The Caraka Jaya Niaga III 11

DMC/SandT/21/07

Singapore

(1) POS Maritime NX S.A. & (2) Pan Ocean Co. Ltd. v. The Owners/bareboat Charterers of MV Caraka Jaya Niaga III-11 - The Caraka Jaya Niaga III-11

High Court of Singapore: Decision delivered by Judicial Commissioner S Mohan: [2021] SGHC 43: 22 February 2021

Vivian Ang Hui Ming, Ho Pey Yan and Douglas Lok Bao Guang, instructed by Allen & Gledhill LLP for the First and Second Plaintiffs

R Govin and Tan Hui Tsing, instructed by Gurbani & Co LLC for the Defendant

COLLISION: BOTH VESSELS TO BLAME: PLAINTIFFS’ CLAIM ISSUED IN TIME: DEFENDANT’S COUNTERCLAIM ISSUED OUT OF TIME: MARITIME CONVENTIONS ACT OF SINGAPORE: WHETHER COUNTERCLAIM STILL QUALIFIED FOR APPLICATION OF ADMIRALTY SINGLE LIABILITY PRINCIPLE

Summary

This was a collision case in which both vessels were at fault. The defendant shipowner sought to defend itself against the plaintiffs’ claim by relying on the “Single Liability Principle”. This principle is usually applied in both-to-blame collision cases; it allows the net payor to reduce its liability since the liability is apportioned in accordance with the degree to which each vessel was at fault in the collision.

The Judge found that the Single Liability Principle applied only when the claims of both vessels are not time-barred, and that a shipowner who is a net payor would only be able to rely on the Single Liability Principle to reduce its liability if its counterclaim were timely.

Case Note contributed by Sri Azali BB (Human Resource Management & Business Law), Paralegal at Penningtons Manches Cooper LLP Singapore.

Introduction: The Single Liability Principle

When two vessels are involved in a collision for which both vessels are at fault, the loss and damage suffered by the owners of the respective vessels will give rise to claims and cross claims by one owner against the other. However, there do not exist two cross-liabilities in damages. The general rule is that liability is apportioned on a percentage basis according to the degree to which each vessel is at fault, giving rise to the Single Liability Principle where a single liability is derived from the difference between the portion of the larger claim and the portion of the smaller claim, which is then payable by the net payor to the net payee. The Single Liability Principle is a straightforward principle where the two claims are not time-barred.

Background

The first plaintiff was the registered owner of the vessel “Grand Ace12” and the second plaintiff was the demise charterer. The defendant was the demise charterer of the vessel “Caraka Jaya Niaga III-11” (the “CJN”). On or about 3 April 2017, a collision occurred between the Grand Ace12 and the Caraka Jaya Niaga III-11. Both the plaintiffs and defendant claim to have suffered loss and damage because of the collision. Under Section 8 of the Maritime Conventions Act 1911 of Singapore (“MCA”) – see footnote 1 - there is a two-year limitation period to bring proceedings, including by way of a counterclaim. In this case, the time-bar fell on or about 3 April 2019. The plaintiffs issued an in rem writ against the CJN in case reference HC/ADM 48/2019 (“ADM 48”) and on 6 May 2019, the writ was served on the CJN.

On 13 May 2019, the defendant issued an in rem writ against the Grand Ace12 in case reference HC/ADM 64/2019 (“ADM 64”). However, by then the two-year time-bar for a claim against the Grand Ace12 had already expired. The writ in ADM 64 was not served and lapsed on or about 13 May 2020. In ADM 48, on 12 June 2019, the defendant applied for an extension of time, pursuant to s8(3) MCA 1911 – see footnote 1 - to maintain a counterclaim against the plaintiffs, notwithstanding that the counterclaim was time-barred by then. The application was dismissed by the Assistant Registrar and no appeal was brought by the defendant against that decision. On 11 June 2020, the plaintiffs and defendant entered into a Consent Judgment which provided that the plaintiffs should bear 40% and the defendant 60% of the blame for the collision. The Consent Judgment was entered into without prejudice to the defendant’s reliance on the Single Liability Principle and without prejudice to the plaintiffs’ right to challenge the defendant’s reliance on the Single Liability Principle when so presented.

Issues of Law

The preliminary question of law to be determined by the Court was whether the defendant was able, on the basis of the agreed facts, to rely on or raise the Single Liability Principle in reduction of the plaintiffs’ claim in this action where the defendant’s counterclaim against the plaintiffs was time-barred.

