A recent decision of the Singapore High Court, Valency International Pte Ltd v JSW International Tradecorp Pte Ltd and others [2025] SGHC 50, clarifies the fundamental role of actual possession (or an immediate right to possession) of the underlying goods in order to sue for conversion of the goods against the context of pledges of bills of lading (BLs) and trust receipt loans. Considering that these are oft-used security instruments in trade finance transactions, the clarifications from this case are of note for cargo interests, shipowners and financing parties alike. 

Facts: Discharge and release of cargo without OBLs 

Valency International Pte Ltd (“Valency”) provided letter of credit (LC) financing to K.I. (International) Limited (“Kamachi”) for Kamachi’s purchase of 55,000 metric tonnes (MTs) of steam coal from JSW International Tradecorp Pte Ltd (“JSW”). The cargo was shipped from South Africa to Krishnapatnam port in India on the MV Stella Cherise (the “Vessel”), and 22 BLs were issued in its respect. JSW had chartered the Vessel from Oldendorff Carriers GmbH & Co KG (“Owners”), and requested Oldendorff to nominate Unicorn Maritime (India) Pvt Ltd (“Unicorn”) as the discharge port agent. The cargo was discharged at Krishnapatnam port without the production of bills of lading by 31 August 2018 against a discharge letter of indemnity. The cargo was however not released to the receiver, Kamachi, because of its ongoing demurrage dispute with JSW. 

Shortly afterwards, on 10 September 2018, HSBC made payment under the LC, and Valency obtained an import trust receipt loan to repay HSBC. Valency also pledged to HSBC, by way of security, the 22 BLs for the cargo; and sent to HSBC a trust receipt for the release of the 22 BLs on the conditions (as are usual for trust receipts) that Valency would:

• receive the 22 BLs and take delivery of the cargo “exclusively for the purpose of selling [it] unless [HSBC] shall direct otherwise”; and
• hold the 22 BLs, the cargo and the proceeds of their sale on trust for HSBC and solely to HSBC’s order.

Valency collected the 22 BLs from HSBC under the trust receipt in two batches – on 13 September 2019 and 24 September 2019. Meanwhile, Kamachi was chasing Owners for the release of delivery orders for the cargo, which JSW was resisting on account of Kamachi’s failure to settle demurrage with JSW. Owners eventually took the position that demurrage was a matter for Valency to settle with Kamachi, and instructed Unicorn on 13 September 2018 to issue delivery orders for the Vessel. JSW also followed suit on 17 September 2018, and instructed Unicorn to release the delivery order for the cargo. Unicorn accordingly issued delivery orders and Kamachi obtained delivery between 17 September 2018 and 15 November 2018. 

Meanwhile, Valency’s import trust receipt loan with HSBC fell due on 24 September 2018. In order to settle this loan, Valency obtained two further loans from HSBC on 24 and 25 September 2018 by discounting (with recourse to itself) the 22 BLs with the bank. Kamachi however failed to pay for the cargo, making only one payment for 2,500 MT (of the 55,000 MT) of the cargo. 

Unicorn released all the cargo to Kamachi, but misrepresented to Valency that the balance of the unreleased cargo was 52,500 MT. It repeated this misrepresentation at least three times. Valency brought multiple claims against Owners, JSW, and Unicorn, including a claim for conversion of the cargo against the Owners and JSW on account of their release instructions for the cargo. 

Finding: A right to sue for conversion rests on possession or immediate right of possession

Valency’s claim in conversation against both the Owners and JSW failed. Central to the failure was the Court’s finding that Valency did not have actual possession, or the immediate right to possession, of the unpaid cargo at the time of the alleged conversion. 

On the facts, Valency argued that it had the immediate right to possession of the unpaid cargo on the basis that it had possession of the BLs. The Court, however, noted that the capacity in which Valency had possession of the BLs did not give it an immediate right to possession. At the time Owners and JSW issued release instructions, the 22 BLs were pledged to HSBC and released to Valency only under a trust receipt. The Court noted that where goods are pledged, the pledgee (in this case, HSBC) has the right to their possession. Until the underlying debt for the security is paid, the pledgee is the only person who may sue for conversion of the goods. The Court also noted the well-settled position that a trust receipt does not destroy a pledge, but maintains it despite the pledgee releasing BLs back to the pledgor. 

On the facts, Valency pledged the 22 BLs to HSBC as security for the import trust receipt loan on 10 September 2018, and obtained possession of the BLs on 11 September 2018 under a trust receipt which expressly preserved HSBC’s security interest. As noted, Valency repaid the import trust receipt loan on 24 and 25 September 2018. 

As such, from 11 September to at least 24 September, the BLs were pledged to HSBC, who was the party with the immediate right to possession to the cargo. 

For completeness, it is added that Owners and JSW also argued that since Valency was not named in the Import General Manifest (“IGM”), it could not have obtained delivery of the cargo from the Krishnapatnam Port authority. The IGM is a legal document containing information about the goods imported and the consignee or importer (if different), which the carrier or the discharge port agent was required to file. 

The expert witnesses for Valency and Owners agreed that under the IGM that was filed, only Kamachi was entitled to take delivery of the Cargo from the port and that certain steps had to be taken (including amending the IGM) or if necessary, a court order, before Valency could take delivery of the unpaid cargo from the port. The Court rejected this argument and clarified that the immediate right to possession, for the purposes of making a claim for conversion, refers to the right to legal possession. The fact that Valency had to take certain steps (including, if necessary, obtaining a court order) affected Valency’s ability to take actual possession of the Unpaid Cargo but did not affect Valency’s right to legal possession.

Comment: Pledged BLs under trust receipt  

It is often said that the BL holder has the right to sue for the goods in a claim for conversion: but this has to be qualified where the BLs have been pledged to a lender with the actual BLs released under a trust receipt mechanism. Applying trite principles, the Court clarified that the pledgor in such a case merely holds the BLs on trust for the bank. Since the trust receipt does not destroy the pledge, the right to possession of the goods remains with the pledgee bank, and a pledgor cannot therefore sue for conversion of the goods in its own right while the pledge remains on foot.