Admiralty and Shipping Law

Citation(2021) 22 SAL Ann Rev 38
Publication year2021
Date01 December 2021

2.1 The Singapore courts handed down four admiralty judgments in 2021, including one by the Court of Appeal. These decisions are reviewed below.

I. The Luna
A. Material facts

2.2 In The Luna,1 the plaintiff, Phillips 66 International Trading Pte Ltd (“P66”), arrested six bunker barges following the collapse of OW Bunker Far East (Singapore) Pte Ltd (“OW”) and Dynamic Oil Trading (Singapore) Pte Ltd (“DOT”). P66 had sold fuel oil to OW and DOT on a free on board basis, with payment to be made 30 days after the date of the certificate of quantity (“CQ”). The CQs were issued by the terminal from which the bunker barges loaded the cargo.

2.3 P66 alleged that it was the shipper under various bills of lading signed by the masters of various bunker barges. Typically, the bills of lading remained with P66 until after payment was received. In the meantime, the bunker barges delivered the cargo as bunkers to various ocean-going vessels without the production of the original bills of lading.

2.4 P66 alleged that the appellant shipowners/demise charterers of the bunker barges had misdelivered the cargo without presentation of an original bill of lading. The Court of Appeal allowed the defendants' appeal, finding, inter alia, that the documents in question were not intended to function as contracts of carriage and/or as documents of title; they thus did not and could not serve the traditional functions of a bill of lading.

2.5 This review covers the admiralty aspects of the decision in The Luna, namely, whether or not P66 was liable for the wrongful arrest of the bunker barges. In that regard, the appellants contended that:

(a) P66 had acted with malice or gross negligence in proceeding to arrest the bunker barges without waiting to hear negative advice from its lawyers; and

(b) there had been material non-disclosure of facts which were potential “knock out blows” to its claims.

B. Wrongful arrest claim

2.6 The Court of Appeal declined to award damages for wrongful arrest. Steven Chong JCA, delivering the judgment of the Court of Appeal, held that the facts of the instant case did not rise to the level to justify an award of damages for wrongful arrest.

2.7 In relation to the substance of the claim, the dispute between the parties centred primarily on a point of law, namely, whether or not the documents in question were intended to serve the traditional functions of bills of lading. The Court of Appeal held that, although it had eventually found that P66's arguments on this point of law did not pass muster, it could not be said that the claims were so unwarrantably brought, or brought with so little colour, or so little foundation, as to imply malice or gross negligence.

2.8 Furthermore, the matters relied upon by the appellants would not have delivered a “knock out blow” to the respondent's claims. Indeed, the High Court found at the summary judgment stage that the respondent had shown a prima facie case. The Court of Appeal's extensive discussion (spanning more than 80 paragraphs) also indicates that these were not matters that would have justified a summary dismissal of the respondent's claims. For those reasons, the Court of Appeal declined to find the respondent liable for wrongful arrest.

2.9 The Luna is an example of a case where the wrongful arrest claim was the subject matter of a trial, rather than being brought by way of a setting-aside application. It also demonstrates the high threshold which a defendant shipowner has to meet in order to successfully prove wrongful arrest: on the facts of The Luna, even though P66's claim was dismissed, the counterclaims for wrongful arrest were not made out.

II. The Ocean Winner
A. Material facts

2.10 In The Ocean Winner,2 following the collapse of the Ocean Tankers group of companies in 2020, PetroChina International (Singapore) Pte Ltd (“PC”) issued four in rem writs against vessels which had been bareboat chartered by Ocean Tankers (Pte) Ltd (“OTC”). Before the writs were issued on 22 April 2022 without leave of court, OTC had applied for an automatic moratorium pursuant to s 211B(1) of the Companies Act3 (“CA”) (“the s 211B Moratorium”). This decision raises several important issues which overlap between the different regimes of admiralty and insolvency law, which are different regimes built on different principles and policy considerations.

2.11 PC did not serve the writs on any of the vessels. On 6 May 2020, OTC applied to withdraw its application for the s 211B Moratorium, and for an order that it be placed under judicial management and, pending the determination of that application, that it be placed under interim judicial management.

