s words, “an extraordinarily long time of 100 days for presentation of [the relevant documents under the June L/C] from date of shipment”, when the normal presentation period provided for in the UCP 600 is only 21 days. Although he did not say so in terms, Mr Gurbani’s argument implies that BOC was somehow aware of the existence of the Zhongguang Contact, and therefore that the shipment date provided for in the Good Copy was not intended to be acted upon. This argument, based as it is on unarticulated and speculative inferences, is so completely against the weight of the clear and direct evidence given by BOC’s witnesses that I reject it entirely.

203. [100]

     [100] I therefore find that, when the June L/C was being opened, BOC was ignorant of the fact that the BL4 Cargo had already been shipped in March 2008, and similarly that, at all relevant times, BOC never knew of or saw the Zhongguang Contract providing for such shipment.

204. [101]

     [101] Although BOC was thus successfully fooled into approving the June L/C, I remain of the view that, after paying Felda for the Cargo, KOSB must have been unable or unwilling to wait an additional 90 days for payment under the June L/C, thereby deciding to negotiate the June L/C and the relevant documents to Maybank. I consider that the Documentary Collection and/or Negotiation Form dated 9 June 2008 provides strong corroborative evidence of this negotiation, because KOSB instructed Maybank that, upon “negotiation/discount of this bill [ie, the June B/E]”, the proceeds therefrom were to be credited to KOSB’s account with Maybank, and the account was accordingly credited for US$3,414,487.32 the very next day on 10 June 2008. In order for the June L/C to be successfully negotiated to Maybank, however, all the relevant documents had to be in order, ie, KOSB had to provide Maybank with a “signed commercial invoice” indicating the serial number of the June L/C and a full set of BL4, made out to order and “blank endorsed” (see [43] above). The 16 January 2008 invoice would not do, since it indicated a different payment term of “100% cash against documents via Buyer’s Nominated Banks”, and I therefore find that the 24 March 2008 invoice (which, incidentally, was signed by Christopher Chai), had to have been created and backdated around this time. In addition, I find that BL4 must have been endorsed in blank by KOSB around this time, in early June 2008.

205. [102]

     [102] The June L/C was thereby successfully negotiated to Maybank, so that when Maybank presented the June B/E drawn under the June L/C and relevant documents to BOC on 9 June 2008, it was doing so in its own right and not on behalf of KOSB (see [86] above).

206. [103]

     [103] What happened thereafter has already been traversed, but the new evidence did throw up one further significant development: that KOSB’s account had been credited again in September 2008 for US$3,414,362.32, apparently as payment of the June B/E drawn under the June L/C (as denoted by Maybank’s internal reference number “9916WAM1907793” and KOSB’s internal reference number “SS/RPL1066/08” (see [23] and [48] above)). This second payment has never been satisfactorily explained, but I surmise that what must have happened is that the June L/C was negotiated to Maybank on a full recourse basis, and that, after BOC informed Maybank on 17 June 2008 of its suspicions (see [58] above), Maybank must have exercised its right of recourse against KOSB to unwind its payment of US$3,414,487.32 to KOSB on 10 June 2008, and that the crediting of KOSB’s account for US$3,414,362.32 in September 2008 represented payment by BOC under the June B/E (see [60] above).

207. Why did the new evidence come to light so late?

208. [104]

     [104] I cannot over-emphasise the significance of the thirty new documents, as well as the effect they had on the case, and I must express my extreme dissatisfaction that this evidence from KOSB appeared so late in the day. Indeed, I cannot help wondering whether something sinister lurks behind Universal’s selective and delayed disclosure, especially when it is borne in mind that Steve Kwan had, in resisting BOC’s application for summary judgment, sworn an affidavit deposing that KOSB had been in possession of BL4 on or about 28 March 2008 (which, if true, would have provided Universal with a complete defence to BOC’s action for misdelivery), a claim that was now completely contradicted by Universal’s new evidence which revealed that KOSB had come into possession of BL4 only after the Discharge Date of 1 April 2008. The wealth of information contained in the thirty new documents also contrasts sharply with the paucity of Universal’s evidence during the first tranche of the proceedings, on which I have already commented (see [65] above).

