Admiralty, Shipping and Aviation Law

• Citation: (2010) 11 SAL Ann Rev 44
• Date: 01 December 2010
• Published date: 01 December 2010

Introduction

2.1 After a barren spell in 2009, 2010 was a considerably more productive year so far as admiralty decisions go. A total of five decisions were handed down, two relating to admiralty jurisdiction of the court, one on the vexed (and hopefully, by virtue of this decision, now settled) question of material non-disclosure, one on the relationship between arrest and arbitration and the last on the right to arrest a vessel owned by a company under a rehabilitation.

The Catur Samudra [2010] 2 SLR 518

2.2 A wide range of issues familiar to admiralty lawyers came to be re-visited in this decision. It involved a sale and lease back agreement which was entered into between the plaintiff buyers/owners and Heritage Maritime Ltd (‘Heritage’ as the sellers and subsequently, demise charterers) for the vessel, Mahakam. It was a condition precedent under the Bareboat Charterparty that the defendants, PT Humpuss (‘HIT’), would execute a guarantee to secure the due performance of Heritage“s obligations under the charterparty. HIT was the parent company of Humpuss Sea Transport Pte Ltd, which was in turn the parent company of Heritage.

2.3 The New York Rule B order was subsequently discharged. The plaintiff then arrested the Mahakam in Malaysia. The Mahakam was subsequently redelivered to the plaintiff and the dispute referred to arbitration. Not content with the foreign proceedings, the plaintiff arrested the Catur Samudra, a vessel owned by the defendant guarantor, HIT, in Singapore. The plaintiff “s action was based solely on the guarantee which was executed by HIT. HIT then filed an application to set aside the arrest on these grounds:

(a) that the plaintiff “s claim under the guarantee issued by HIT was not a claim arising out of an agreement relating to the charterparty in respect of the Mahakam, under s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123,

2001 Rev Ed) and therefore did not come within the subject matter of admiralty jurisdiction in Singapore.

(b) HIT was not in possession or control of the Mahakam at the time the cause of action under the guarantee arose and therefore s 4(4)(b) of the High Court (Admiralty Jurisdiction) Act was not satisfied.

The challenge to admiralty jurisdiction based on s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act

2.4 Before proceeding to the substantive issues raised in the case, Steven Chong JC (as he then was) made it clear (The Catur Samudra [2010] 2 SLR 518 at [22]-[23]) that the burden of proof was on the plaintiff to satisfy the jurisdiction requirements under s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) on a balance of probabilities.

2.5 Turning to s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed), Chong JC noted that there were two limbs governing the proper construction to s 3(1)(h), namely, ‘arising out of’ and ‘relating to’. For ease of exposition, s 3(1)(h) is reproduced below:

any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship. [emphasis added]

2.6 In relation to the expression ‘arising out of’, Chong JC considered authorities such as The Antonis P Lemos [1985] AC 711, The MARA [2000] 3 SLR(R) 31 and The Indriani [1996] 1 SLR(R) 5, and concluded that the courts have consistently ‘leaned towards a broad interpretation of the expression “arising out of “ to enlarge the types of claims as falling within s 3(1)(h)’: The Catur Samudra [2010] 2 SLR 518 at [32]. For instance, it is well settled that this provision is not confined to contractual claims and may extend to tortious claims.

2.7 As regards the expression, ‘relating to’, Chong JC applied the House of Lord“s decision of Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance [1985] 1 AC 255 (‘The Sandrina’) which held that the test for an agreement that is ‘relating to the use or hire of a ship’, is that of a ‘reasonably direct connection with such activities’ [emphasis added]: The Catur Samudra [2010] 2 SLR 518 at [33]. Compared with the connecting expression in s 3(1)(h), ‘arising out of ’, ‘relating to’ has a considerably narrower scope.

2.8 In this connection, Chong JC considered various authorities where claims might appear to fall within s 3(1)(h), but was held not to do so, such as The Tesaba [1982] 1 Lloyd“s Rep 397, The Sandrina itself and The Bumbesti [1999] 2 Lloyd“s Rep 481. He noted that these cases

were made under agreements which ‘by themselves were not agreements relating to the use or hire of a vessel’: The Catur Samudra [2010] 2 SLR 518 at [35]. As an aside, Chong JC“s reference to The Bumbesti is potentially significant. It is not fully settled in Singapore (at any rate) if an arbitration award can be enforced by way of an admiralty action in rem: The Bumbesti, which yielded a negative answer, has not, until The Catur Samudra, been cited in any reported Singapore decisions, whereas The Stella Nova [1981] Com LR 200, which The Bumbesti expressly departed from, was cited (apparently with approval) by the Court of Appeal in Alexander G Tsavliris & Sons Maritime Co v Keppel Corp Ltd [1995] 1 SLR(R) 701 and in this case (The Catur Samudra [2010] 2 SLR 518 at [44]). However, as the issue was not squarely raised in The Catur Samudra, it must await judicial exploration on another occasion. Chong JC further adopted a useful indicium for the direct connection test, which is to pose the questions:

(a) how did the claim arise; and

(b) whether the agreement based on which the claim arose related to the use or hire of the vessel: The Catur Samudra [2010] 2 SLR 518 at [44].

2.9 Turning to consider the guarantee in the present case, Chong JC held that the guarantee was not an agreement relating to the use or hire of a vessel. Rather, ‘the sole purpose of the guarantee was to provide financial protection to the plaintiff against the risk of default by Heritage under the Bareboat Charterparty’: The Catur Samudra at [35]. Chong JC likened the guarantee to the provision of insurance to an owner of a vessel, which was held to be outside the scope of s 3(1)(h) in The Aifanourious (1980) SC 346.

2.10 Chong JC further held that the guarantee could not be transformed into such an agreement under s 3(1)(h) simply by characterising the guarantee as a term or condition precedent to execution of the charterparty. To do so would be to relegate the ‘direct connection’ test into the much looser ‘but for’ test, which would be inconsistent with the weight of the authorities. Chong JC referred to the example in The Bumbesti where it might have been said that a charterparty would not be entered into ‘but for’ an arbitration agreement. Yet, such an arbitration agreement was held not to fall within s 3(1)(h).

2.11 Interestingly, Chong JC referred to but declined to follow two decisions dealing with claims which arose from contracts collateral to a charterparty. The first is the New Zealand High Court case of The Fua Kavenga [1987] 1 NZLR 550, where the arrest of a vessel on the basis of a guarantee was allowed, and the second, the Canadian Federal Court case of National Bank Leasing v Merlac Marine Inc (1992) 52 Federal

Trial Report 15 (‘National Bank Leasing’), where the arrest of a vessel on the basis of a guarantee bond was allowed. Smellie J, in The Fua Kavenga, applied the wide interpretation of the expression ‘arising out of ’, but did not take into account the narrower interpretation of the expression ‘relating to’. The court in National Bank Leasing did not consider any of the leading UK authorities and instead considered the guarantee bond to be inseparably linked to the charterparty.

2.12 Rounding up on this point, Chong JC concluded that ‘if the collateral agreement is not intrinsically an agreement relating to the use or hire of a vessel such as a contract of insurance, container leasing agreement, an arbitration agreement in the charterparty or the guarantee in the present case, it would fall outside the purview of s 3(1)(h)’ [emphasis added]: The Catur Samudra [2010] 2 SLR 518 at [43]. It follows that the subject matter of the claim based as it was on the guarantee, was only collateral or ancillary to the contract of carriage and fell outside of s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed).

The challenge to admiralty jurisdiction based on s 4(4)(b) of the High Court (Admiralty Jurisdiction) Act

2.13 The plaintiff sought to argue that HIT was ‘in possession or in control’ of the Mahakam at the time when the cause of action arose (no earlier than 16 April 2009 in the present case), in order to bring themselves within s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed). The expression, ‘in possession or in control’ of the vessel in connection with which the claim arose, has not received much judicial discussion, outside of the obvious example of a bareboat charter. Thus the observations of Chong JC in this regard would provide useful guidance to admiralty practitioners as to the scope and meaning of the expression.

2.14 Chong JC agreed with Chao Hick Tin JC (as his Honour then was) in The Interippu [1990] SGHC 181, where it was held by Chao JC that the term ‘in possession or in control’, must mean possession or control as an ‘independent legal right’. Chong JC further referred to the cases which established that persons who would satisfy the test of being ‘in possession or in control’ include a demise charterer (see The Span Terza [1872] 1 Lloyd“s Rep 225); a salvor in possession (see The Evpo Agnic [1988] 1 WLR 1090); a purchaser under a conditional sale agreement (see The Permina 3001 [1977-1978] SLR(R) 1); and a person in the position of a demise charterer, albeit not under a demise charter (see The Evpo Agnic [1988] 1 WLR 1090). Chong JC held that the ‘common denominator is that each of them has legally enforceable rights as regards...