Admiralty, Shipping and Aviation Law

Citation(2004) 5 SAL Ann Rev 22
Published date01 December 2004
Date01 December 2004

2.1 The year 2004 witnessed slightly fewer admiralty decisions compared with the recent past. Two of these decisions, however, raise important issues on tonnage limitation. The arrest of demise chartered vessels was finally introduced by way of an amendment to the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed).

Right to invoke admiralty jurisdiction

2.2 The facts of The Acrux[2004] 4 SLR 531 are rather unusual. The plaintiff”s claim, for goods and services supplied to the vessel, Acrux, was relatively modest in quantum, amounting to all of $51,064.06. After two corporate guarantees for this sum were offered and rejected, the defendant shipowner made part payment by way of telegraphic transfer of $50,955.23 on 6 April 2004 but refused to pay the small balance of principal sum and costs of the action. The vessel was arrested on 7 April 2004. Payment of the small shortfall and interest was made under protest by the defendant on 8 April 2004. The defendant shipowner sought to set aside the arrest. The trivial shortfall in the principal sum was allegedly attributable to banking charges, which the plaintiff had in the past been prepared to absorb.

2.3 Belinda Ang Saw Ean J refused the defendant”s application, notwithstanding the various grounds put forward by the defendant. The first ground relied upon by the defendant was easily disposed of. Its argument that security to prevent the arrest had been furnished by way of a corporate guarantee from a related company was rejected, as it was plainly inconsistent with its subsequent action of instructing its bankers to remit funds to the plaintiff”s account.

2.4 The second ground was that because payment had been effected to the plaintiff in the sense that instructions were already given on 2 April 2004 to the defendant”s bankers to remit the money to the plaintiff, no cause of action remained as of 2 April 2004, the day the writ was issued. This ground

was also all too fallible since it is trite law that by the deadline of 9.00am, 2 April 2004, a deadline imposed by the plaintiff, the moneys had not been received by the latter. Furthermore, as of that date, the plaintiff had no unconditional and immediate use of the funds since the value date of the remittance as evidenced by the remittance advice was 6 April 2004.

2.5 The defendant also relied on the fact that it had made full payment of the principal sum by virtue of the second payment on 8 April 2004. This too was rejected by the learned judge as the second payment was made under protest. Such payment did not have the effect of discharging the principal claim. Since the dispute to the validity of the claim for the shortfall and interest remained intact, because payment was made under protest, the admiralty action (and hence, the arrest) could still be sustained, although the relief that might eventually be given would be declaratory in nature. In any case, the plaintiff was entitled to be secured for the costs of the whole action and not merely for costs up to the time of the release of the vessel or time of protest payment. The learned judge concluded that given the special circumstances in this case, the trivial amount of the shortfall was not a reason for finding that admiralty jurisdiction had been oppressively invoked. A related ground of material non-disclosure was also rejected.

2.6 The result in The Acrux is that the plaintiff got his pound of flesh, so to speak, by being able to arrest the vessel to obtain security for a small principal shortfall plus costs. The court may have been influenced by the defendant”s conduct in the case, not least its failure to make full payment (or put up adequate security) despite the threat of an arrest. However, it is submitted that the case is not to be taken as a licence for the oppressive use of the device of arresting a vessel for trivial claims, for which a simple letter of demand is often sufficient to elicit a settlement or sufficient security for the shipowner: see The Song Da 2[1995] SGHC 297. The other point of interest is the effect of payment under protest. While it is usually a sensible reservation adopted by a defendant, it can occasionally backfire, as the decision clearly illustrates.

2.7 An important statutory amendment to the High Court (Admiralty Jurisdiction) Act took effect on 1 April 2004. By virtue of the High Court (Admiralty Jurisdiction) (Amendment) Act (No 2 of 2004), s 4(4) of the Act was amended to allow for the arrest of a vessel if at the time the action is brought (ie, at the time of issuance of the admiralty writ in rem), the person who would be liable in an action in personam is the demise charterer of that ship in connection with which the claim arises. (For a more detailed discussion on the topic, see ‘Admiralty Jurisdiction of the High Court: Arrest

of Ships on Demise Charter to Secure the Obligations of the Demise Charterer’, a Consultation Paper prepared by the Law Reform and Revision Division, Attorney-General”s Chambers; for a recent Singapore case on demise charter, see Pan United Shipping Pte Ltd v Cendrawasih Shipping Pte Ltd[2004] SGHC 32.)