The Parties’ Arguments

The defendant argued that the fact that its counterclaim was time-barred was not relevant as it was not seeking to bring any proceedings against the plaintiffs but merely seeking to defend itself against the plaintiffs’ claim by relying on the “Single Liability Principle” as applied in The Khedive [1882] 7 App Cas 795 (“The Khedive”). Based on the apportionment of liability agreed in the Consent Judgment, the defendant argued that it should be entitled to set-off 40% of its loss and damage against 60% of the plaintiffs’ recoverable loss and damage in reliance on the Single Liability Principle, thereby reducing its liability to the plaintiffs. In support of its case, the defendant relied primarily on the decision of the English High Court in MIOM 1 Ltd v Sea Echo ENE (No 2) [2012] 1Lloyd’s Law Reports 140 (“Sea Echo”). This case stated that the net payor might not wish to commence proceedings against the net payee, and might wish to rely upon the Single Liability Principle in order to reduce its liability only if sued by the net payee. On the other hand, the plaintiffs submitted that the defendant was not entitled to rely on the Single Liability Principle to reduce the plaintiffs’ claims as the principle did not apply when the counterclaim was time-barred.

Decision of the High Court

The Judge agreed with the Plaintiffs’ submissions and made two preliminary observations. Firstly, the discussions on the Single Liability Principle in Sea Echo was obiter dicta (not binding as a precedent) as the question of the time bar was belatedly raised by the plaintiff in that case during the discussion on the appropriate orders for the costs of determining liability. No time bar had ever been pleaded previously. The judge in Sea Echo had dismissed the plaintiff’s point on the time-bar and had found that there was a valid and existing counterclaim that he could consider to assess and determine the apportionment of liability. In contrast to the Sea Echo, the defendant’s claim/counterclaim in this case was already time-barred and hence the Single Liability Principle would not apply.

Secondly, the Judge found that the time bar under section 8 MCA 1911 was procedural in nature and in this case, had barred the remedy sought by the defendant whose claim/counterclaim was not brought in time. However, this did not extinguish the underlying rights which gave rise to the counterclaim.

The Judge then went on to examine the true nature and operation of the “Single Liability Principle” and held that it was a rule of procedure applied in the English Court of Admiralty dating back to at least the 1800s and that the application of the principle clearly presupposed that both ships were at fault, had suffered damage and that both shipowners had advanced valid claims and counterclaims against each other. In other words, the claims and counterclaims were not time-barred, such as in the case of The Khedive, where the Single Liability Principle could be applied. As such, the Judge rejected the defendant’s arguments that:

(a) the essence of the Single Liability Principle was based on equity and fairness

(b) the “Single Liability Principle” represented a form of set-off.

Ultimately, the Judge noted that, as a procedural rule, the Single Liability Principle does not apply or operate in a case where s.8 MCA 1911 applies and thus prevents the defendant from bringing or maintaining proceedings (including a counterclaim).

Comment This case clearly explains that the “Single Liability Principle” presupposes the existence of valid claims and counterclaims as described and applied in The Khedive. The decision in the present case confirms that the “Single Liability Principle” is not applicable in cases where a party’s counterclaim is time-barred under s.8 MCA 1911. In the event of a ship collision where both vessels are at fault, shipowners who wish to seek a legal remedy should take care to issue their counterclaim against the other party before the time limit expires, else they will not be able to bring or maintain proceedings due to the effect of s.8 MCA 1911.

Fn.1. Maritime Convention Act 1911

8. Limitation of Actions

(1) No action shall be maintainable to enforce any claim or lien against a ship or her owners in respect of

(a) any damage or loss to another ship, her cargo or freight, or any property on board her, or damages for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former ship, whether such ship be wholly or partly in fault; or

(b) any salvage services

unless proceedings therein are commenced within 2 years from the date when the damage, loss or injury was caused or the salvage services were rendered.

….

(3) Notwithstanding subsections (1) and (2), any court having jurisdiction to deal with an action to which this section relates

(a) may, in accordance with the Rules of Court, extend any such period, to such extent and on such conditions as it thinks fit; and

(b) shall, if satisfied that there has not during such period been any reasonable opportunity of arresting the defendant ship within the jurisdiction of the court, or within the territorial waters of the country to which the plaintiff’s ship belongs or in which the plaintiff resides or has his principal place of business,

extend any such period to an extent sufficient to give such reasonable opportunity.