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COMMODITIES IN FOCUS

7

receipts were considered to be documents of title, but

rather because the bank had advanced money under

a contract of pledge and there was a presumption

that delivery of the pledged goods would be at the

earliest opportunity, that is, on shipment.

The situation was materially the same here: the

delivery of goods to a carrier, consigned to a bank,

amounted to a constructive delivery of the goods to

the bank, so as to perfect a pledge over the goods.

Therefore, by handing the diamonds to the freight

forwarder and directing that they be delivered to

BEA, Rupam Impex had constructively delivered the

diamonds to KBC and perfected the pledge.

KBC were awarded the full amount of the claim.

“KBC were awarded the full

amount of the claim”

Ignorance of the pledge

Brink’s then applied to the Court of Final Appeal,

where they argued that they did not know about

KBC’s interest in the diamonds and should not

therefore be liable to KBC for the misdelivery.

The Court rejected Brink’s argument and held that

Brink’s knowledge or ignorance of the pledge made

between KBC and Rupam Impex was irrelevant and

not reasonably arguable. The Court affirmed the

Court of Appeal judgment and dismissed Brink’s

appeal.

“The Court affirmed the Court of

Appeal judgment and dismissed

Brink’s appeal”

Comment

Before the Brink's/KBC decision, constructive delivery

to a pledgee could be:

a.

giving control of the goods through delivery of a

key;

b.

transferring valid title documents (such as bills

of lading) to the pledgee; and

c.

acknowledgment by the custodian that he holds

the goods to the order or at the disposition of

the pledgee.

The Brink's/KBC case did not fall into any of these

categories: there were no keys, the air waybills were

not title documents and Brink’s actually denied

knowledge of KBC’s interest in the diamonds.

This case therefore creates a new type of

constructive delivery: when the pledgor delivers the

goods to a carrier and directs the goods to be

delivered to the pledgee (or its agent). That is

sufficient to perfect the pledge. It is irrelevant

whether the carrier/custodian knows that the goods

are subject to a pledge.

Andrew Rigden Green

Partner, Hong Kong

T +852 2533 2761

E:

andrew.rigdengreen@shlegal.com