Cascade Shipping Inc v Eka Jaya Agencies (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Karthigesu J
• Judgment Date: 03 February 1993
• Neutral Citation: [1993] SGCA 7
• Date: 03 February 1993
• Subject Matter: Whether shipowners entitled to freight,Admiralty and Shipping,Hire,Demise clause in bill of lading,Time charterparties,Effect of notice given to charterer's agents,Carriage of goods by sea
• Docket Number: Civil Appeal No 102 of 1991
• Published date: 19 September 2003
• Defendant Counsel: Iyer Anjali (Allen & Gledhill)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Steven Chong (Drew & Napier)

Cur Adv Vult

The appellants (`Cascade`) are the owners of the vessel `Grace Liberty II`. By a time charterparty in the Baltime Form dated 21 April 1990 Cascade chartered the `Grace Liberty II` to PT Samudera Internusa (`Samudera`). The charterparty contained the following relevant provisions:

9 Master

The master to be under the orders of the charterers as regards employment, agency, or other arrangements. The charterers to indemnify the owners against all consequences or liabilities arising from the master, officers or agents signing bills of lading or other documents or otherwise complying with such orders, as well as from any irregularity in the vessel`s papers or for overcarrying goods.

18 Lien

The owners to have a lien upon all cargoes and subfreights belonging to the time-charterers and any bill of lading freight for all claims under this charter, and the charterers to have a lien on the vessel for all moneys paid in advance and not earned.

43 Vessel to use charterers B/L or B/L approved by charterers and/or sub-charterers ... during the period of this charter party. Owners/master authorize charterers or their appointed agents to sign B/L on behalf of the master ... without prejudice to the charter party.

54 Charterers port agent to do normal agency work for vessel, as usually included in agency work, without payment.

By an agency agreement, substantially in the standard form prescribed by the Singapore National Shipping Association, dated 1 June 1990, Samudera appointed the respondents (`Eka Jaya`) as their agents in Singapore. The relevant provisions for present purposes are, cl 1 which required Eka Jaya to provide the necessary agency services as may be required by Samudera from time to time; cl 2 which set out the duties of Eka Jaya which apart from the usual `husbanding` services rendered to a vessel by an agent required Eka Jaya `to advise consignees of the cargo`s arrival, to collect freight and to issue delivery orders`, and cl 6 which provided that Samudera was to provide Eka Jaya `with sufficient funds at least 3 working days prior to the arrival of the vessel, to cover estimated disbursements failing which [Eka Jaya was to] have the authority to retain money collected from freight charges in any amount not exceeding the estimated disbursements so as to cover advance disbursement`. The clause further provided that notwithstanding the non-receipt of the required funds, Eka Jaya was at liberty, at its entire discretion, to render service to the vessel. The agency agreement also set out the scale by which Eka Jaya`s remuneration for the services rendered to Samudera under the agency agreement was to be calculated but it contained no specific provision of how or from what funds the payment was to be made. Similarly, there was no provision specifically dealing with how the freights collected by Eka Jaya were to be accounted to Samudera.

The bills of lading used by Samudera during the period of the charter of the `Grace Liberty II` were its own as permitted by cl 43 of the charterparty and were signed at Singapore by Eka Jaya under the authority given to Samudera by Cascade pursuant to cl 43. The bills of lading contained what is commonly referred to as a `demise clause` which was cl 4 and read as follows:

4 Agency clause

If the vessel is not owned by or chartered by demise to PT Samudera Internusa by whom this bill of lading is issued (as may be the case notwithstanding anything that appears to the contrary) this bill of lading shall take effect only as a contract with the owner or demise charterer as the case may be as principal made through the agency of the said PT Samudera Internusa who act solely as agents and shall be under no personal liability whatsoever in respect thereof.

We will refer to this clause hereafter as the `demise clause`.

Samudera fell into arrears of the payment of charterhire under the charterparty. By 21 September 1990 the arrears of charterhire amounted to US$230,855 and by a letter of that date Cascade, through its managers, Norse Management (UK) Ltd, addressed Eka Jaya as follows:

The charterers have not paid the hire, an amount of US$230,855 is presently overdue ...

