Marchand Navigation v Olam Global Agri & Sinco Shipping - The Maria Theo 1

DMC/SandT/2024/07

Singapore

Marchand Navigation Co v Olam Global Agri Pte Ltd and Sinco Shipping Pte Ltd (The “Maria Theo 1”)

General Division of the High Court: Justice Kwek Mean Luck: [2023] SGHC 339: 29 November 2023

Judgment available at: https://www.elitigation.sg/gd/s/2023_SGHC_339

Tan Hui Tsing and Deborah Koh for Marchand (Owners)

Jonathan Tan for Olam (Sub-charterer) and Adrian Tan for Sinco (Charterer)

LIEN: WHETHER OWNERS ENTITLED TO EXERCISE THE LIEN PURSUANT TO CLAUSE 18 NYPE 1946 FORM OVER DEMURRAGE DUE TO HEAD-CHARTERERS UNDER SUB-CHARTER

ARBITRATION: ARBITRATION CLAUSE PROVIDING FOR “ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS CONTRACT“ TO BE EXCLUSIVELY REFERRED TO ARBITRATION IN LONDON: WHETHER COURT PROCEEDINGS SHOULD BE STAYED IN FAVOUR OF ARBITRATION: WHAT CONSTITUTES A “DISPUTE”

Summary

In this case, the shipowner successfully applied to the High Court for confirmation that it was entitled to exercise its lien over demurrage owed to its charterer, by the sub-charterer under the charterer’s sub-charter, pursuant to clause 18 of the New York Produce Exchange (“NYPE”) 1946 Time Charter (“Clause 18”), in the charterparty between the owner and the charterer (the “Charterparty”), in circumstances where the owner had stepped in to pay for bunker fuel supplied to the vessel, during the performance of the Charterparty, which was – under the Charterparty – the contractual responsibility of the charterer. Therefore, the shipowner had given the sub-charterer valid notice of its exercise of the lien.

Case note contributed by Tan Hui Tsing, LLM (Maritime Law), LLB (Hons), Solicitor of England & Wales, Advocate & Solicitor of Supreme Court of Singapore and International Contributor to DMC’s Case Notes.

Background

Marchand had time chartered its vessel to Sinco which in turn had sub-chartered the vessel to Olam. Marchand sought to exercise its lien under Clause 18 in respect of demurrage owing by Olam to Sinco under the sub-charter after Marchand had paid for bunkers on behalf of Sinco, for which Sinco should have paid under clause 2 of the Charterparty.

Clause 18 of the Charterparty read:

“That the Owners shall have a lien upon all cargoes, and all sub-freights or hire or sub-hires or demurrages and time for detention, if any for any amounts due under this Charter, ...”

The Charterparty further contained an arbitration clause which read:

“17. Arbitration, if any, to be in London and English Law to apply for both substance and procedures. See clause 46.” “Clause 46 – BIMCO Law and Arbitration Clause 2020 (English Law | London Arbitration)

(a) This contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this contract shall be referred exclusively to arbitration in London in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this clause. The seat of arbitration shall be London even where any hearing takes place in another jurisdiction.”

Sinco contested Marchand’s exercise of the lien on the grounds put forward by Marchand, namely, that there were no sums due under the Charterparty. That meant that there was a “dispute” between it and Marchand. That in turn, meant that Marchand’s claim had to be resolved through arbitration and not through court proceedings.

Judgment

(1) Whether Marchand’s payment for bunkers on behalf of Sinco was an amount due under the Charterparty

The phrase “any amounts due under this Charter” in Clause 18 was wide enough to encompass the amounts owing by Sinco to Marchand as a result of Marchand paying for bunkers on behalf of Sinco where the responsibility for making such payments fell on Sinco.

(2) Whether there was a dispute within the meaning of the arbitration clause

The case of Tjong Very Sumito and others v Antig Investments Pte Ltd [2009] 4 SLR(R) in the Singapore Court of Appeal had “set a very high bar before the court would be willing to find that there was no “dispute referable to arbitration”. The mere assertion of a dispute sufficed. Thus, in this case, the High Court was unable to find that there was no dispute referrable to arbitration.

(3) Whether Marchand was entitled to exercise its lien against Olam

Even if there was a dispute for the purposes of the arbitration clause, this did not prevent Marchand’s exercise of lien under Clause 18 as against Olam as:

(a) Olam was not a party to the arbitration clause in the Charterparty and was entitled to a court determination of its rights and obligations as the sub-charterer.

(b) There was no requirement at law that the notice of exercise of lien had to be accompanied by proof of final determination of any dispute between the owner and the charterer.

(c) This approach was in line with Care Shipping v Latin American Shipping [1983] 1 QB 1005 where – in circumstances closely similar to those in the present case – the court determined that monies under a lien belonged to the owners notwithstanding that arbitration proceedings were still underway between the owners and their charterers.

Comment

The conclusion ultimately reached by the High Court was correct. It was recognised that the High Court could not go as far as to find that there was no dispute as between Marchand and Sinco because of the finality of the Court of Appeal decision in Tjong Very Sumito that the mere assertion of a dispute would suffice. However, the High Court acknowledged that even if there was a dispute referable to arbitration, the question remained whether the presence of such dispute prevented Marchand’s exercise of the lien under Clause 18 as against Olam.

The High Court determined, therefore, that it had jurisdiction to decide who was entitled to the liened sum, because this concerned the distinct issue of whether the presence of such a dispute as between Marchand and Sinco under the Charterparty prevented Marchand’s exercise of the lien under Clause 18 as against Olam, which, in the High Court’s opinion, on the authority of Care Shipping it did not. Therefore, the High Court was able to hold that Olam was entitled to make payment of the liened sum to Marchand, because the lien had been exercised validly so far as Olam was concerned.