The Bunga Melati 5

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DMC/SandT/12/23

Singapore

Singapore Court of Appeal

The “Bunga Melati 5” [2012] SGCA 46: Judgment delivered by VK Rajah JA, 21st August 2012

Rajah & Tann LLP for the Appellants (Plaintiffs)

Gurbani & Co for the Respondents (Defendants)

ADMIRALTY JURISDICTION: WHETHER A GOOD ARGUABLE CASE ON THE MERITS REQUIRED: THE VASILIY GOLOVNIN EXPLAINED

Summary

For the purpose of invoking the Court’s admiralty in rem jurisdiction, its decision in The “Vasiliy Golovnin” [2008] 4 SLR(R) 994 did not introduce a new merits requirement of a good arguable case, that needed to be proved by the arresting party.

To invoke the Court’s admiralty in rem jurisdiction, the plaintiff is only required to prove the jurisdictional facts set out in Section 4(4) of the High Court (Admiralty Jurisdiction) Act on a balance of probabilities.

Note: In this case, the Singapore Court considered a number of issues apart from the invoking of the admiralty in rem jurisdiction of the Court, which are beyond the scope of this summary. The focus of this summary is on the Singapore Court’s commentary on the steps and standards of proof for a plaintiff to invoke the Court’s admiralty in rem jurisdiction. This represents a development in Singapore’s admiralty law, and would be of particular interest to, and significance for both current and prospective admiralty litigants.

This note has been contributed by Ng Weiting, LLB (Hons), Associate at Ang & Partners, international contributors to the website for Singapore.

Facts

1. The Plaintiffs, Equatorial Marine Fuel Management Services Pte Ltd (“Equatorial”) were in the business of supplying marine fuels. The Defendants, MISC Berhard (“MISC”), a shipping company, owned several vessels including the “Bunga Melati 5”.

2. The Plaintiffs claimed the sum of US$21,703,059 plus contractual interest, which represented the outstanding amount due and owing from the Defendants pursuant to:-

a. Two contracts entered into on or about 3 July 2008, under which the Plaintiffs agreed to supply 35,000 mt of bunkers to vessels owned or operated by the Defendants in August and September 2008; and

b. A contract entered into on or about 18 September 2008, under which the Plaintiffs agreed to supply, on a spot basis, 1,000 mt of bunkers to the Defendants’ vessel MT “Navig8 Faith”.

(collectively, the “Contracts”).

3. It was the Plaintiffs’ case that a company called Market Asia Link Sdn Bhd (“MAL”) had at all material times acted as the Defendants’ broker or buying agent in respect of the Contracts and that the Defendants were therefore contractually liable to the Plaintiffs for the bunkers supplied. The Plaintiffs contended in the alternative that the Defendants were liable to them in unjust enrichment, having enjoyed the use of the bunkers without paying for them.

4. The Plaintiffs commenced the present in rem action and served the in rem writ on the “Bunga Melati 5”, without arresting her. The in rem action was a “sister ship action”, in that the “Bunga Melati 5” was not one of the vessels which had received the bunkers.

5. The Defendants applied in the present proceedings for the following orders:

a. That the writ and statement of claim be struck out pursuant to Order 18, Rule 19 of the Rules of Court and/or the court’s inherent jurisdiction for being plainly unsustainable;

b. That the writ be struck out and/or set aside on the basis that the court’s in rem admiralty jurisdiction under the High Court (Admiralty Jurisdiction) Act (the “HC(AJ)A”) had been improperly or invalidly invoked against the “Bunga Melati 5”; and

c. A declaration that the Plaintiff was not entitled to invoke the court’s in rem admiralty jurisdiction against the “Bunga Melati 5” or any other vessel owned by the Defendants in relation to the Plaintiffs’ claim in respect of the bunkers supplied under the Contracts.

6. The Defendants contended that MAL was at all material times the contractual sellers of the bunkers for the Defendants’ vessels and therefore there was no agency relationship between themselves and MAL, nor any contractual relationship between themselves and the Plaintiffs. The Plaintiffs had wrongly invoked the court’s in rem jurisdiction as the defendant was not “the person who would be liable on the claim in an action in personam” under Section 4(4)(b) of the HC(AJ)A.

7. Section 4(4) of the HC(AJ)A, which sets out the mode of exercise of admiralty jurisdiction, provides as follows:-

(4)…Where - (a) the claim arises in connection with a ship; and

(b) the person who would be liable on the claim in an action in personam (referred to in this subsection as the relevant person) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,

an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against –

(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it.


The Assistant Registrar’s decision

8. The Assistant Registrar (the “AR”) ordered that the writ be struck out as the court’s admiralty jurisdiction had not been properly invoked. The AR took the view that the Plaintiffs had failed, on the available evidence, to show a good arguable case that they had contracted with the Defendants for the supply of the bunkers in question.

