Cooperative Rabobank U.A. (Singapore Branch) v 1. MISC Berhad (27NCC-26-03/2017)

MISC BERHAD (Company Number: 8178-H)

AET PRODUCT TANKERS SDN BHD (Company Number: 1177989-V) … DEFENDANTS BEFORE YA KHADIJAH BINTI IDRIS JUDICIAL COMMISSIONER 2 GROUNDS OF JUDGMENT [1] This is an admiralty action in personam filed by the Plaintiff in relation to various bills of lading which were issued by the 1st Defendant under a charterparty. The bills of lading were issued in respect of a cargo shipped on board the Defendants’ vessel. In breach of the terms of the bills of lading, the Defendants had misdelivered the cargo to third parties who had not presented the bills of lading. The Plaintiff thus claim damages in the amount USD 2,897,000.00 alternatively the delivery-up of the cargo or its market value. [2] The Plaintiff filed the following interlocutory applications –

vide enclosure 37, an application to strike out the Defendants’ Statement of Defence under Order 18 rule 19 of the Rules of Court 2012 (“RoC 2012”); and

vide enclosure 41, an application for interrogatories pursuant to Order 26 of the RoC 2012. Both applications were dismissed by this court. This judgment relate to both enclosure 37 (Application to Strike Out Defence) and enclosure 41 (Application to Strike Out Interrogatories). 3 Plaintiff’s pleaded case [3] The Plaintiff, Cooperative Rabobank U.A (Singapore Branch) is the Singapore branch of a financial institution incorporated in the Netherlands. [4] MISC Berhad (“1st Defendant”) and AET Product Tankers Sdn Bhd (“2nd Defendant”) are companies incorporated in Malaysia. The 2nd Defendant is a subsidiary company of the 1st Defendant. [5] The 1st Defendant was the previous registered owner and AET is the current registered owner of the vessel “Bunga Aster” (IMO Number: 9399351) (“Vessel”) which is registered at Port Klang under the Malaysian flag. The change of registered ownership of the Vessel from MISC to AET occurred sometime between 25 March 2016 and 1 April 2016. [6] The Plaintiff is the holder and in possession of various bills of ladings issued by the 1st Defendant pursuant to a charterparty between the Plaintiff and 1st Defendant (“the Charterparty). The bills of ladings are numbered consecutively from SIN-LDU/IXY201 to SIN-LDU/IXY-220 and are all dated 9 March 2016. All the bills of lading are hereinafter 4 collectively referred to as “the Bills of Lading”. The named shipper under the Bills of Lading was AAA Oils and Fats Pte Ltd (“AAA”) and the Bills of Lading were issued ‘To Order’. The said bills were all endorsed in blank on the reverse side by AAA. The named notify party in the Bills of Lading was Ruchi Soya Industries Limited (“Ruchi Soya”). [7] The Bills of Lading were issued in respect of a total quantity of 4999.692 MT of Crude Palm Oil in bulk (Cargo) shipped on board the Vessel at Lahad Datu, Malaysia, bound for Kandla, India in like quantity, good order and condition as when shipped. The Cargo was loaded co-mingled into tanks 3P, 3S and Slop P of the Vessel. [8] AAA had sold the Cargo to Aavanti at a price of USD 3,049,812.12. On 29 March 2016, the Plaintiff received the blank-endorsed Bills of Lading from Raffeisen Bank International, who were acting on behalf of AAA. The purpose of Raffeisen Bank International’s presentation of the Bills of Lading to the Plaintiff was to collect payment from Aavanti. [9] At the request of Aavanti, the Plaintiff settled AAA’s request for payment by remittance of USD 3,049,812.12 to Raffeisen Bank International, and took up the Bills of Lading. The sum of 5 USD 3,049,812.12 comprised of a USD 2,897,000 loan by the Plaintiff to Aavanti, at Aavanti’s request and pursuant to the terms of the Trade Finance Facility, and the balance USD 54,950 and charges to be debited from Aavanti’s accounts with the Plaintiff. [10] As a continuing security for the said loan, the Bills of Lading and the Cargo (among other things) were pledged by Aavanti to the Plaintiff. The Plaintiff has remained in possession of the Bills of Lading at all material times. Aavanti has yet to repay the said loan to the Plaintiff. [11] On 5 July 2016 the Plaintiff wrote to the 1st Defendant enquiring amongst others, about the current location of the Cargo and demanding immediate delivery-up for the Cargo. On 26 July 2016 AET UK Limited (“AET UK”) wrote to deny that the 1st Defendant had any contractual relationship with or any knowledge about Aavanti in relation to the shipments under the bill of ladings. [12] The Plaintiff were then informed by AET UK on 16 November 2016 that the Cargo had been delivered to Ruchi Soya at the port of Kandla between 8 April 2016 and 9 April 2016. It is the Plaintiff’s stand that at all material times they were and is the pledgee and / or lawful holder of the original Bills of Lading and is entitled to immediate possession of the 6 Cargo. However, the 1st and 2nd Defendant has wrongfully and in breach of its obligations delivered the Cargo to Ruchi Soya without production of the original Bills of Lading which were all material times in the possession of the Plaintiff. Defendants’ pleaded case [13] It is the Defendants contentions that the Plaintiff is neither the shipper nor consignee of the Bills of Lading. As such the Plaintiff acquires no right in contract under section 1 of the Bill of Lading Act 1955 which is said to be applicable in Malaysia pursuant to section 3 of the Civil Law Act 1956. Accordingly the Defendants takes the position that the Plaintiff has no cause of action against them on the Bills of Lading. [14] The Defendants denied that the Plaintiff is the pledgee and lawful holder of the original bills of ladings. The Plaintiff’s possession of the Bills of Lading amounts to nothing more than a lien for payment. [15] It is the Defendants’ case that the delivery of the cargo to Ruchi Soya was pursuant to instructions from the Plaintiff’s own customer, Aavanti and was done pursuant to the issuance of back to back Letters 7 of Indemnity from the vessel’s charterer Nova Carriers Pte Ltd and Aavanti respectively and was authorized by Clause 16 the terms of the charterparty between the 1st Defendant and Nova Carriers as evidenced by the Fixture Recap dated 9 February 2016 and / or pursuant to accepted custom of the trade. [16] It is the Defendants’ position that it is now a custom of the trade that delivery of the cargo against letter of indemnity is not a breach of the contract of carriage as contained in or evidenced by bill of lading. Bill of lading would not be used as instruments for the release of the cargoes carried between Malaysia / Indonesia to India due to the short sailing time and the bills of ladings would never have made their way through the banking chain for which payment and delivery up must be made. The Plaintiff who hold themselves out as specialists in trade finance and been bankers to Aavanti and other palm oil traders know or have sufficient information in front of them to know of this practice / custom of the trade. By acquiescing to Aavanti delivering the Cargo to Ruchi Soya against the Letters of Indemnity, the Plaintiff has waived their right to make demand for the delivery of the Cargo against the Bills of Lading. 8 Application to Strike Out Defence [17] On 13 August 2018, vide enclosure 37 the Plaintiff filed the Application to Strike Out Defence seeking for the following reliefs –

that the Defendant’s Statement of Defence (“the Defendants’ Defence”) be struck out in its entirety;

in the alternative the following paragraphs in the Defendants’ Defence be struck out:

paragraph 5 –

Save that the Plaintiff is the holder and in possession of Bills of Lading No. SIN-LDU/IXY 201 to SIN-LDU/IXY 220 all dated 9th March 2016, Paragraphs 7 and 8 of the Statement of Claim is admitted. The Plaintiff is put to strict proof that they are the holders and in possession of the said Bills of Lading.

