Admiralty, Shipping and Aviation Law

• Citation: (2003) 4 SAL Ann Rev 13
• Published date: 01 December 2003
• Date: 01 December 2003

Setting aside of arrest

2.1 Last year”s Annual Review carries a discussion of the High Court decision of The Rainbow Spring[2003] 2 SLR 117 (see (2002) 3 SAL Ann Rev 8 at paras 2.1—2.8). The matter was appealed to the Court of Appeal by the claimant. In a decision (reported at [2003] 3 SLR 362) that would go a long way towards safeguarding shipowners” interests against unwarranted arrest of their ships, the Court of Appeal clarified that applicants seeking to arrest a vessel have a duty to ensure full and frank disclosure of all material facts. If they do not discharge this duty, they are liable to have the arrest set aside. As Judith Prakash J, who delivered the judgment of the court, stated at [37]:

Arrest is a drastic remedy given on an ex-parte basis. The duty to make full and frank disclosure is an important bulwark against the abuse of the process of arrest. There must be the possibility of a sanction for the failure to observe that duty.

The appellate court also upheld an earlier decision by Belinda Ang Saw Ean JC (as she then was) in the High Court to set aside the arrest of the Rainbow Spring, on the separate ground that the shipowner was not the party personally liable for alleged breach of the charterparty.

2.2 The claim arose from a carriage of potassium nitrate which was discharged from the Rainbow Spring in a damaged condition, thereby exposing the claimant, Admiral Chartering, to a claim by the owners of the cargo. Admiral Chartering then filed a writ against the vessel”s owners claiming for an indemnity against the cargo claims, and subsequently arrested the Rainbow Spring. Admiral Chartering”s position was that it was entitled to arrest the Rainbow Spring as it had concluded a charterparty with Rainbow Spring Shipping, the owner of the vessel. Rainbow Spring Shipping”s position was, however, that the charterparty had been concluded with another company called Oriental Shipway Inc. Rainbow Spring Shipping had bareboat chartered the vessel to Emerald Shipping who time sub-chartered the vessel to Oriental Shipway Inc, which in turn entered into the sub-sub-charter with Admiral Chartering. Rainbow Spring Shipping therefore contended that it was not the person who would be liable on the claim for the purpose of s 4(4)

of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed). Rainbow Spring Shipping further put forward an alternative ground to set aside the arrest of the vessel as Admiral Chartering had failed to make full and frank disclosure in its affidavit in support of the arrest. No reference was made in the affidavit supporting the warrant of arrest to the existence of a series of correspondence in which Admiral Chartering acknowledged that it had contracted with Oriental Shipway Inc. It was in respect of this alternative ground that the Court of Appeal made this significant ruling.

2.3 Both the High Court and the Court of Appeal agreed with Rainbow Spring Shipping that it was not the party who would be liable to Admiral Chartering on the claim, and the claim therefore had to be dismissed, and the arrest, set aside. The Court of Appeal accepted that the contract was contained in a series of correspondence in which the charterparty terms were recapitulated. In the correspondence, Admiral Chartering acknowledged that its charterparty was entered into with Oriental Shipway Inc. The Court of Appeal dismissed Admiral Chartering”s contentions that Oriental Shipway Inc was an agent of Rainbow Spring Shipping, the shipowner, and that the fixture recapitulation correspondence did not evidence the charterparty which was instead allegedly contained in a standard time charter form, signed mistakenly by a director of Rainbow Spring Shipping, although the charterparty had named, at the outset, Oriental Shipway Inc as the disponent owner. The court also accepted that because of the intervening two charterparties, Rainbow Spring Shipping and Admiral Chartering did not have any direct contractual relationship. For these reasons, as was the case before Ang JC below, Admiral Chartering had failed to demonstrate even an arguable case that the shipowner was the party liable in personam.

2.4 The Court of Appeal also accepted Rainbow Spring Shipping”s argument that there was material non-disclosure when Admiral Chartering applied for the arrest of the vessel. In arriving at this conclusion, the court rejected the view espoused by Ang JC below that material non-disclosure can seldom, if ever, be a ground for setting aside an arrest, if the jurisdictional requirements in the High Court (Admiralty Jurisdiction) Act are not otherwise challenged. The Court of Appeal, however, agreed that even where material non-disclosure is shown, the court nevertheless retains a discretion to maintain the arrest.