2.12 On 8 May 2020, OTC's interim judicial managers applied to set aside or strike out the writs under O 12 r 7(1) and/or O 18 r 19(1) of the revoked Rules of Court 2014. In the meantime, by way of an order of court dated 12 May 2020, the High Court granted OTC's application to withdraw the application for a s 211B Moratorium and placed OTC in interim judicial management. On 7 August 2020, OTC was placed under judicial management, and its interim judicial managers were appointed as its judicial managers (“the JMs”).

2.13 OTC contended that PC ought to have obtained leave of court before filing the writs, pursuant to ss 211B(8)(c)–211B(8)(d) of the CA (in force at the material time). Two issues arose for determination:

(a) whether or not the filing of admiralty in rem writs constituted the commencement of “proceedings” against “the company” (that is, OTC), under s 211B(8)(c) of the CA (“the First Issue”); and

(b) whether or not the filing of admiralty in rem writs constituted an “execution, distress or other legal process” against the “property” of OTC under s 211B(8)(d) of the CA (“the Second Issue”).

B. The First Issue: Would filing of writ constitute commencement of proceedings?

2.14 Ang Cheng Hock J answered the First Issue in the negative. In coming to his decision, Ang J considered that the filing of an admiralty in rem writ merely created a security interest, viz the statutory lien granted by s 4(4) of the High Court (Admiralty Jurisdiction) Act4 (“HCAJA”), for the plaintiff. The issuance of an in rem writ merely crystallised a plaintiff's security interest, and the insolvent company was not denied any “breathing space” by the mere filing of the writ, nor was it in any way hindered by its efforts to devise a scheme of arrangement.

2.15 Absent the service of the writ on the vessel named therein, the court's admiralty jurisdiction had yet to be invoked. In that limited sense, the action had not substantively “commenced” until service of the writs.

2.16 Ang J further held that, conversely, if a plaintiff was unable to file the admiralty in rem writ to even create its statutory lien, its right to a security interest in the form of a statutory lien over the vessel was potentially at risk of being destroyed by the insolvent company. This was because the shipowner could defeat a plaintiff's in rem claim by terminating the bareboat charters with the charterers' agreement and accepting physical redelivery of the vessel before the writ was filed. While s 211B of the CA was intended to protect companies from being distracted by having to defend legal proceedings while devising a scheme proposal, it was never intended to defeat or deny the creation of substantive legal rights.

2.17 The latter was precisely what OTC and the respective registered owners (that is, “the Xihe Group”) had sought to do in the instant case: The person who would be liable in personam for PC's cargo claims was the bareboat charterer (that is, OTC), not the vessels' owners (that is, the respective Xihe Group entities). Yet, on or around 18 May 2020, after OTC had been placed under interim judicial management, OTC had sought to terminate the majority of its bareboat charterparties by redelivering the vessels to the respective Xihe Group entities. This was an obvious attempt to ringfence the Xihe Group's assets. The termination of the bareboat charterparties prevented further admiralty in rem writs from being issued against these ships pursuant to s 4(4) of the HCAJA, since OTC would no longer be the vessels' bareboat charterers.

2.18 Furthermore, the mere filing of the writs was not “against the company”, since an action in rem was an action against the res, not the

owner or demise charterer of the vessel. Thus, the fact that the bareboat charterer, OTPL, was the so-called “true defendant” because PC's cargo claims were, in substance, against the bareboat charterer was beside the point. If no appearance had been entered, the actions would remain, at all times, actions in rem against the res (that is, the vessels), and OTC would not be personally liable at all.

2.19 Having said that, Ang J noted that since OTC had entered appearance in the respective admiralty actions, the actions had become a “mixed” action in rem and in personam. In the circumstances, in light of the existing moratorium in favour of OTC arising from the fact that it was now in judicial management, PC would have to obtain leave of court to proceed with the claim in the writs, including service of the writs of the vessels and/or arrest of the vessels. Such steps would constitute commencing and thereafter continuing “proceedings” against OTC.

B. The Second Issue: Would filing of writ constitute “execution, distress or other legal process”?

2.20 Ang J further held that the mere filing of an in rem writ was not an “execution” within the meaning of s 211B(8)(d) of the CA. In that regard, Ang J held that the writs of execution were writs meant to enforce a judgment or order of court. The mere filing of an in rem writ was also not “distress” within the meaning of s 211B(8)(d) of the CA, because “distress” was the process of distraining movable property to realise an amount of unpaid rent.

2.21 The term “other legal process” in s 211B(8)(d) of the CA...

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