(ii) paragraph 7 –

Save that it is denied that the Plaintiff is the pledgee and lawful holder of the original Bills of Lading, Paragraphs 12 and 13 are admitted. The Defendants will contend and prove at the trial of this action that the delivery of the cargo to Ruchi Soya was pursuant to instructions from the Plaintiff’s own customer, Aavanti and was done pursuant to the issuance of back to back letters of undertaking from the vessel’s charterer Nova Carriers Pte Ltd and 9 Aavanti respectively and was authorized by Clause 16 the terms of the charterparty between the 1st Defendant and Nova Carriers as evidenced by the Fixture Recap dated 9th February 2016 and/or pursuant to accepted custom of the trade.

(iii) paragraph 8 (a) – (e), (h), (j) and (g);

Paragraphs 14 to 18 of the Statement of Claim is denied and the Plaintiff is put to strict proof. The Defendants aver that: a. It is an accepted practice in the palm oil industry especially for shipments between Malaysia/Indonesia to India that the Bills of Lading would not be used as instruments for the release of the cargoes carried thereunder at the port of destination, given that the sailing time is short and the bills of ladings would never have made their way through the banking chain for which payment and delivery up must be made. As such, it is now recognised that delivery of the cargo against Letters of Indemnity is not a breach of the contract of carriage as contained in or evidenced by the Bills of Lading. This is now a custom of the trade known to shipowners, charterers, international trading houses and the banks who finance them. Without prejudice to the generality of that statement, the Defendants aver that the Plaintiff, who have been in the business of trade finance, hold themselves out as specialists in trade finance and been bankers to Aavanti and other palm oil traders know or have sufficient information in front of them to know of this practice/custom of the trade. b. The Plaintiff as one of the trade financiers to Aavanti in Singapore for since 2010 was aware or had sufficient information by way of course of conduct to which they were 10 privy to, that there was a standing practice between Aavanti and Ruchi Soya for delivery to be made by Aavanti to Ruchi Soya without payment and without the production of the original bills of lading. The instructions from Aavanti would be by way of the use of letters of indemnity. c. It is denied that the Plaintiff is the pledgee and the holder of the bills of lading and is therefore entitled to immediate possession of the cargo upon demand and surrender of the said bills of lading. The Plaintiff is put to strict proof. d. The Plaintiff is neither the shipper nor consignee of the said bills of lading. The Plaintiff therefore acquires no right in contract under Section 1 of the Bills of Lading Act 1855 which applies in Malaysia by virtue of Section 3 of the Civil Law Act 1956 to sue the Defendants on the said Bills of Lading. The Plaintiff also does not appear on the said bills of lading as a notify party. Accordingly, it is the Defendants averment that the Plaintiff acquires no property in the said cargo nor title to sue by reason of any blank endorsement of the original bills of lading by AAA Oil & Fats Pte Ltd when the original bills of lading came into the hands of the Plaintiff, who made payment on behalf of Aavanti and received the said bills of lading on behalf of Aavanti. The Plaintiff acquired no rights to sue or title to the said cargo by reason of the endorsement and delivery of the said bills to the Plaintiff. It is further averred that the Plaintiff has no right in contract against the Defendants. e. It is further averred that if the Plaintiff took the said bills of lading as pledgee pursuant to the alleged trade finance facility (which is denied), the Plaintiff only took the same as security for the said facility. It amounted to nothing more than a lien for payment. The Plaintiff acquired no right of suit 11 nor any right to possession of the goods carried under the said bills of lading at the time the Plaintiff came into possession of the said bills of lading on the 29th of March 2016. g. The Plaintiff is put to strict proof as to when did Aavanti default on the payment due under the trade finance facility and when and under what terms did the Plaintiff become entitled to exercise their right under the said trade finance facility to realize any alleged security over the said bills of lading. h. It is averred that by that time, the Plaintiff knew or ought to have known that the cargoes would have been long since released to the receiver. It is averred that as specialists in the trade finance area and as long time bankers to Aavanti, they knew or had sufficient information before them to know that Aavanti had parted with possession of the cargo which was carried under the said bills of lading. It is therefore averred that the Plaintiff had actual or constructive knowledge that Aavanti had parted with the possession of the cargo to Ruchi Soya and had acquiesced to the said parting of possession of the cargo to Ruchi Soya and that the Bills of Lading were no longer operative to represent title or possession of the cargoes carried thereunder. The Plaintiff is thus estopped from asserting that as alleged holders of the said bills of lading, they have the right to sue and the right to demand possession of the said cargoes. j. Further or in the alternative, it is averred that by acquiescing to Aavanti making the delivery of the said cargo to Ruchi Soya against the Letter of Indemnity, the Plaintiff has now 12 waived their right to make demand on the Defendants for delivery up of the said cargo against the said bills of lading.

(iv) paragraph 9 (b) (c)

By reason of the averments in Paragraph 8 above, it is the Defendants’ averment that: b. there has been no breach of duty and/or breach of duty as bailee and/or breach of duty of care and/or any conversion or detinue as alleged. Aavanti delivered the cargoes to Ruchi against letters of indemnity with the actual or constructive knowledge of the Plaintiff. There is no misdelivery and the Plaintiff has waived any right to demand possession of the goods against the bills of lading and is estopped by its knowledge from asserting a right to demand delivery up of the cargo or its value against the Defendants. c. The Plaintiff has likewise no title to sue. Plaintiff’s contentions [18] The grounds in support of the Application to Strike Out Defence may be summarised as follows –

the Plaintiff is the holder and in possession of the Bills of Lading issued by the 1st Defendant pursuant to the Charterparty in respect of the Cargo shipped on board 13 Bunga Aster owned by the 1st Defendant at Lahad Datu Malaysia bound for Kandla India;