209. [105]

     [105] It was never satisfactorily explained to me why the thirty new documents were not disclosed earlier, as they were plainly relevant to the arguments canvassed by Universal in the first tranche. Mr Gurbani claims that the new documents were not then relevant since Universal merely had to meet BOC’s pleaded case, and their disclosure was only necessitated to correct my misapprehension of the true state of affairs during the second tranche. I disagree, for it was obvious even at the first tranche of the proceedings that much would turn on when the various endorsements on BL4 had been made (especially since Universal itself was arguing that it had correctly delivered the BL4 Cargo to the person entitled to it), and that having sight of these new documents from KOSB would have assisted me in making important findings of fact in relation thereto. In addition, in my view there is no reason why this evidence could not have emerged soon after I gave directions on 6 June 2011 for further submissions, rather than on 18 July 2011, after Ms Ang had already returned with submissions on the issue of subrogation pursuant to my directions, with the consequence that Ms Ang’s efforts were rendered entirely futile, since (as I explain at [184] below) the new documents completely destroyed any possibility of BOC being subrogated to the rights of Felda or Maybank.

210. BOC amends its pleadings

211. [106]

     [106] In any event, on 15 August 2011, Ms Ang made an oral application to amend BOC’s pleadings to include a claim in civil conspiracy, reflecting BOC’s reaction to the new evidence which had come to light and which necessitated a radical shift in BOC’s case. After numerous adjournments and delays, I finally heard the application in late September 2011, where Ms Ang asked for some latitude on the basis that the new evidence revealed BOC to have been a victim of a fraud to which Universal had been privy, and that Universal ought not in fairness to be allowed to get away with what it had done with impunity. Unsurprisingly, Mr Gurbani vigorously resisted Ms Ang’s application, contending first that, as a jurisdictional matter, a claim in conspiracy did not fall within s 3(1)(g) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (the “HCAJA”); and second, that BOC’s application to amend its pleadings came far too long after the trial to be permitted.

212. (a) Central to Mr Gurbani’s objection was the point that there had already been sufficient material before the court for BOC to have pleaded a claim in conspiracy. Mr Gurbani submitted that the common directorships of Alvin Kwan and Steve Kwan had been raised during the first tranche of the proceedings, with the questions asked by Ms Ang (in Mr Gurbani’s words) “veering to conspiracy”, and that BOC was now “bringing things which long existed at the trial”. In short, according to Mr Gurbani, it had always been BOC’s case that KOSB and Universal’s directors were working in concert. That being so, it seemed to me that Mr Gurbani himself tacitly accepted that conspiracy was an issue in dispute, which BOC’s proposed amendment would clarify, rather than a completely different issue as such.

213. (b) Given that it was Universal which had so belatedly introduced the new evidence in the first place, I was of the view that it lay ill in Universal’s mouth to now allege that the lateness of BOC’s proposed amendment was fatal because it required the investigation of new evidence to determine (especially when most of the evidence to be investigated was that adduced by Universal). For the same reasons, I would not have countenanced any submission that the proposed amendment caused prejudice to Universal, and to his credit Mr Gurbani did not press the point.

214. (c) This was an exceptional case in which the discovery of evidence given by Universal has been selective, to say the least, and because of the highly unusual route by which this evidence was eventually disclosed.

215. Fourth tranche

216. [108]

     [108] Some time then had to be set aside for Universal to call witnesses to respond to BOC’s conspiracy allegation, and in this regard I heard K H Chong’s testimony over the course of two days.

217. [109]

     [109] Like Alvin Kwan, K H Chong turned out to be an exceedingly uninformed witness, claiming that his only involvement as a director of Universal was to lend his name to its incorporation, and that he had otherwise no knowledge of how Universal was run, its business, its employees, or indeed almost anything to do with the matters with which this action is concerned. Nonetheless, K H Chong’s evidence confirmed what I already suspected (viz, that BL4 was retained by KOSB from 4 April to early June 2008 and not returned to Universal as required under the terms of KOSB’s LOI), for he testified, inter alia, that while he did not know what became of BL4 after KOSB received it from Maybank on 4 April 2008, he considered it unlikely that BL4 was returned to Universal, and that it was more likely that BL4 was kept by KOSB as it had not been paid for the BL4 Cargo.

218. [110]

     [110] Finally, both parties’ closing submissions on the conspiracy claim were addressed to me, and I was once again obliged to reserve my judgment in order to take into account all the new developments, evidence and submissions, and the impact they had on the case.

219. Issues

220. [111]

     [111] Having thus clarified the facts, and the procedural history of this case, it is now possible to crystallise the issues that I have to decide:

221. (a) BOC’s claim for breach of contract:

222. (i) The proper law of BL4

223. (ii) Whether Universal was in breach of contract by delivering the BL4 Cargo without production of BL4

224. (iii) Whether BOC acquired any rights of suit under BL4

225. (b) BOC’s claim for civil conspiracy

226. (i) Lawful means conspiracy

227. (ii) Unlawful means conspiracy

228. BOC’s Claim for Breach of Contract

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