2.8 With this amendment, the law in Singapore is brought in line with the laws of the United Kingdom, Malaysia, Hong Kong, New Zealand and Australia so far as arrests of demise chartered vessels are concerned. Before the introduction of this amendment, an arresting party was occasionally met with a challenge to the validity of the arrest on the ground that the person who is liable in personam is not the beneficial owner as respect all the shares in the vessel, but only a demise charterer.

2.9 Previously, a shipowner would be able to bring himself outside the scope of s 4(4)(a) of the unamended Act by transferring control or possession of the vessel to an associated company or subsidiary by way of a demise charterparty. This amendment will therefore plug a lacuna in the maritime law of Singapore: see Singapore Parliamentary Debates, Official Report (5 January 2004) vol 77 at cols 61—62. One might argue whether the expansion in admiralty jurisdiction should be confined to a demise charter because a time charter arrangement between a shipowner and an entity controlled by it may equally pose a problem to maritime claimants such as necessaries suppliers. The explanation to this restricted extension is that historically and legally, a demise charterer is considered an owner pro hac vice of the vessel and is therefore more akin to the owner than a time charterer vis-à-vis the world at large, save for the actual owner.

Limitation of liability

2.10 Last year”s Annual Review carried a discussion of the two High Court decisions of The Seaway[2004] 2 SLR 577 and The Sunrise Crane[2004] 1 SLR 300 at paras 2.23—2.27 and paras 2.19—2.22 respectively. Both decisions have been affirmed by the Court of Appeal, the latter by a majority.

2.11 The facts of The Seaway[2005] 1 SLR 435 are straightforward. The defendant”s dredger, the Seaway, collided with a wharf located in an oil terminal owned by the plaintiff. As an alternative plea to a denial of liability, the defendant relied on the tonnage limitation provision of s 136(1 )(d) of the Merchant Shipping Act (Cap 179, 1996 Rev Ed) (‘MSA’). If tonnage limitation could be established, the recoverable amount was calculated to be $607,927.68 as opposed to an estimated amount of $16.15m.

2.12 The material parts of ss 136(1)(b) and 136(1)(d) of the MSA provide that:

The owner of a ship shall not, where all or any of the following occurrences take place without his actual fault or privity:

(b) where any damage or loss is caused to any goods, merchandise or other things whatsoever on board the ship;

(d) where any loss or damage is caused to any property (other than any property mentioned in paragraph (b)) or any right is infringed through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship, or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers, or through any other act or omission of any person on board the ship,

be liable to damages beyond the following amounts:

(ii) in respect of such loss, damage or infringement as is mentioned in paragraphs (b) and (d), whether there is loss of life or personal injury or not, an aggregate amount not exceeding in the currency of Singapore the equivalent of 1,000 gold francs for each ton of the ship”s tonnage.

[emphasis added]

2.13 As the Court of Appeal noted, s 136(1)(d) is applicable to two situations, namely,

(a) where any loss or damage is caused to any property, other than any goods, merchandise or other things on board the ship (‘first limb’); or

(b) where any right is infringed (‘second limb’).

2.14 The primary issue the Court of Appeal (and the learned judge below) had to wrestle with was whether the word ‘property’ in s 136(1)(d) covered a privately-owned wharf such as that of the plaintiff. At first instance, the court reached the conclusion that such a wharf did not come within the scope of the word ‘property’ in s 136(1)(d). The Court of Appeal, in contrast, found that it did and, in so deciding, dwelt extensively into the

legislative history behind s 136(1) of the MSA. In so doing, the court observed that a purposive approach to statutory interpretation could be undertaken even if the provision in question was not ambiguous or inconsistent and extrinsic materials could be referred to in this process.

2.15 The predecessor to s 136 was s 295 of the Merchant Shipping Act 1970 (Cap 172, 1970 Rev Ed) (‘the 1970 MSA’). Section 295(4) of the 1970 MSA was repealed in 1981. Section 295(4) treated any obligation or liability in respect of any damage to, inter alia, harbour works, as coming within the scope of s 295(1)(d), which availed the shipowner of a right of limitation if the loss or damage caused by the vessel...

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