(b)

it was a term of the Bills of Lading that the 1st Defendant shall deliver the Cargo to the holders of the Bills of Lading. The Plaintiff was the holder of the Bills of Lading at all material time;

thus the Plaintiff is the pledgee of the Bills of Lading and has remained in possession of the said bills and is entitled to the immediate possession of the Cargo. However the Defendants has discharged and misdelivered the Cargo to Ruchi Soya at Kandla on 8 April 2016 and 9 April 2016 without the production of the original Bills of Lading; 14

it is the Defendants’ duty as carrier of the Cargo to deliver the Cargo to the holder of the Bills of Lading. The Defendants plea that the delivery of the Cargo to Ruchi Soya which was done pursuant to the Letters of Indemnity issued by Aavanti to the charterer Nova Carriers Pte Ltd is not a defence but an admission to the Defendants’ liability for delivering the Cargo without the presentation of the Bills of

the Plaintiff is not a party to the Charterparty and any arrangement which the Defendants had with the charterer is separate and distinct from the Plaintiff’s right as a pledgee and the holder of the Bills of Lading; and

the Defendants are therefore in breach of the contract of carriage as evidence by the Bills of Lading and / or breach of duty as a bailee. Defendants’ contentions [19] The Defendants grounds for resisting the Application to Strike Out Defence is as follows – 15

the delivery of the Cargo was made against the issuance of back to back letters of indemnity from the charterer Nova Carriers and Aavanti which was authorised by clause 16 of the terms of the charterparty between 1st Defendant and

it is an accepted practice, a custom of trade and a notorious fact in the palm oil industry that bills of ladings would not be used as instruments for the release of cargo in shipments between Malaysia / Indonesia to India. Therefore delivery of cargo against letters of indemnity is not a breach of the contract of carriage as evidence in the Bill of Ladings;

the Letters of Indemnity were issued in the following manner:

by letter dated 28 March 2016 addressed to AAA, Avanti instructed AAA to deliver the Cargo to Ruchi Soya without the production of the Bills of Lading;

(ii) by letter dated 1 April 2016 addressed to the 1st Defendant, Nova Carriers who was the charterer instructed the 1st Defendant to deliver the Cargo to 16 Ruchi Soya without the production of the Bills of Lading; and

(iii) by letter dated 1 April 2016 addressed to Nova Carriers (the charterer), AAA instructed the Nova Carriers to deliver the Cargo to Ruchi Soya without the production of the Bills of Lading. The Letters of Indemnity are essentially similar to one another in that the issuer undertake to indemnify the addressee in respect of any liability or loss incurred by the addressee by reason of delivering the Cargo to Ruchi Soya without production of the original Bills of Lading.

the Plaintiff is well aware of such practice by way of course of conduct to which they were privy;

the Plaintiff has acquired no right in contract under Section 1 of the Bills of Lading Act 1855, applied in Malaysia vide Section 3 of the Civil Law Act 1956; 17

the Plaintiff was never a pledgee of the Bills of Lading and thus is not entitled to immediate possession of the Cargo. Instead the Plaintiff’s possession and holding of the Bills of Ladings amounts to nothing more than a lien for payment;

the Plaintiff was always aware that the Cargo had been discharged against the Letters of Indemnity, and was further aware and approved Aavanti to deliver the Cargo to Ruchi Soya without using the Bills of Lading, relying instead on the use of the Letters of Indemnity. Accordingly the Plaintiff has acquiesced to Ruchi Soya taking possession of the Cargo and thus the Bills of Lading no longer conferred title to sue or a right to possession to the Cargo. By their conduct the Plaintiff has waived their right to demand for immediate possession of the Cargo; and

it is the Plaintiff’s role in the transaction which is an issue to be tried and the investigation by interlocutory discovery and by cross examination of the Plaintiff’s bank officers in charge of the Aavanti account which will shed light on the extent of knowledge and complicity that the Plaintiff bears. 18 The law [20] Order 18 rule 19 (1) of the RoC 2012 reads as follows –

Striking out pleadings and endorsements (O. 18 r. 19)

The Court may at any stage of the proceedings order to be struck out or amended any pleading or the endorsement, of any writ in the action, or anything in any pleading or in the endorsement, on the ground that –

it discloses no reasonable cause of action or defence, as the case may be;

it is scandalous, frivolous or vexatious;

it may prejudice, embarrass or delay the fair trial of the action; or

it is otherwise an abuse of the process of the Court, and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.

No evidence shall be admissible on an application under subparagraph (1)(a).

This rule shall, as far as applicable, apply to an originating summons as if it were a pleading. [21] With regards to the legal principles in respect of striking out application, the Supreme Court in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36 held – 19 The principles upon which the court acts in exercising its power under any of the four limbs of O 18 r 19(1) of the RHC are well settled. It is only in plain and obvious cases that recourse should be had to the summary process under this rule (per Lindley MR in Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd), and this summary procedure can only be adopted when it can be clearly seen that a claim or answer is on the face of it ‘obviously unsustainable’ (see AG of Duchy of Lancaster v L & NW Rly Co). It cannot be exercised by a minute examination of the documents and facts of the case, in order to see whether the party has a cause of action or a defence (see Wenlock v Moloney & Ors). The authorities further show that if there is a point of law which requires serious discussion, an objection should be taken on the pleadings and the point set down for argument under O 33 r 3 (which is in pari materia with our O 33 r 2 of the RHC) (see Hubbuck & Sons Ltd v Wilkinson, Heywood & Clark Ltd). The court must be satisfied that there is no reasonable cause of action or that the claims are frivolous or vexatious or that the defences raised are not arguable. (emphasis added) [22] In Aras Jalinan Sdn Bhd v Tipco Asphalt Public Co Ltd & Ors [2012] 1 MLJ 510 the Court of Appeal referred to the principles laid in Bandar Builder Sdn Bhd & Ors v United Malayan Banking Corporation Bhd (supra) and further held – [6] A striking out application is not a trial on affidavits. It is not an application where the parties have to adduce evidence to establish the merits of their case. The court should not conduct a minute examination of the documents and the facts of the case. So long as the claim discloses some cause of action or raises some question fit to be tried it should not be struck out. The mere fact the case is weak and not likely to succeed is no ground for the pleadings to be 20 struck out. If necessary, appropriate amendments to the pleadings should be granted or directed and the case ordered to proceed to trial, on its merits. (emphasis added) [23] Thus the court should only exercise its power to strike out a claim or defence under Order 18 rule 19 in cases where it is plain and obvious that the claim or defence is unsustainable. As long as the claim or defence discloses some ground of action and raises some questions fit to be tried, the claim or defence should not be struck out even though the case is weak and not likely to succeed. The burden is therefore on the Plaintiff to show that the Defendants’ Statement of Defence is obviously unsustainable. Findings of the court [24] On the hearing date of the Application to Strike out Defence, the Plaintiff abandoned prayer 1 which sought for the entire Statement of Defence be struck out but maintain its position for the relevant paragraphs specifically stated in prayer 2 to be struck out. [25] As stated above it is the Plaintiff’s contentions that they are the lawful holder of the Bills of Lading and is entitled to immediate 21 possession of the Cargo and that the Defendants has breached their obligations when they delivered the Cargo to Ruchi Soya without production of the original Bills of Lading which were at all material times in the possession of the Plaintiff. The Defendants on the other hand submits that the Plaintiff is not entitled to rely on the Bills of Lading (to demand possession of the Cargo) as the Plaintiff knew of the practice between Aavanti and Ruchi Soya that Ruchi Soya will take delivery of the Cargo without production of the original Bills of Lading. By their conduct the Plaintiff has waived their right to demand for immediate possession of the Cargo. Thus the Bills of Lading no longer conferred title to sue or a right to possession to the cargo. [26] In its written submission learned counsel for the Plaintiff cited numerous authorities which set out the position of the law in respect of the functions of a bill of lading. A bill of lading serves the following purposes –

