Singapore Court of Appeal rules against bill of lading holder in conversion claim

31 March 2026

In Valency International Pte Ltd v JSW International Tradecorp Pte Ltd & Ors [2026] SGCA 1, the Court of Appeal of Singapore dismissed an appeal brought by Valency International Pte Ltd (“Valency”) against JSW International Tradecorp Pte Ltd (“JSW”) and Oldendorff Carriers GmbH & Co KG (“Oldendorff”) against the decision of the General Division of the High Court of Singapore, which was reported in Valency International Pte Ltd v JSW International Tradecorp Pte Ltd & Ors [2025] SGHC 50.

In a judgment released on 12 January 2026, the Court of Appeal held that instructions given to a discharge port agent to release cargo may not amount to an act of conversion unless the claimant can prove the chain of causation between the instructions and the actual act of releasing the cargo, the latter being the event which ultimately crystallised the injury to the claimant’s interest. It also held that a pledgee of bills of lading, being normally the person who has the right to sue in conversion, would not lose this right even if it redelivers the bills of lading to the pledgor, unless the redelivery takes place in circumstances that constitute a voluntary surrender of the pledgee’s interest.

Allen & Gledhill Partners Jason Chan, SC and Kenny Yap represented the successful respondent, JSW.

Background

The dispute involved a shipment of 55,000 MT of steam coal (“Cargo”) by JSW to K.I. (International) Limited (“Kamachi”), which was financed by Valency. Valency in turn financed Kamachi’s purchase of the Cargo through a loan from HSBC (“Loan”). Pursuant to the Loan, Valency pledged the bills of lading for the Cargo to HSBC (“Pledge”). HSBC subsequently released the bills of lading to Valency under a trust receipt arrangement. The trust receipt arrangement required Valency to hold the bills of lading, the Cargo, and/or the proceeds of any sale thereof on trust for HSBC and solely to HSBC’s order (“Trust Receipt”).

The Cargo was shipped from South Africa to India on board the vessel “STELLA CHERISE” which was voyage chartered by JSW from Oldendorff, who in turn voyage chartered the vessel from Cara Shipping Pte Ltd, who in turn time chartered the vessel from the ship owner Stella Cherise Pte Ltd. The Cargo was discharged from the vessel without production of the original bills of lading at the discharge port, Krishnapatnam Port. The agent for the vessel at Krishnapatnam Port was Unicorn Maritimes (India) Pvt Ltd (“Unicorn”).

After the Cargo was discharged at Krishnapatnam Port, Unicorn issued a letter to Valency in which Unicorn undertook not to release delivery orders for the Cargo without Valency’s instructions and/or surrender of the original bills of lading. Thereafter, JSW and Oldendorff sent separate instructions by email to Unicorn for the release of delivery orders for the Cargo (“Release Instructions”).

Valency did not give any instructions to Unicorn in respect of the Cargo. Nevertheless, Unicorn proceeded to issue and release delivery orders for the Cargo over a three-month period, while continuing to represent to Valency that the Cargo remained at Krishnapatnam Port. The delivery orders issued by Unicorn enabled Kamachi to obtain delivery of the Cargo at Krishnapatnam Port even though Kamachi only paid Valency for 5,000 MT of the Cargo, leaving 50,000 MT of the Cargo unpaid.

Thereafter, Valency commenced Singapore proceedings against JSW, Oldendorff, and Unicorn, for (amongst others) conversion of the Cargo (“Conversion Claim”). At first instance, Justice Chua Lee Ming (“Chua J”) dismissed all of Valency’s claims against JSW and Oldendorff, including the Conversion Claim (see Valency International Pte Ltd v JSW International Tradecorp Pte Ltd & Ors [2025] SGHC 50). To read our article on Chua J’s decision, please click here. Dissatisfied, Valency appealed against Chua J’s decision but limited the scope of its appeal to the Conversion Claim.

On appeal, Valency maintained that (i) the release instructions issued by JSW and Oldendorff to Unicorn amounted to acts of conversion, and (ii) it had a right to sue in conversion notwithstanding that the bills of lading had been pledged to HSBC.