9. The AR had considered several local and English authorities and concluded that:-

a. Section 4(4) was primarily a provision about identifying the ships that may be arrested by reference to the person who would be liable in personam, on the assumption that the action succeeded.

b. Section 4(4) did not lay down any requirement for proving in personam liability on the part of the named defendants, even in the case of a dispute over whether the defendant was the proper party to be sued.

c. Only jurisdictional facts stipulated in Section 4(4) such as the ownership of the offending and of the sister ships, and whether there was “possession and control” of the offending ship at the material time, had to be proved on a balance of probabilities.

d. Quite apart from the Section 4(4) requirements, the law required the Plaintiffs to establish even at the jurisdictional stage that it had a good arguable case.

10. The AR held alternatively that, even if the Plaintiffs did not have to show merits to its claim in order to invoke the Court’s admiralty jurisdiction, the Plaintiffs’ claim still ought to be struck out under Order 18 Rule 19 of the Rules of Court and/or the court’s inherent jurisdiction for being plainly unsustainable and frivolous.

The decision of the High Court

11. The AR’s decision to strike out the Plaintiffs’ claim was upheld on appeal to a Judge of the High Court. The Judge’s finding that the claim ought to be struck out was made on the basis of Order 18 Rule 19 of the Rules of Court, and not on the basis that the Court’s admiralty jurisdiction had been improperly invoked.

12. The Judge disagreed with the AR’s view that the Plaintiff was required at the jurisdictional stage to show a good arguable case on the merits, and came to the following conclusion on the requirements of Section 4(4):-

a. When a defendant challenged the plaintiff’s invocation of the court’s admiralty jurisdiction in rem, the plaintiff had the onus of establishing jurisdiction;

b. When the court’s jurisdiction in rem depended on the establishment of a factual precondition or state of affairs, the plaintiff had to establish such jurisdictional facts on a balance of probabilities;

c. Where the court’s jurisdiction in rem depended on the proper characterisation of the plaintiff’s claim and/or construction of the words in the relevant statutory provision, the plaintiff only had to show a good arguable case that his claim was of the type or nature required by the relevant statutory provision; and

d. At the jurisdictional stage, the strength of the plaintiff’s claim on the merits was not relevant to jurisdiction, but was a matter for trial or an application for striking out under Order 18 Rule 19 of the Rules of Court or the court’s inherent jurisdiction. This would be so even where the defendant’s defence was that some other person would be liable on the plaintiff’s claim in an action in personam.

13. The Plaintiffs appealed from the decision of the Judge.


Judgment

14. On appeal, the Court of Appeal overturned the Judge’s decision on the ground that the appellants’ claim in agency by estoppel (which is not discussed here) was, on the facts, not so factually or legally unsustainable that it had to be struck out under Order 18 Rule 19 of the Rules of Court.

15. As for the requirements of Section 4(4) in respect of the invocation of the court’s admiralty jurisdiction in rem, the Court of Appeal agreed with and confirmed the Judge’s view that there is no new merits requirement in the law in Singapore before the Courts’ admiralty jurisidiction in rem could be invoked, which was the impression given by the Court of Appeal’s decision in The “Vasiliy Golovnin” (citation above).

16. The Court of Appeal reiterated that a plaintiff need not prove who “the person who would be liable on the claim in an action in personam” is for the purposes of establishing admiralty jurisdiction until the defendant subsequently challenges the plaintiff’s action.

17. The Court of Appeal re-stated the 5-step process through which a plaintiff has to go when admiralty jurisdiction is challenged as follows:-

a. prove, on the balance of probabilities, that the jurisdictional facts under the limb it is relying on in s 3(1)(d) to (q) exist; and show an arguable case that its claim is of the type or nature required by the relevant statutory provision;

b. prove, on the balance of probabilities, that the claim arises in connection with a ship;

c. identify, without having to show in argument, the person who would be liable on the claim in an action in personam (i.e., the “relevant person”);

d. prove on the balance of probabilities that the relevant person was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship; and

e. prove on the balance of probabilities that the relevant person was, at the time when the action was brought, (i) the beneficial owner of the offending ship as respects all the shares in it or the charterer of that ship under a demise charter; or (ii) the beneficial owner of the sister ship as respects all the shares in it.

18. The Court of Appeal further expressed the view that while it was not the role of the Assistant Registrar to determine the sustainability of the plaintiff’s action when a warrant of arrest is applied for, this did not mean that the plaintiff would have a carte blanche to arrest vessels without having to show a shred of evidence of the connection between the “relevant person” and the alleged defendant at the time of the application for a warrant of arrest. The Assistant Registrar ought to refuse to grant the warrant of arrest should the plaintiff’s claim be supported by obviously insufficient or contradictory documentary evidence in plain cases of processoral abuse.