it is a document of title entitling the holder of immediate right to the cargo;

a contract of carriage for the delivery of the cargo shipped thereunder; and 22

carrier’s obligation under a contract of carriage as evidenced by a bill of lading is to deliver the shipment shipped thereunder to the holder or the party in possession of the bill of lading. [27] In the present case as contended by the Defendants, their pleaded defence is that the Plaintiff approved the business practice between its customer Aavanti and Ruchi Soya for the cargo (crude palm oil) shipped to be delivered to Ruchi Soya without the presentation of Bills of lading (such practice is hereinafter referred to as the “LOI-based Discharge practice”) as opposed to the practice of delivering the Cargo upon the presentation of the Bills of Lading (hereinafter referred to as “the Presentation Rule”). [28] In support of such assertions the Defendants draw the attention of this court to an affidavit (see the Defendants’ affidavit enclosure 39 Exhibit L-1 page 1 – 195) filed in the Singapore High Court by one Mr Khandewal Rajiv (“Rajiv’s Affidavit”) a former director of Aavanti in support of an application by Aavanti under section 210 (10) of the Singapore Companies Act. It is the Defendants’ position that in the said affidavit, Aavanti themselves have affirmed that LOI-based Discharge practice was a commonly known and accepted practice and had been 23 acquiesced thereto by all parties, including institutional lenders such as the Plaintiff. Paragraphs 69 – 72 of Rajiv’s Affidavit which is reproduced in the Defendants’ affidavit states as follows –

(iii) Trade Finance Dispute

In the interest of transparency, and as a matter of completeness, I would draw this Honourable Court attention to an ongoing disputes between certain Institutional Lenders (in particular SocGen, OCBC, Rabobank), Ruchi, the company and third parties concerning the discharge and release of certain cargo financed by them to Ruchi without receiving payment or a suitable payment instrument (eg letter of credit).

In this respect, the Company’s position has always been that as part of the normal course of supply chain operations accepted by all participants in the supply chain for the last two decades, it was part of the usual course of its business that Ruchi would receive cargo shipped to it, even without the bill of lading, on the basis of letters of indemnity (“LOI”) issued by Ruchi to the Company [Aavanti] and from the Company to the supplier and onward to the relevant charterer / ship owner. To avoid demurrage costs which would have been incurred in respect of delays in discharge of the vessel, the Company would first obtain from Ruchi and then furnish the relevant supplier with an LOI in respect of any claims that the ultimate charterer / ship owner would face in respect of the discharge without sighting the original bills of lading. The ship owner / charterer, upon receipt of the LOI from their direct interfacing client, would then discharge the relevant cargo to Ruchi. This is known as the commercial practice of “LOI-based discharge. 24

The Company’s position is that at all material times, the Company, Ruchi, the Institutional Lenders (i.e. OCBC, SocGen and Rabobank as appropriate) and the relevant third parties (i.e suppliers, vessel owners, charterers) were aware of and acquiesced to the practice of LOI-based Discharge. The Company has conveyed this position to the relevant Institutional Lenders (whether via correspondence or at face-to-face meetings), Ruchi and to the relevant third parties. Annexed hereto and marked as “KR-18” are copies of the relevant documents evidencing this commercial practice.

However, this has recently been disputed by the relevant Institutional Lenders and third parties, who have disavowed knowledge of this practice and threatened legal proceedings against the Company as a consequence of cargo discharged on this basis. [29] It is argued by the Plaintiff that the Defendants cannot rely on the trade finance agreement between Plaintiff and its customer as the basis of the Plaintiff’s claim against the Defendants is premised on the Bills of Lading where Plaintiff is the lawful holder. It is further argued that the Plaintiff’s knowledge of the purported custom / practice of LOI-based Discharged between Aavanti and Ruchi Soya is immaterial for the determination of the striking out application. With respect I disagree. [30] The Defendants are claiming that the Plaintiff, as specialists in the trade finance area and as long time bankers to Aavanti, knew that Aavanti had parted with possession of the cargo to Ruchi Soya and had 25 acquiesced to the said parting to Ruchi Soya without the production of the original Bills of Lading. As such the Bills of Lading were no longer operative to represent title or possession of the cargoes carried thereunder and estopped from asserting they have the right to sue and the right to demand possession of the said cargoes. No doubt the Plaintiff’s action against the Defendants is premised on the Bills of Lading but the issue at this juncture is whether the Plaintiff knew of the LoI-based Discharge practised by Aavanti with its long time trade partner Ruchi Soya. Although the Letters of Indemnity does not directly involves the Plaintiff, the fact that it relate to the release of the Cargo against the Letters of Indemnity and not on the production of the original Bills of Lading which is in the possession of the Plaintiff, raises questions as to the Plaintiff’s knowledge in relation to the LoI-based Discharge practice carried out between Aavanti and Ruchi Soya. [31] The Plaintiff cited authorities to rebut the Defendants’ reliance on clause 16 of the Charterparty on the basis that such a provision which allows delivery of cargo against letter of indemnity without the presentation of the bill of lading does not afford a defence against claim by the lawful holder of the bill of lading. It is noted the cases cited although relate to the function of bill of lading, it is not concerned with the defence pleaded by the Defendants in the instant case, namely, the 26 practice of the LoI-based Discharge which is said to be approved by the Plaintiff. In the instant case, the Bills of Lading may not have provisions which authorises the release of the Cargo without production of the same but it is trite that contractual provisions may be waived by conduct and not necessarily by incorporating express written provision to that effect in the contract. In the instant case the Plaintiff’s purported knowledge of the LoI-based Discharge practice may be construed as its consent or agreement to the LoI-based Discharge practised by Aavanti and Ruchi Soya. In this respect, it cannot be said that the Defendants’ defence is not arguable. [32] Based on Rajiv’s Affidavit, in particular paragraphs 69 – 72 the practice of LoI-based Discharge exists and it involves institutional lenders which includes the Plaintiff. Although paragraphs 73 – 74 of Rajiv’s affidavit did not make specific reference to the Plaintiff (but Plaintiff is identified as one of the Institutional Lenders as defined in paragraph 38 of Rajiv’s Affidavit), the facts as pleaded by the Plaintiff in the instant case shows there exists a trade finance agreement with Aavanti for the payment of the Cargo to AAA from whom Aavanti purchased the Cargo. Rajiv’s Affidavit further indicates that institutional lenders like the Plaintiff is aware of the LOI-based Discharge practice and that since the cargo is to be delivered without production of bill of 27 lading the bill of lading no longer confer title to sue or a right to the possession of the cargo. [33] The Defendants referred to an English case Songa Chemicals AS v Navig8 Chemicals Pool Ltd [2018] EWHC 397 (Comm) (The Songa Wind case) where the court dealt with the standard form P & I letter of indemnity for the delivery of cargo without the production of original bills of lading. [34] In that case Songa Chemical AS (Songa) owner of the vessel “Songa Winds” chartered to Navig8 Chemicals Pool Inc (Navig8) who then chartered the vessel to Glencore Agriculture B.V. (Glencore) to carry a cargo of crude sunflower seed oil. The original sale contract was between Glencore as seller and Ruchi Agritrading (Pte) Ltd (Agritrading) as buyer for 6,000 metric tonnes of crude edible grade sunflower oil in bulk. However, after shipment, the original sale contract was replaced by a sale contract between Glencore (as seller) and Aavanti Industries Pte Ltd (Aavanti) (as buyer). [35] The delivery of the cargo was made against the issuance of letters of indemnities in the following manner – 28

