Admiralty, Shipping and Aviation Law

• Date: 01 December 2005
• Citation: (2005) 6 SAL Ann Rev 39
• Published date: 01 December 2005
• Author: TOH Kian Sing LLB (Hons) (National University of Singapore), BCL (Oxford); Advocate and Solicitor (Singapore). CHAN Leng Sun LLB (Malaya), LLM (Cambridge); Advocate and Solicitor (Malaya), Advocate and Solicitor (Singapore), Solicitor (England and Wales). Jack TEO Cheng Chuah LLB, LLM (National University of Singapore), PGDipTHE (National Institute of Education, Nanyang Technological University), Advocate and Solicitor (Singapore); Associate Professor, Nanyang Business School, Nanyang Technological University.

Introduction

2.1 The year 2005, like 2004, was a rather lean year as far as admiralty decisions go. Two decisions concerning the setting aside of arrests raised, inter alia, the question of the duty of disclosure of material facts. The third involved the limitation of liability of shipowners and demonstrated, once again (see The Sunrise Crane[2004] 4 SLR 715), how difficult it can be for a shipowner to satisfy the requirement of absence of fault and privity.

Requirements of arrest under section 4(4) of the High Court (Admiralty Jurisdiction) Act: Duty of disclosure of material facts

2.2 The facts of The Inai Selasih[2005] 4 SLR 1 (HC), [2006] 2 SLR 181 (CA) were somewhat unusual. The case involved a joint-venture agreement evidenced by a memorandum of understanding (‘MOU’), the object of which was to secure dredging and land reclamation works in Malaysia. The MOU envisaged the entering into of a bareboat charterparty for the vessel, Inai Seroja, which was, however, only for appearances” sake. The defendant, IK, was named the charterer. This was the external arrangement provided for under the MOU to satisfy certain requirements necessary for securing public dredging contracts. The vessel arrested, the Inai Selasih, was beneficially owned by the defendant. The arrest was for the obtaining of security for arbitration proceedings that were ongoing in Switzerland.

2.3 From the evidence adduced, the plaintiff was in possession and control of the vessel, Inai Seroja, at all material times and had employed the master and key members of the crew. Belinda Ang Saw Ean J held that in these circumstances, the plaintiff failed to show on a balance of probabilities that the defendant, IK, was the bareboat charterer of the vessel, Inai Seroja, for the purpose of s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (‘HCA’). The charterparty was a sham which did not give rise to any legal rights and obligations and did not confer on IK the status of a charterer.

2.4 The court, however, rejected the defendant”s alternative argument that even if a charterparty existed, it had been terminated by the time the cause of action arose. It also rejected the argument that the claim did not come within the purview of s 3(1)(h) of the HCA. The learned judge held that a joint venture involving the use of an identifiable ship was, in a proper case, capable of falling within the scope of s 3(1)(h) of the HCA. However, not any involvement would suffice. There must be a reasonably direct connection between the MOU and the use and hire of the Inai Seroja. An important indicium in ascertaining the presence of this connection was whether the use or hire of the ship was an incidental or minor part of the agreement. If it was, then it was likely that the claim was probably not within the provision. It was evident from the provisions of the MOU that there was a close connection between the MOU and the use of the Inai Seroja. Further, pursuant to the MOU, the parties had also worked on various projects in Malaysia in which the Inai Seroja was the dredger used. Therefore, the conditions of s 3(1)(h) of the HCA were satisfied.

2.5 As an alternative ground for setting aside the arrest, her Honour also ruled (at [26]) that because the status of IK as a charterer was ‘a very necessary ingredient of [the] arrest’, the external and internal arrangements between the parties which had a bearing on the plaintiff”s assertion that IK was the charterer of the Inai Seroja were material facts which should have been disclosed to the duty registrar hearing the application for the warrant of arrest. That would have enabled the registrar to determine if a warrant of arrest should be issued at all, because if IK was not a charterer, one of the requirements of s 4(4) would not have been satisfied. The court further observed that simply exhibiting the MOU (from which the internal arrangements between the parties may conceivably have been inferred) was not sufficient compliance with the duty to disclose material facts. (This finding of non-disclosure was reversed by the Court of Appeal having regards to passages in the text of the affidavit.)

2.6 The court also awarded damages in favour of the shipowner for wrongful arrest on the ground that in relying on a document (ie, the MOU) which it knew to be a sham, the plaintiff was acting mala fide. A sham document was used to mislead the court into issuing the warrant of arrest. This finding was also reversed by the Court of Appeal.

2.7 Notwithstanding the Court of Appeal”s ruling on this point, The Inai Selasih provides a stern reminder to arresting parties of the duty to make full and frank disclosure. That duty goes beyond exhibiting the relevant documents — it extends to drawing the court”s attention to any fact which

may be relevant to the exercise of its discretion whether or not to grant a warrant of arrest. The fact that the arrest was set aside on this alternative ground is itself sufficient as well. It shows that even if the requirements of the HCA were satisfied, the failure to observe this duty may in appropriate circumstances justify the setting aside of the warrant. It is also interesting to note that this case is the first reported Singapore decision where the ground for setting aside the arrest (alternative to that of material non-disclosure) was that the defendant was not a charterer of the offending...