Asta Rickmers Schiffahrtsgesellschaft mbH & Cie KG v Hub Marine Pte Ltd

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang J
• Judgment Date: 28 September 2005
• Neutral Citation: [2005] SGHC 184
• Docket Number: Originating Summons No 734 of 2005
• Date: 28 September 2005
• Published date: 30 September 2005
• Year: 2005
• Plaintiff Counsel: Thomas Tan (Haridass Ho and Partners)
• Citation: [2005] SGHC 184
• Defendant Counsel: Cheah Kok Lim and Keh Kee Guan (Ang and Partners)
• Court: High Court (Singapore)
• Subject Matter: Plaintiff applying for pre-action discovery against defendant to determine if arbitral award may be enforced against defendant,Civil Procedure,Plaintiff having to find alternative avenue to enforce arbitral award against company after company wound up,Discovery of documents,Plaintiff suspecting defendant related to wound-up company,Order 24 r 6, O 24 r 7 Rules of Court (Cap 322, R 5, 2004 Rev Ed),Whether appropriate to order pre-action discovery

28 September 2005

Tay Yong Kwang J:

1 This is an application for pre-action discovery commenced pursuant to O 24 r 6 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed). It seeks an order against the defendant that within 14 days from the date on which the order is made, the defendant is to give discovery of documents by making and serving on the plaintiff a list of documents specified hereunder which are or have been in its possession, custody or power, and make and file an affidavit verifying such list:

(a) documents relating to the hire, use and/or operation of the vessel Hub Racer by the defendant during the period February to April 2001;

(b) the documents should include but are not limited to correspondence, notes and memoranda passing between the defendant and Hub Lines Pte Ltd and/or authored by the defendant’s director, Au Ah Yian (NRIC No S1162597E) (“Au”); bank statements, cash book entries and ledgers; bills of lading and/or any similar document; charterparty, fixture note and/or any similar document;

(c) the documents should cover the period November 2000 to May 2001.

2 On 29 July 2005, the Deputy Registrar of the Supreme Court granted the plaintiff discovery of the following:

(a) documents relating to the hire, use and/or operation of the vessel Hub Racer by the defendant during the period November 2000 to 1 May 2001;

(b) documents relating to the hire, use and/or operation of the vessel Hub Racer authored by Au for the period November 2000 to 1 May 2001;

He also ordered that the costs of the application, fixed at $3,000 (excluding disbursements which were to be paid in full), be paid by the plaintiff to the defendant. He further ordered that the costs of complying with his order be paid by the plaintiff to the defendant on an indemnity basis, such costs to be agreed or taxed.

3 The defendant appealed to a judge in chambers, asking that the Deputy Registrar’s order be set aside and that the plaintiff’s action be dismissed with costs. On 22 August 2005, I dismissed the defendant’s appeal and ordered the defendant to pay the plaintiff $2,000 as costs of the appeal. The defendant has appealed to the Court of Appeal against my decision.

The plaintiff’s case

4 The plaintiff was the owner of the vessel, Hub Racer (“the vessel”), now known as Asta Rickmers. By a charterparty dated 1 December 2000, the plaintiff chartered the vessel to Hub Lines Pte Ltd (“Hub Lines”) for two years commencing from the date of delivery until at least 1 March 2003, with the latest date being 1 May 2003. The exact period was to be Hub Lines’ option. The hire rate was US$11,000 per day. The charterparty provided for any disputes to be referred to arbitration in London.

5 On 5 February 2001, the vessel was delivered to Hub Lines. However, on 13 April 2001, Hub Lines sent a fax to the plaintiff’s broker purporting to terminate the charter. On 17 April 2001, the plaintiff informed Hub Lines that it considered the purported termination a repudiatory breach, which the plaintiff accepted, and that the plaintiff would seek full compensation for all losses and damage arising therefrom.

6 The matter proceeded to arbitration in London. Hub Lines was represented by Rajah & Tann in the arbitration proceedings until 5 February 2003 when it informed the arbitrators that it had not received instructions from Hub Lines in respect of the submissions in defence and therefore would not be acting for Hub Lines any further. The arbitration proceeded in spite of that and on 28 August 2003, the arbitral award in the plaintiff’s favour was published. The plaintiff was awarded more than US$2.3m, interest and costs. Hub Lines was also ordered to pay the costs of the arbitral award amounting to £4,980.

7 On 5 February 2003, a Thai company commenced winding-up proceedings against Hub Lines. On 14 March 2003, Hub Lines was ordered to be wound up.

