Banks when playing their part in financing international trade do also become holders of B/Ls at some stage which gives them rights of suit against the carrier, and when needed they do not shy away from exercising these - a recent example being The Yue You 902 [2019] where buyer of cargo defaulted on loan.
Ship discharged cargo to receivers (R) (to whom B was selling the cargo) against a LOI provided by charterers cum sellers (S). Discharge finished before loan was granted by OCBC to B. B then defaulted and OCBC enforcing its claim demanded delivery of cargo or damages for non-delivery. Ship owners contended that S remained the holder of B/L, or alternately B/Ls were ‘spent’ when OCBC acquired them & thus had no right of suit.
Court found for OCBC. B/L was not spent because of two reasons: (a) delivery of cargo against LOIs never exhausts the B/L; (b) delivery was in any case made to the wrong party. An alternate view was also expressed in case B/Ls were spent. It was that the sale contract between S and B was ‘contractual or other agreement’ as it was the reason for the loan, thus bringing OCBC under s.2.2.a of Singapore COGSA, giving them right of suit.
A loss for ship owner (and consequently S) amounting to $7m! (lucky for S there were back to back LOIs).
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