Act of conversion must cause the claimant to lose the right to possess, use, or control

On the first issue, the Court of Appeal found that JSW and Oldendorff’s respective Release Instructions did not constitute an act of conversion.

In the present case, the Court of Appeal found that Valency did not discharge its burden of proving that the Release Instructions in fact caused Unicorn to issue and release the delivery orders. A bare denial of title would not give rise to liability in conversion unless the intentional act or conduct directly affecting or impacting the subject property was factually linked to the claimant’s loss of right to possess, use, or control that subject property.

In respect of JSW’s Release Instruction, the Court of Appeal held that the instructions had to be understood in the surrounding context of communications leading up to JSW issuing its Release Instruction. In light of (i) Unicorn’s concurrent obligations to Valency under Unicorn’s own undertaking, (ii) Unicorn’s subsequent deception of Valency on the closing balance of the Cargo after Unicorn released the delivery orders, and (iii) prior transactions between JSW, Valency, and Unicorn which indicated that Unicorn was aware of its obligation to wait for Valency’s instructions before it could release the Cargo, the Court of Appeal found that JSW’s Release Instruction did not cause Unicorn to release the delivery orders for the Cargo.

In respect of Oldendorff’s Release Instruction, the Court of Appeal found that the instructions could not be construed as an instruction or direction for Unicorn to deliver the Cargo without surrender of the bills of lading or Valency’s consent.

In any event, given that there were two Release Instructions by JSW and Oldendorff, there was no evidence as to which Release Instruction (if any) caused Unicorn to release the delivery orders of the Cargo.

In the circumstances, the Court of Appeal found that neither of the Release Instructions amounted to conversion.

Standing to sue in conversion when goods are pledged

On the issue of Valency’s right to sue in conversion, the Court of Appeal affirmed Chua J’s holding that Valency, being the owner and pledgor of the bills of lading at the time of the Release Instructions, did not have standing to sue in conversion because it did not have the right to immediate possession. Valency’s physical possession of the bills of lading, held on Trust Receipt for HSBC, was not sufficient to give it the right to sue in conversion.

The right to immediate possession, and hence standing to sue in conversion, was the right of HSBC, the pledgee. The pledgee’s “special property” or “special interest” in the bills of lading is derived from the pledge: the pledgee will generally be entitled to retain possession of the good until the pledge is honoured.

The Court of Appeal rejected Valency’s argument that when HSBC redelivered the bills of lading to Valency, the pledge was brought to an end and Valency obtained the immediate right to possession. Instead, the Court of Appeal clarified that a pledge will only be extinguished if the redelivery of the asset takes place in circumstances that constitute a voluntary surrender of the pledgee’s interest in the same.

On the evidence, the Court of Appeal found that the terms of the Trust Receipt preserved the pledge and HSBC’s special property in the Cargo even after HSBC released physical possession of the bills of lading to Valency.

Practical implications

This decision serves as a timely reminder that a claimant who wishes to sue in conversion must establish the causal nexus between the alleged act of conversion and the loss or injury to the claimant’s interest in the property. A bare denial of title will not, in the absence of conduct directly affecting the goods, give rise to a liability in conversion.

This decision also confirms that the release of pledged bills of lading to a borrower under a trust receipt arrangement that preserves the financier’s pledge does not extinguish the pledge or the financier’s special property in the underlying assets.

This should provide comfort to trade financiers who may be assured that a trade financier which has released pledged bills of lading under similar trust receipt arrangements remains the only party with standing to sue in conversion in the event of wrongful interference with the pledged assets.

However, trade financiers should be careful to ensure that their trust receipts and pledge agreements are properly worded to ensure the continuation of the pledge notwithstanding the release of any bill of lading to the borrower in the usual course. Properly drafted agreements will ensure that the financier’s “special interest” in the pledged assets is preserved against third-party interference, providing a clear path to recovery if such pledged assets are misdelivered.

Reference materials

The judgment is available on the Singapore Courts website www.judiciary.gov.sg.