Aavanti issued a letter indemnity addressed to Glencore, requesting Glencore to deliver the cargo to Ruchi without production of original bill of lading;

Glencore issued a letter indemnity addressed to Navig8, requesting for the cargo to be delivered to Aavanti without production of original bill of lading; and

Navig8 issued a letter indemnity addressed to Songa, requesting Songa to deliver the cargo to Aavanti without production of original bill of lading. The indemnification obligations as contained in the said letters of indemnities is substantially the same as in the instant case, namely, to provide indemnity against any liabilities which may be sustained by reason of delivering the cargo in accordance with the request. [36] Aavanti obtained financing from Societe Generale (SocGen) to purchase the cargo from Glencore. SocGen claim to be the lawful holder of the original bill of lading for the cargo discharged under the letters of indemnity. SocGen and Glencore was not paid. SocGen commenced arbitration proceedings against Songa for misdelivery. Consequently Songa initiated legal action against Navig8 under the letter of indemnity issued by Navig8 to Songa. 29 [37] The court found, on the facts, that Aavanti and Ruchi subscribed to the practice of delivery to be made without the production of bills of lading. It is stated as follows –

There was a standing practice, between Aavanti and Ruchi, for delivery to be made to Ruchi of cargo quantities sold to it by Aavanti without production of bills of lading. Indeed, Glencore says that practice was sufficiently well established, and known to SocGen, that SocGen's bill of lading claim against Songa should fail. Glencore has co-operated in the defence of SocGen's claim to date (the present dispute over funding that defence notwithstanding) with a view to enabling Songa to pursue that line of argument as effectively as possible. The direct evidence I have of the Aavanti-Ruchi practice comes from an affidavit of Rajiv Khandelwal, a director of Aavanti, sworn in Singapore on 29 June 2016 in support of an application by Aavanti for temporary protection from its creditors. That affidavit does not quite state in terms that the practice extended to cases in which Ruchi had not paid for the cargo prior to delivery. But I agree with Mr Schaff QC for Songa that the plain tenor of Mr Khandelwal's evidence is that it did. The particular context for his explanation of the practice was precisely that of claims by banks, including SocGen, who had financed purchases by Aavanti but not been reimbursed; and the general context he gave for the Singapore application was that (a) Ruchi owed Aavanti c.US$135 million for products delivered to it under the practice he describes and (b) bills of lading held by SocGen where it had financed Aavanti's purchase of those products would not secure SocGen's lending except if it could claim against the bill of lading carriers, because the products were delivered straight to Ruchi.

I am in no position to assess SocGen's awareness, if any, of the practice Mr Khandelwal describes and I offer no view on whether such awareness might defeat its misdelivery claim (which is a matter for the London arbitrators). But I think it clear that delivery to Ruchi, at Aavanti's 30 direction, though Ruchi had yet to pay for the subject quantities, was within the standard pattern of the trading between Aavanti and Ruchi. (emphasis added) [38] As the matter before the court in that case did not concern SocGen claim for misdelivery against Songa, the court did not deal with SocGen’s knowledge as it is for the determination in the arbitration proceedings commenced by SocGen against Songa. However by the above comment it is clear that knowledge of the bank (SocGen) of the LoI-based Discharged practice is a relevant point to be considered in the bank’s claim against the ship owner (Songa). This is evidently clear from the following passage in the judgment –

If Aavanti had been the lawful holder of the relevant bills of lading at the time, but unable for some reason to produce them to the master, that being the classic case catered for by the use of this type of LOI, no misdelivery claim by Aavanti could have succeeded. Songa faces a misdelivery claim not because it delivered to Ruchi rather than to Aavanti, but because it delivered to Ruchi (as intended and nominated by Aavanti) rather than to SocGen. (Again, I emphasise, I intend by that no comment as to the merits of the misdelivery claim. They will depend on the validity of SocGen's claimed title to sue as holder of the bills, the defence said to arise out of its alleged awareness of the trading practice between Aavanti and Ruchi, and any other issues that may be put before the London arbitrators.) (emphasis added) 31 [39] The practice of LOI-based Discharge is confirmed to be a practice which is common knowledge amongst the financiers and traders of palm oil shipments by one Mr PR Thakore, who is at present the Chairman of the Contracts Committee of the Palm Oil Refiners Association of Malaysia (PORAM) and a former chairman of the Commercial and Technical Committee of PORAM. In his affidavit, Mr. Thakore explained the rationale and benefit of the LOI-based Discharge which is as follows –

Because of the short duration of the voyages between Malaysia and India, as little as 6 days, it is often the case the ships arrive at the ports of discharge before the bills of lading are available thereby incurring waiting time and demurrage charges. In such an event, the vessel, though having arrived at the port of discharge, cannot discharge the cargo without production of the bills of lading. Demurrage and wasted expenses would be incurred while awaiting arrival of the bills of lading.

To overcome this a common practice has developed, whereby ship owners and consignees / receivers agree in their contracts for cargo to be released to consignee / receivers against a letter of indemnity pending the arrival of the bills of lading. This practice is common knowledge amongst the financiers and traders of palm oil shipments and of great benefit to charterers, shippers and receivers as it avoids additional charter hire and frees the carrier for continuous trading.

This is why the practice of discharge against letters of indemnity came about. This is not a one-off practice. It has commonly prevalent and may even be said to occur as a matter of course. 32

The prevalence of this practice has resulted in acknowledgment of the use of these discharge against letters of indemnity clauses, in that ship owners are now authorized to release cargo against charterer letters of indemnity in standard P & I wordings.