2.5 The Court of Appeal decision provides much needed clarification to an important issue in admiralty law. The decision below was helpful in establishing the existence of a duty to ensure full and frank disclosure of all material facts in an application to arrest a vessel, a position which is consistent with earlier Singapore decisions like The AAV[2001] 1 SLR 207. The Court of Appeal went further in acknowledging that the duty exists and can give rise to

an independent ground of setting aside an arrest. It is for the courts to work out how far the duty of disclosure extends. The criterion of disclosure is the relevance of a fact to the court”s decision as to whether or not to issue a warrant of arrest. It is simple to state but not always easy to apply, particularly where the arrest is to be effected urgently. This is where the court”s discretion to maintain the arrest notwithstanding non-disclosure of material facts may play a significant role.

Anti-suit injunction

2.6 The case of Evergreen International SA v Volkswagen Group Singapore Pte Ltd[2003] SGHC 142 raises an important issue in the law of tonnage limitation, which is, the extent to which a party may refuse to participate in a limitation fund constituted in Singapore so as to be able to pursue a separate action in another forum which offers more attractive tonnage limitations. The Singapore High Court”s clear and resounding response is that such a claimant would be restrained from proceeding with the overseas action for to do so would be to infringe the shipowner”s right to choose a forum to constitute his limitation fund.

2.7 The Ever Glory, the plaintiffs” vessel, collided with the car carrier, the Hual Trinita, in Singapore territorial waters. After the shipowners settled their claims against each other, the plaintiffs commenced a limitation action in Singapore against all persons, including the 74 defendants (cargo interests and insurers), having potential claims arising out of the collision. A limitation decree was obtained from the Singapore court on 24 September 1999, followed by a declaration that the limitation was confined to a figure slightly above $2.4m plus interest. This limitation sum was paid into court on 4 November 1999.

2.8 The defendants were kept informed of every step taken in the Singapore action but did not take part in it at all or attempt to set it aside. Instead, on the very day the limitation decree was obtained in Singapore, they arrested a sister vessel of the Ever Glory in Belgium and commenced proceedings before the Belgian courts, which apply a higher limit based on the 1976 Convention on Limitation of Liability for Maritime Claims as compared with the Singapore courts, which apply the 1957 International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships pursuant to the Merchant Shipping Act (Cap 179, 1996 Rev Ed). The limitation sum under the 1976 Convention was $13m, several times more than the limitation fund constituted before the Singapore courts.

2.9 The plaintiffs then applied for an anti-suit injunction against the defendants to restrain them from carrying on the Belgian proceedings, and succeeded in doing so.

2.10 Belinda Ang Saw Ean J saw little difficulty in finding that the court had in personam jurisdiction in respect of the anti-suit injunction over the defendants by virtue of the various limbs of O 11 of the Rules of Court (Cap 322, R 5, 1997 Rev Ed). In so doing, the court rejected the argument that in the exercise of its discretion whether to assume jurisdiction under O 11, the court has to have regard to the question whether the injunction would be enforceable against the defendants. The court also found as a fact that Singapore was the natural forum: the collision took place in Singapore waters, salvage and repair operations were undertaken in Singapore, the masters of both vessels were prosecuted here, the evidence and witnesses were located here, and Singapore law was the lex loci delecti as the tort of collision occurred here.

2.11 The defendants” conduct of commencing and proceeding with the Belgian proceedings was considered by the court to be vexatious and oppressive. Given that the limitation decree was properly obtained and the limitation fund properly constituted in Singapore, which was the natural forum for the action, it was illegitimate and improper for the defendants to challenge the plaintiffs” right to choose the limitation forum as well as the rights conferred on the plaintiffs by the limitation decree and limitation fund. It was not merely a question of the defendants electing not to claim against the fund.

2.12 The defendants” proceedings in Belgium were seen as an attempt to subvert the right of the shipowner to claim limitation in a particular forum. If the proceedings in Belgium were allowed to continue, the plaintiffs would have to set up another limitation fund in Belgium, when there was already a properly constituted limitation fund in Singapore. The defendants could not attempt to obviate the need to share in the Singapore limitation fund rateably with the other claimants. After all, the court observed, after...