Admiralty, Shipping and Aviation Law

• Author: TOH Kian Sing SC 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); Senior Assistant Director, Legal & Enforcement Division, Competition Commission of Singapore.
• Date: 01 December 2007
• Published date: 01 December 2007

Introduction

2.1 In last year”s Review (see (2006) 7 SAL Ann Rev 39), the decision of the Honourable Justice Tan Lee Meng in The Vasiliy Golovnin[2006] SGHC 188 on the preliminary point of adducing evidence of foreign law was discussed. That decision was the precursor to his Honour”s judgment delivered on 31 July 2007 and reported at [2007] 4 SLR 277, which dealt with the two primary issues of setting aside of the warrant of arrest and wrongful arrest, the former being the subject of the plaintiffs” appeal, and the latter, the defendant”s cross-appeal.

The factual matrix

2.2 The facts in The Vasiliy Golovnin[2007] 4 SLR 277 are somewhat involved. The defendant, Far Eastern Shipping Company PLC (‘FESCO’), was at the material time owner of the vessel, the Chelyabinsk, which it chartered to Sea Transport Contractors Ltd (‘STC’), which in turn sub-chartered the vessel to Rustal SA (‘Rustal’). The plaintiffs, Credit Agricole (Suisse) SA and Banque Cantonale De Geneve SA (‘the Banks’), had provided financing to Rustal for the purchase of the cargo of rice and in consideration thereof, became the holders of the bills of lading. Three of the four subject bills of lading named Lome in Togo as the port of discharge, the remaining named ‘any African port’ as the port of discharge.

2.3 STC, on Rustal”s instructions, requested FESCO to switch the bills of lading with Rustal to alter the port of discharge from Lome to Douala but the switch never materialised. Subsequently, because of an apparent dispute between STC and Rustal with respect to the payment of hire, STC instructed FESCO not to switch the bills of lading unless further ordered by it to do so, and instructed the vessel to continue to proceed to Lome to discharge the cargo (instead of Douala).

2.4 On 21 December 2005, one of the Banks instructed FESCO to discharge the cargo at Douala instead of Lome (the discharge port

named in the bills of lading). FESCO failed to comply with its instructions and proceeded instead to Lome, where various court orders were obtained by STC, Rustal and the Banks in relation to the cargo carried on board. STC wanted a court order to discharge and detain the cargo for unpaid hire, Rustal, an order to prevent its discharge, as did the Banks. After various interlocutory skirmishes, the Lome court eventually ordered the cargo to be discharged in Lome. The court also found that STC was entitled to retain the cargo as security. FESCO as the shipowner accordingly commenced and completed discharge in Lome in mid-February 2006.

2.5 The Banks then arrested the Chelyabinsk in Lome on or about 21 February 2006 in respect of the same claims as the subsequent action in Singapore. On 24 February 2006, FESCO successfully set aside the arrest (a point which is elaborated below) and the vessel left Lome on 25 February 2006. The time allowed for an appeal against the Lome Release Order expired on 17 March 2006, without any appeal being filed in Lome.

2.6 On 18 March 2006, the Banks arrested the Vasiliy Golovnin, a sister vessel of the Chelyabinsk, in Singapore. The arrest was set aside by the learned assistant registrar who also struck out the writ but did not award damages for wrongful arrest.

2.7 Both before the learned assistant registrar and the judge, the setting aside of their warrant of arrest and striking out of their writ rested on the following grounds:

1. (a) Material non-disclosure

2. (b) Issue estoppel

3. (c) Absence of a sustainable cause of action

Non-disclosure of material facts

2.8 Tan J agreed with the learned assistant registrar that the warrant of arrest should be set aside on the ground of non-disclosure. Tan J reiterated the law in Singapore on what constitutes non-disclosure of material facts sufficient to set aside a warrant of arrest of a vessel. As the Court of Appeal enunciated in The Rainbow Spring[2003] 3 SLR 362 at [37], in an application for the arrest of a vessel, the arresting party is obliged to make full and frank disclosure of all the material facts to the court because the arrest of a vessel is a drastic remedy given on an ex parte basis, and so the duty to make full and frank disclosure to the court is an important bulwark against any abuse of the arrest process. Tan J adopted the oft-cited test of materiality for non-disclosure as formulated in The Damavand[1993] 2 SLR 717 at 731 at [30].

2.9 FESCO had submitted that the Banks had not disclosed the following five material facts in its application for a warrant of arrest of the Vasiliy Golovnin:

(a) The Chelyabinsk had been released from arrest by the Lome court following an inter partes hearing.

Tan J agreed with the learned assistant registrar that the Banks” counsel should have specifically drawn to the court”s attention at the ex parte application for a warrant of arrest that there had been a contested hearing in Lome between the Banks and FESCO which resulted in the arrest of the Chelyabinsk being set aside. The fact that the Lome court had already considered and dismissed the Banks” arguments as to whether the vessel could be arrested by them was a material fact to be taken into account by the Singapore judge when considering whether or not to grant the Banks” application for a warrant of arrest of the Chelyabink”s sister vessel, the Vasiliy Golovnin in Singapore.

Tan J rejected the Banks” assertion that the fact that there was a contested hearing in Lome might be gleaned from the exhibits in the affidavit in support of the application for arrest. Citing the English decisions of Intergraph Corp v Solid Systems Cad Services Ltd[1993] 20 FSR 617 at 625 and National Bank of Sharjah v Dellborg[1993] 2 Bank LR 109 at 112, his Honour agreed with the learned assistant registrar”s observation that the judge to whom the application for arrest was made might not have read the entire lengthy affidavit and all its exhibits (around 400 pages). The applicants, in this case the Banks, came under a duty to specifically point out that there had been a contested hearing in Lome; otherwise, the duty of disclosure was not discharged. This aspect of Tan J”s decision breaks new ground. The previous decisions on material nondisclosure in the ex parte application for a warrant of arrest tended to focus on facts that were omitted from the affidavit filed in support of the warrant of arrest. This aspect of the decision goes one step further: it behoves the applicant to take the court through the material facts in the exhibits to the affidavit so that the court can properly and fully appraise the facts relevant to the exercise of its discretion. This, with respect, is undoubtedly correct. To file an extremely lengthy affidavit (such as the one filed in this case) and yet not highlight to the court a potentially relevant fact, and to expect the court to discern that fact for itself is clearly a practice the court has to set its face against.

(b) Banque Cantonale had offered a letter of indemnity to FESCO on 21 December 2005 in consideration of the cargo being discharged at Douala instead of Lome.

Tan J further agreed with the learned assistant registrar that the letter of indemnity was a material fact to be taken into account in deciding whether or not to order the arrest of the Vasiliy Golovnin. This was because the letter of indemnity went towards establishing whether an agreement had been reached between the parties to discharge the cargo at Douala instead of Lome and whether FESCO was in breach of contract for discharging the cargo in...