It is certainly known to all players in the market, including the financing banks, and has, been going on for many years. [40] The Plaintiff contends that Mr Thakore’s affidavit is unnecessary and irrelevant to be considered for the purpose of the Striking Out Application because, among others, it does not say the alleged custom / practice dispenses with the production of bill of lading and that delivery of cargo against letter of indemnity is not a breach of the contract of carriage. In this respect this court is of the view whether the LOI-based Discharge is a breach of the contract of carriage is a question of fact which in the present case centred on the purported knowledge of the Plaintiff of the arrangement between Aavanti and Ruchi Soya for the Cargo to be delivered to Ruchi Soya without the production of the Bills of Ladings. Based on Mr. Rajiv’s affidavit, it would appear that the Plaintiff is aware of such practice. However whether the Plaintiff is aware of such practice or otherwise is not a matter to be decided at this juncture based on affidavit evidence. At the same time, it is to be noted the Plaintiff did not make any specific denial of having knowledge of the 33 existence of such practice in particular between its customer Aavanti and Ruchi Soya. If it is proven that the Plaintiff is aware of such practice but chose not only to remain silent but continue to finance purchases made by Aavanti this may tantamount to acquiescence on the part of the Plaintiff. Under such circumstances it would not be open to the Plaintiff to claim misdelivery of the Cargo. [41] On the point of delivering cargo without presentation of bill of lading based on practice and custom, a case cited by the Plaintiff is of significant relevance. In SA Sucre Export v Nirthern River Shipping Ltd (“The Sormovskiy 3068”) [1994] 2 Llyod’s Rep 266, the plaintiff charterers claimed damages from the defendant shipowners for breach of contract as the holders of a bill of lading which evidenced the shipment of 60,000 bags of sugar on the vessel Sormovskiy 3068 at Antwerp for carriage to St Petersburg. Subsequently it was agreed between all the parties that Vyborg should be substituted for St. Petersburg as the port of discharge of the cargo. The plaintiff charterer contended they suffered losses as a result of delivery of 2070 tonnes of sugar by the master to Commercial Sea Port at Vyborg (CSP) (which the defendant claimed to be the agent of the plaintiff charterer) without the presentation of the original bill of lading. One of the defence put up by the defendant shipowners was that they had complied with their delivery 34 obligations because, inter alia, they delivered in accordance with the practice, custom and law of the port of Vyborg. [42] The court in The Sormovskiy 3068 considered the legal position on delivery without production of bill of lading and stated that the defendants shipowner are prima facie liable to the plaintiff because they delivered the cargo to the CSP without production of the original bill of lading. As it is a rebuttable presumption, the court then proceeded to consider the issue on delivering in accordance to the practice, custom and law of Vyborg and said as follows – In the absence of authority to the contrary I adhere to the view which I have already expressed, namely that (subject to the exceptions discussed above) on the facts of this case the defendants were in breach of contract if they delivered cargo to the CSP without presentation of an original bill of lading (which they did) unless there is either a rule of law or a custom in the strict sense in Vyborg that the master must deliver the cargo to the CSP as the agent of the plaintiffs without insisting upon the production of an original bill of lading. The question whether the CSP was the agent of the plaintiffs thus becomes relevant in one or other of two circumstances. The first is if there was either a rule of law or a custom (in the strict sense) in Vyborg that the master must deliver the cargo to the CSP without insisting upon receiving an original bill of lading. In that event the defendants was not be liable provided that the CSP received the cargo as agent of the plaintiffs. 35 The second is if the view which I have expressed is wrong and it is held that there was no breach of contract if the defendants delivered the cargo to the persons entitled to possession without insisting upon receiving an original bill of lading. In that event it would follow that the defendants were not in breach of contract if they delivered the cargo to the plaintiffs’ agent and that they were thus not in breach of contract if the CSP was the agent of the plaintiffs for the purpose of receiving delivery of the cargo. I accept Mr. Berry’s submission that the question whether the CSP was the agent of the plaintiffs for that purpose is governed by Russian law. In these circumstances I should logically consider first the question whether there was either any rule of law or any custom (in the strict sense) in Vyborg that the matter must deliver the cargo to the CSP without insisting upon receiving an original bill of lading and only then the further question whether the CSP was the agent of the plaintiffs for any purpose and, if so, what. However, as will be seen, it is convenient to consider these questions together. (emphasis added) [43] Two experts on Russian law were called to give evidence on behalf of the plaintiff charterer and defendant shipowner on the law, custom and practice at Vyborg port. The evidence given by the 2 experts relate to the position before and after demise of the USSR which includes the only state organisation authorised to import goods and the regulatory framework which existed back then. Having considered the evidence of the 2 experts and also from other witnesses from both parties the court held that the defendants shipowners did not comply 36 with their obligations to deliver to the parties entitled to possession under the bill of lading. It was further held that defendants shipowners did not deliver in accordance with the practice and custom and law of the port of Vyborg. [44] In the instant case, affidavit evidence were adduced to the effect that in the palm oil industry, bills of lading would not be used as instruments for the release of cargo in shipments between Malaysia / Indonesia to India and that delivery is made against letter of indemnity (the LoI-based Discharge practice). At the risk of repeating, it is not for this court, at this juncture to determine whether such practice or custom exist or whether the Plaintiff was aware and condoned such practice practice between Aavanti and Ruchi Soya. However the affidavit evidence appears to indicate a “mismatch situation” where the Plaintiff who claim to be the lawful holder of the Bills of Ladings (which serves as a document of title to the Cargo) yet at the same time appears to approve the discharge of the Cargo based on LoI (based on Rajiv’s Affidavit and Thakore’s Affidavit). As such this court is of the considered view that such a situation calls for investigation as to the Plaintiff’s knowledge of the LoI-based Discharge practice between Aavanti and Ruchi Soya in the crude palm oil industry. In this respect reference is made to the case United Merchant Finance Bhd v Majlis Agama Islam 37 Johor [1994] 2 CLJ 151 where it was held by the Federal Court that if the court is satisfied that it is shown that there were circumstances that ought to be investigated the words “there ought for some reason to be a trial” in Order 14 rule 3 of the Rules of High Court 1980 (which is equivalent to the present Order 14 rule 3 of the RoC 2012) ought to be invoked and accordingly the court ought not to disposed of the case summarily. This court is of the view such circumstances exist in the instant case and therefore a trial ought to be conducted. [45] Premised on the above, it is this court considered opinion that the Defendants’ defence cannot be said to be obviously unsustainable. Based on the facts, the defence put up by the Defendants that Plaintiff is aware and has acquiesced such practice is arguable. As such the Plaintiff’s knowledge of the practice between Aavanti and Ruchi Soya is material and relevant for this court to consider in determining the misdelivery claim mounted by the Plaintiff against the Defendants. As knowledge essentially and fundamentally concerns facts, it is best determined by oral evidence from the parties including that of Aavanti and Ruchi Soya. [46] The other issue which is a dispute between the parties is the applicable law which governs the Bills of Lading. It is the Plaintiff’s 38 position that the law governing the Bills of Lading is English law as the Bills of Lading incorporates the clauses, conditions, terms and exceptions of the Charterparty. The relevant provision of the Bills of Lading reads as follows – “…. This shipment is carried subject to the claused overleaf and to the terms, clauses, conditions and exceptions of the Contract of Affreightment/Charter Party dated 6 February 2016 between MISC Berhad and Nova Carriers Pte Ltd and all terms whatsoever of the Contract of Affreightment/Charter Party apply to and govern the rights of the parties concerned in this shipment. If there should be any conflict between the conditions set out overleaf and the terms, clauses, conditions and exceptions of the Contract of Affreightment / Charter Party, the latter shall prevail.” By virtue of clause 8 of the Charterparty, English law is applicable.

that the Defendants do withdraw the interrogatories no. 1 to no. 16 dated 25 July 2018 (“Interrogatories”) and / or the Interrogatories to be struck out on the basis that the said Interrogatories are objectionable; and

in the event that prayer (a) above is dismissed by this Court, that the Plaintiff responds to the Interrogatories and / or provide specific objection to each and every interrogatory within 21 days from the date. [52] The Defendants served the Interrogatories on the Plaintiff on 25 July 2018. The questions in the Interrogatories are produced verbatim below – 42

How long has Aavanti Pte Ltd been a customer of the Plaintiff?

