[1971] 1 Lloyd's Rep. 439, Privy Council, on appeal from the
Malaysian Court of Appeal
[1967] 2 Lloyd's Rep. 437.
In this case the bank as the holder of a mate's receipt, not being a document of title, was unable to sue the charterers in conversion on those grounds, where the charterers had released the goods to the shipper without production of any documents.
The bank however succeeded on the alternative grounds that property in the goods had passed to it on shipment.
Facts, Action by bank, Mate's receipt as document of title, Alternative action of bank
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Wah Tat Bank had taken mate's receipts (naming the bank as consignee) as security, where they advanced credit to the shipper of a cargo. It was envisaged that when the bank was reimbursed, the bank would hand back the mate's receipts endorsed to the shippers so that they could get delivery of the goods. It was therefore contemplated that the mate's receipts would in fact operate as documents of title, in the sense that delivery would not take place except against their production, and that no other document of title would be issued for the cargo.
The charterers, on the instructions of the shippers, released the goods back to the shipper without production the mate's receipts (no bills of lading having been issued).
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The bank sued the charterers in conversion and what was then (before the statutory changes made in 1977) trover, but failed to establish that as holder of the mate's receipt, it had (constructive) possession of the goods.
There was no doubt that the bank was an equitable pledgee, giving it an interest which would have been enforceable against the shipper, but the bank had not given notice to the ship, which was therefore not bound by the equitable pledge. The bank could not be a common law pledgee without delivery. So their action depended on whether there was symbolic delivery, and that depended on whether the mate's receipts constituted documents of title.
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The Privy Council held that in principle a mate's receipt could be a document of title, on proof of custom (which could include a local custom, in this case covering shipments from Sarawak to Singapore), but that this document, being marked "non-negotiable", could not be.
Doubt was even expressed in the case as to whether a bill of lading naming a consignee (i.e., not transferable by delivery and indorsement) could be a document of title. This point was not resolved.
Note that the custom was that a bill of lading was not issued, so that the only document which could be a document of title was the mate's receipt. This differed from the documents in Hathesing v. Laing, and also that in Nippon Yusen Kaisha v. Ramjiban Serowgee; in both these cases the mate's receipts were envisaged as preliminary documents only, which would normally later be given up for a bill of lading, the latter being used as a document of title. Indeed, had it been usual for the mate's receipt to be given up for a bill of lading, it is difficult to see how any local custom that they were used as documents of title could be established.
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The bank nevertheless succeeded (in conversion) on the grounds that "the shipment of the goods was a delivery to the ship as bailee for the bank so that thereby the pledge was completed and the bank given the possessory title on which it relies." Since the bank was named as consignee, and had advanced the full amount of the money, shipment constituted delivery to the bank, and passed special property to the bank as pledgee. If the bank had instead been a buyer under a contract of sale, shipment in similar circumstances would likewise have transferred property to it.
The situation in Kum v. Wah Tat Bank was however rather unusual; the bank succeeded only because shipment of the goods could be regarded as delivery to the bank - in a normal documentary credit, the pledge is not created until tender of documents after shipment, and property does not pass until then. Kum v. Wah Tat Bank therefore gives no general protection to banks which advance money on the security of a document which is not a document of title.
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These notes were last updated on 08 May 97.
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