8 Since Hub Lines had been wound up, the plaintiff had to consider other avenues of enforcing the arbitral award. In March 2004, the German Shipowners’ Defence Association (“GSDA”) wrote on the plaintiff’s behalf to EOX Group Berhad (“EOX”), inviting EOX to settle the award on the basis that Hub Lines was its subsidiary. EOX was a public company based in Kuching, Sarawak with its shares quoted on the Kuala Lumpur Stock Exchange. The group managing director of EOX, Richard L C Wee, replied to state that it did not have a subsidiary by that name and that neither EOX nor any of its subsidiaries or related companies entered into the charterparty in question. GSDA replied to say that the website of “HUBLINE” stated that “Hubline is a subsidiary of EOX Group Berhad” and invited EOX again to settle the arbitral award. There was no further response from EOX.

9 On 19 May 2004, the Singapore correspondents of GSDA wrote to EOX with the intention of persuading EOX to settle the arbitral award on the basis that Hub Lines was indeed linked to it, threatening to initiate action to pierce the corporate veil and to publicise the matter in all trade papers so as to warn other shipowners. EOX’s solicitors in Sarawak replied, maintaining that Hub Lines was not EOX’s subsidiary and was not related to it and threatening legal action for defamation should the allegations be published to third parties.

10 Faced with this situation, the Singapore correspondents of GSDA obtained the financial statements filed by Hub Lines with the registry of companies for the four years ending 31 December 1998 up to 31 December 2001. Hub Lines’ financial statements showed that its two directors, Heng Tong Nerng and Au, each held one share in the company which had an issued and paid-up capital of $2. The plaintiff was not aware at the time it entered the charterparty on 1 December 2000 that Hub Lines was a two-dollar company.

11 It appeared from the documents that the central figure in this matter was Au. He was a director of both Hub Lines and the defendant at the material time. He signed the charterparty on behalf of Hub Lines. The defendant had an issued and paid-up capital of $200,000 in June 2001 and its sole shareholder was Wonder Link Sdn Bhd (“Wonder Link”), with the ultimate holding company being Billion Power Sdn Bhd. The financial statements of the defendant for the year ending on 30 June 2000 showed that Au held 1m shares in Wonder Link. As Wonder Link’s issued and paid-up capital was RM10m in 10m shares, Au was effectively a 10% shareholder of the defendant.

12 The defendant’s financial statements for the year ending on 30 September 2001 reported that Au had 3,452,013 shares in EOX. The defendant’s issued and paid-up capital increased to $1m. The defendant was still a wholly-owned subsidiary of Wonder Link although its ultimate holding company has changed to EOX. Therefore, although it could not be said that Hub Lines was a subsidiary of EOX, both companies had Au as their common shareholder.

13 The object of the plaintiff in taking out this application was to ascertain if the defendant was liable in any way for the payment of the arbitral award. The plaintiff’s allegations were that:

(a) The defendant, by virtue of having operated the vessel, was the real charterer of the vessel and Hub Lines was only named as the charterer as a front for the defendant.

(b) The defendant was a sub-charterer of the vessel under a back-to-back charterparty or similar arrangement with Hub Lines.

14 The plaintiff’s allegations were based on several grounds. The first ground was that in the survey report dated 6 February 2001 for the on-hire of the vessel, the defendant was named as the charterer of the vessel. There was a joint inspection arranged by Hub Lines or the defendant and the plaintiff merely consented to the party conducting the survey. It could be assumed therefore that Hub Lines or the defendant provided the charterer’s name for the survey.

15 The second ground was that documents such as letters to the master of the vessel, sailing instructions and a circular were all sent on the notepaper of the defendant.

16 The third ground was that the defendant paid most of the charter hire during the two months of its hire. Out of a total of seven payments, the first two payments amounting to US$321,743.95 were paid by Hub Shipping Sdn Bhd (“Hub Shipping”) and the rest of the payments amounting to US$371,112.84 were made by the defendant. None of the seven payments was made by Hub Lines. It was likely that the defendant, having paid such a large amount of the hire, was more than the mere agent that it purported to be.

17 The fourth ground for the plaintiff’s allegations came from the notes to the accounts and the report of the auditors of Hub Lines contained in the financial statements for the years ending on 31 December 1998 to 31 December 2001. The principal activities of Hub Lines were those of shipping and forwarding agents but it ceased to do business between 1 January 1997 and 31 December 1998. For the years 1999 to 2001, Hub Lines consistently made losses and it was said that the company may be unable to continue operating as a going concern. The directors and an unnamed related party and, in later years, a trade creditor, had undertaken to provide financial and other support necessary at least for the next 12 months to enable Hub Lines to trade and meet its liabilities. For 2000 and 2001, Hub Lines employed only its directors and no one else. No mention or provision was made in the financial statements for the year ending on 31 December 2001 for the plaintiff’s claim on the charterparty which arose in April 2001.

18 Further, given its precarious financial position in 2000, it was questionable why Hub Lines entered into the two-year charterparty costing it US$11,000 per day or some US$330,000 per month. It was therefore necessary to investigate what financial and other support was actually given and whether the related party and the trade creditor in question was the defendant.

19 The defendant was likely to be a party to subsequent...