What are the documents evidencing the banker-client relationship between Aavanti and the Plaintiff at the material time of this claim?

If there are documents evidencing the relationship, identify the name of the documents, the effective date of execution of the documents and names of the persons in the Plaintiff and in Aavanti who signed these documents on behalf of the Aavanti and the Plaintiff.

What are the facilities which Aavanti had with the Plaintiff at the material time of the incident?

What are the documents evidencing these facilities? Please specify the names of the documents, the effective dates of the documents and who signed these documents on behalf of Aavanti and the Plaintiff?

Please specify the manner in which Aavanti would apply for the financing of any of the sale transactions which Aavanti required the Plaintiff to finance on their behalf?

If the application was made in writing, specify the documents and the process of how the application would be considered and approved?

If the application was made orally, please identify who were the individuals in Plaintiff and in Aavanti respectively who were involved in the financing of the transaction in relation to this claim?

How is the approval of the application for financing of a trade transaction communicated by the Plaintiff to Aavanti?

How are communications between Aavanti and the Plaintiff conducted in relation to each trade finance transaction? If in writing, is by way of email, facsimile or letter? If orally, please specify the individuals in the 43 Plaintiff and in Aavanti who dealt with trade finance transactions which both parties were involved in between the periods of January 2015 till June 2016.

Please specify the individuals in the Plaintiff and in Aavanti respectively who dealt with trade finance transactions involving sale of palm oil and palm oil related products to Ruchi Soya Industries Ltd (if different from 10 above) between the period of January 2015 and June 2016.

How many trade finance transactions involving the end delivery of cargo to Ruchi Soya Industries Ltd did the Plaintiff finance for Aavanti between the period of January 2015 and June 2016?

In relation to trade finances involving end delivery of cargo to Ruchi Soya in India, please specify each transaction, giving particulars of shipment dates, bill of lading numbers, invoice numbers, trade finance amounts, when the original bills of lading were received by the Plaintiff, when goods covered by the said bills of lading were released to Ruchi Soya and the date for each transaction Aavanti paid the Plaintiff for the trade finance of the said cargo / bills of ladings.

What notices were Aavanti required to give the Plaintiff in relation to each transaction as regards the transportation and delivery status of each cargo which had been financed by the Plaintiff?

In relation to the claim in this action, when the Plaintiff hold Aavanti in default of payment?

How was this default notice given? If in writing, please specify the document, date and the person who issued this notice of default. 44 Plaintiff’s contentions [53] It is argued that the questions in the Interrogatories are objectionable on the following grounds –

the Interrogatories are premature and unnecessary as the Plaintiff had filed an application to strike out some parts of the Defendants’ Statement of Defence;

the questions are designed to assist the Defendants to prove and / or to obtain evidence of the Defendants defence which is a fishing expedition; and

the Interrogatories relates to the Plaintiff’s banker – client relationship with Aavanti which is wholly unnecessary and irrelevant to the issue at hand for either disposing the matter fairly or saving cost. Defendants’ contentions [54] The Defendants rely on the following grounds to resist the Plaintiff’s application – 45

the Interrogatories are not premature as the Interrogatories were served on the Plaintiff one day after the Plaintiff filed their Reply to the Defendants’ Defence and well over 2 weeks before the Plaintiff filed its application to strike out the

the Interrogatories relate directly to the fact in issue and are wholly necessary and relevant to this action in personam:

essentially relate to the Defendants’ Defence that the LoI-based Discharge is accepted in the palm oil industry;

(ii) that the Plaintiff is aware of this practice; and

(iii) that the Plaintiff has acquiesced to Ruchi Soya taking possession of the Cargo and the Bill of Ladings accordingly no longer conferred title to sue or a right to possession to the Cargo. The law [55] The provisions in relation to interrogatories can be found in Order 26 of the RoC 2012. The court in Aarti a/p Telak Chan v Previnder 46 Singh a/l Pretam Singh [2018] MLJU 6; [2018] 1 LNS 13 laid down the principles relating to interrogatories as follows – [13] Discovery by interrogatories in a nutshell:

Interrogatories consist of a series of written questions posed to the opponent about the case concerning discovery of facts, which is to enable a party to obtain from the opposite party admissions or evidence of material facts to be added at the trial or to appraise the strength or weakness of the case before the trail and thereby to assist in the fair disposal of the proceedings at or before the trail or is saving costs. The answers to interrogatories might also reduce the need for and scope of discovery;

Interrogatories that do not relate to a matter in question or otherwise known as “fishing interrogatories’ are not allowed.

Interrogatories can be served before the pleadings are closed without leave of the court.

However once pleadings are closed, the leave of the court is necessary for serving interrogatories.

If the answer to the interrogatories is insufficient, the court may make an order requiring a party to make necessary further answer either by affidavit or on an oral examination as the court may direct. [56] In Sheik Abdullah bin Sheikh Mohamad v. Kang Kock Seng [1974] 1 LNS 151, the Federal Court held that under certain circumstances, interrogatories may extend to any facts the existence or non-existence which is relevant to the facts in issue. The court said – 47 Although interrogatories must be confined to matters which are in issue, they may under some circumstances extend to facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue. In considering whether the interrogatories should be allowed or not the court must consider whether they are designed to obtain admissions of facts which will reduce the issues, shorten the length of the trial and thus save costs.. [57] Thus what is required to be determined by this court is that the

are admissions or evidence of material facts and relate to a matter or facts in issue;

are admissions of facts which will reduce the issues for purpose of disposing this in personam action fairly and that it is costs savings; and

may not relate directly to the facts in issue but it may be relevant to the existence or non-existence of the facts in issue. Findings of the court [58] The questions in the Interrogatories as summed up by the Defendants may be divided into the following categories – 48

questions 1 – 5 relate to the trade finance arrangement between the Plaintiff and Aavanti;

questions 6 – 10 relate to the process and procedure in relation to the trade finance arrangement;

questions 11 – 14 relate to the Plaintiff’s knowledge of the LoI-based Discharge practice / custom in the palm oil industry; and

