Hyphen Trading Ltd v BLPL Singapore Pte Ltd – Singapore High Court, 25 Oct 2023

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HTL, a UK commodity trading company, claimed ownership of nickel briquettes and held bills of lading for their shipment from Malaysia to India. A dispute arose with BLPL, the alleged contractual carrier, over ownership of the cargo. HTL sought to sell the cargo in Singapore and petitioned the Court to do so in advance of the ownership ruling.    

Background

HTL claimed ownership of the nickel briquettes and held three bills of lading for the shipment from Malaysia to India. BLPL, a Singapore shipping company, was alleged to be the contractual carrier and issuer of the bills of lading. However, BLPL received correspondence from solicitors with two other companies, TPL and TIPL, asserting TIPL’s lawful ownership of the bills of lading due to a worldwide freezing injunction granted by the English High Court. HTL countered, claiming lawful ownership and requesting the swift release of the cargo. BLPL responded, denying knowledge of the bills of lading held by HTL and stating they were not issued by BLPL.

The cargo was stored in a Port Klang warehouse.  HTL sought a preservation order from the Singapore court on March 7, 2023, which requested to keep the cargo in BLPL’s custody until the ownership dispute was settled. HTL’s claim was based on TIPL’s issuance of a customs declaration form, suggesting imminent delivery to TIPL. The court promptly granted the order on the same day, with HTL agreeing to cover warehousing costs.

On July 7, 2023, HTL initiated legal proceedings in Singapore, proposing to sell the cargo and suggesting that the proceeds be held in court or an escrow account until the ownership dispute was resolved. HTL argued factors such as the cargo’s diminishing value, safety concerns, and unnecessary warehousing costs. TIPL opposed the sale, citing forecasted nickel price rise, minimal security risk, modest storage costs, and concerns about a fair resolution of the ownership dispute.

The legal context for such actions is outlined in Order 13, rule 4 of the Singapore Rules of Court 2021, which allows the court to order the sale of movable property if it is perishable, likely to diminish in value, or desirable to sell for any other reason. The English equivalent, Part 25 of the Civil Procedure Rules, permits the court to order the sale of relevant property for reasons such as it being of perishable nature or for any other good reason. Essentially, both measures are similar in practical terms.

Since the nickel briquettes were not perishable, the issue to be decided was whether the cargo was likely to diminish in value or whether it was desirable to sell the cargo for any other reason.

Decision

The Court held that an order for sale would not be made and referenced the relevant factors in determining whether or not there should be a sale, as cited in The Myrto [1977] 2 Lloyd’s Rep 243:

(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.”

Justice S Mohan concluded that the criteria for a sale had not been satisfied, since (a) HTL had not produced any evidence that the cargo was likely to diminish in value and, (b) the storage expenses ($221K) were a fraction of the value of the cargo ($10M). 

The Court referred to Emilia Shipping Inc v State Enterprise for Pulp and Paper Industries [1991] 1 SLR(R) 411 and Five Ocean Corp v Cingler Ship Pte Ltd [2016] 1 SLR 1159 where orders were made but the storage and insurance costs were approximately 31 percent and 73 percent of the value of the cargo. Even included additional charges, the expenses in the current case were only about 6 percent.

Based on HTL’s commitment to cover the storage fees, it was decided that proceeding with a sale would not be necessary. As there were no third parties involved, the remaining factors were deemed insignificant in this case. And since there was no risk of theft or fraud of the cargo, the Court determined that there was no basis for ordering a sale at that time.