questions 15 – 16 relate to the process and procedure following the default by Aavanti. [59] This court is of the view there is no merits in the Plaintiff’s contentions that the Interrogatories are premature. On the facts the Interrogatories were served on the Plaintiff on 25 July 2018 which is one day after the Defendants filed their Defence and before the Plaintiff filed the Application to Strike Out Defence. To say that the Defendants are barred from eliciting admissions / information via the Interrogatories because of the said application is simply flawed and unjustified. [60] The Plaintiff’s pleaded case is that the Defendants are in breach of the contract of carriage by delivering the Cargo without the presentation of the Bills of Lading and that as the lawful holder of the Bills of Lading which were pledged by Aavanti to them, they are entitled to the 49 possession of the Cargo. Thus it is wrong for the Defendants to deliver the Cargo to Ruchi Soya. The Defendants pleaded defence is that the Plaintiff has no right to demand for the possession of the Cargo as the Bills of Lading did not confer such right on the Plaintiff as the Plaintiff knew and accepted the LoI-based Discharge practised between Aavanti and Ruchi Soya. Thus the core issue to be determined by this court is whether the Defendants has breached the contract of carriage by delivering the Cargo to Ruchi Soya against the LoI and without the Bill of Ladings presented. The said issue in turn relate to the issue whether the Plaintiff approved the LoI-based Discharge practice between Aavanti and Ruchi Soya which may amount to a waiver on the part of the Plaintiff of its right in relation to the Cargo under the pledged Bills of Ladings. [61] As stated above, this court is of the view that the Plaintiff’s knowledge of the LoI-based Discharge practice between Aavanti and Ruchi Soya is relevant to determine the issue of the alleged breach of the contract of carriage (as evident by the Bill of Ladings) and knowledge would normally be inferred from one’s conduct, the questions posed in the Interrogatories relate to the issue on the following grounds – 50

having considered the questions in the Interrogatories, this court is of the view that the answers to the Interrogatories would provide material facts in relation to the Plaintiff’s purported knowledge and acquiescence to the LoI-based

in particular questions 1 – 3 seeks to establish the banker-client relationship between the Plaintiff and Aavanti and the identification of the persons in the Plaintiff bank and Aavanti who executed the relevant documents;

questions 4 – 5 also relate to the relevant documents (questions 4 and 5) executed by the Plaintiff and Aavanti in relation to the trade financing agreement which would provide information as to the terms and conditions of the trade finance including the arrangement for payment, security in the form of the Bills of Lading. The arrangement / agreement between the Plaintiff and Aavanti in relation to the Bills of Lading would be relevant to the issue of the Plaintiff’s claim that they are the lawful holder of the Bills of Ladings and thus has the right to sue on the Bill of Ladings; 51

questions 6 – 9 relate to the process and procedure applied by the Plaintiff in relation to Aavanti’s application for trade financing. This facts would provide information in relation to the Plaintiff’s knowledge of the trade business carried out by Aavanti in relation to the sale and purchase of palm oil. In this respect as contended on behalf of the Defendants, such information relate directly to the Plaintiff’s knowledge of the purpose of the trade transaction it was asked to finance. The Plaintiff as any other prudent banker is expected to analyse its customer’s business in order to access the commercial risk it is undertaking and subsequently to determine the necessary conditions to be imposed in order to minimize such risk. In “The Diana Prosperity” [1976] 2 Lloyds’s Rep 621 the court said – No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as 'the surrounding circumstances' but this phrase is imprecise, it can be illustrated but hardly defined. In a commercial contract it is certainly right that the Court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating… 52 As such information is only within the Plaintiff’s control and knowledge, the Defendants are entitled to elicit such relevant information from the Plaintiff (United Merchant Finance Bhd v Majlis Agama Islam Johor [1994] 2 CLJ 151);

questions 10 – 11 relates to information in relation to the persons in the Plaintiff bank and Aavanti who handle the trade finance transaction between both parties, in particular in relation to the sale of palm oil and palm oil related products to Ruchi Soya. This information would determine the competent persons to give evidence in relation to the trade finance transactions between the 3 parties in order to assist this court to determine the issue of the Plaintiff’s purported knowledge of the LoI-based Discharge practice;

question 12 – 14 is relevant and necessary for the purpose of determining the Plaintiff’s knowledge as to the trade arrangement between Aavanti and Ruchi Soya in particular the discharge of the Cargo. The information sought (including the particulars of the transaction, shipment dates, the relevant bill of ladings, when the original bill of ladings received by the Plaintiff, the date goods covered by the bill of 53 lading released and when Aavanti paid the Plaintiff) would relate directly to the purported knowledge and acquiescence on the part of the Plaintiff of the LoI-based Discharge practice between Aavanti and Ruchi Soya;

question 15 and 16 is sought by the Defendants pursuant to the Plaintiff’s assertion in its Statement of Claim that Aavanti has defaulted in repayment of the loan granted by the Plaintiff to Aavanti for the purchase of the Cargo. It is noted that no other details were provided in the Statement of Claim in relation to the said default. As the Plaintiff’s claim is premised on the Bills of Ladings charged by Aavanti as security for the loan and Aavanti defaulted on the loan, the information requested is relevant and necessary to determine the issue of the Plaintiff’s right to pursue this in personam action against the Defendants. [62] The Interrogatories sought by the Defendants are not information or admissions which are contained in the Plaintiff’s pleadings. As stated above the information the Defendants intended to elicit from the Plaintiff are information within the control and knowledge of the Plaintiff as the Interrogatories essentially relate to the trade finance arrangement 54 between Plaintiff and its customer Aavanti. No doubt the said arrangement does not concern the Defendants as it is between the Plaintiff and Aavanti and that the Interrogatories may not be directly relate to the core issue. However the circumstances discussed above shows the admissions sought from the Plaintiff through the Interrogatories relate to the Plaintiff’s knowledge of the LoI-based Discharge practice and the Plaintiff’s acquiescence of such practice which is directly relevant to the Plaintiff’s claim that the Defendants has breached the contract of carriage as evident in the Bills of Lading when the Defendants delivered the Cargo to Ruchi Soya without the presentation of the original Bills of Lading. Accordingly this court is of the considered view that the Defendants are entitled to elicit information (by obtaining admissions) which relate directly and in support of their Defence that the Plaintiff has acquiesced the practice of discharging the Cargo against the issuance of the Letters of Indemnity which may estop them from pursuing this action against the Defendants. Conclusion [63] It is the considered view of this court that the Interrogatories which relate to the existence of the relevant documents evidencing the trade finance arrangement between the Plaintiff and Aavanti will reduce the 55 time of trial thus expediting the disposal of this action. Importantly the answers provided will assist this court to adjudge the issues between the Plaintiff and Defendants fairly. As such the Plaintiff’s Application to Strike Out Interrogatories was accordingly dismissed with cost. ( KHADIJAH BINTI IDRIS ) JUDICIAL COMMISSIONER HIGH COURT (COMMERCIAL DIVISION) DATED 30 APRIL 2019 Counsel: Plaintiff : James P. David and together with Cahaya Narimas Faad of Messrs Shaikh David & Co. Defendants : Arun Krishnalingam and together with Aaron Siva