As you will see under the terms of cl 18 of the charter party the owners have a lien upon all cargoes and sub-freights belonging to the time charterers and any bill of lading freight for all claims under the charter.

The owners are now exercising the lien. Please take note that any freight you are holding or are due to collect on behalf of the charterers must be paid direct to the owners.

Banking details are: ...

Kindly confirm that you will conform with the requirements of cl 18 of the charter party and remit all moneys directly to the account specified above.

Perhaps we should add that if you ignore this notification you may become liable to pay freight twice.

On 20 October 1990 Eka Jaya`s solicitors wrote to Cascade`s solicitors as follows:

Our clients instruct us that as at 25 September 1990, they have collected freight amounting to $287, 315.46 which sum was utilized to set-off a debt of $341,092.10 due and owing by their principals, ie the charterers as at that date. The charterers` suggestion to make remittance is on the assumption that there is a credit in their account with our clients, which is erroneous. Freight collected after 26 September 1990 amounted to $2,959.20 and there is still a sum of $55,800.17 due and owing from the charterers to our clients. (Emphasis added.)

It would appear from this letter, that the letter from Cascade`s managers dated 21 September 1990 was received by Eka Jaya on or about 25 September 1990. It would also appear from this letter that Eka Jaya effected the set-off on 25 September 1990.

On 2 November 1990, Cascade`s solicitors, having obtained a copy of Samudera`s bill of lading on 31 October 1990, addressed Eka Jaya`s solicitors in these terms:

In your fax of 20 October 1990 you confirmed that your clients have collected freight amounting to $287,315.46 and that your clients have utilized that sum to set-off a debt allegedly due to your clients by the charterers. The terms of the bills of lading confirmed that the contract of carriage contained therein or evidenced by the bill of lading is between the cargo owners and our clients, the shipowners. In this regard, may we refer to you to cl 4 of the bill of lading. Therefore, all freight collected under the bills of lading is due to our clients and not the charterers and consequently your clients have no right of set-off with regard to collected freight.

The letter concluded with a demand for the payment of the freight collected by Eka Jaya amounting to $287,315.46. Eka Jaya, however, disputed the demand but acknowledged that the freight collected by them after 26 September 1990 was due and owing to Cascade. Accordingly, Cascade`s demand and the amount claimed in this action was limited to $287,315.46 being the amount of freight collected by Eka Jaya up to 25 September 1990 and which sum they claimed they had set-off against moneys due to them from Samudera under the agency agreement.

Before proceeding further it is pertinent to note that Cascade`s original claim for the freight collected by Eka Jaya was founded on the lien under cl 18 of the charterparty. However, the claim as pleaded in the statement of claim, in line with their demand for payment made on 2 November 1990, is founded on the demise clause contained in Samudera`s bill of lading. Paragraph 8 of the statement of claim reads as follows:

As the contracts contained in or evidenced by the bills of lading were contracts between the plaintiffs (Cascade) and the owners of the cargoes, all freight collected by the defendants (Eka Jaya) thereunder were due to the plaintiffs and not PT Samudera Internusa.

On the other hand Eka Jaya`s defence, as appears from the only affidavit filed by one of its directors on 18 January 1991, is that the bill of lading with the demise clause is to appraise shippers of cargo, that notwithstanding what appears on the face of the bill of lading, their contract of affreightment is with the owners of the carrying vessel against whom they are legally bound to seek redress for any breaches of the contract of affreightment. The legal effect of the demise clause is not to convert Eka Jaya`s obligations to collect freight from the shippers on behalf of their principals, Samudera, which emanates from the charterparty and the agency agreement, to one of collecting freight on behalf of Cascade. Furthermore, Cascade`s right to intercept the freight in the hands of Eka Jaya is strictly governed by cl 18 of the charterparty and such right can only arise from and after notice to Eka Jaya of the exercise of such right under cl 18 of the charterparty by Cascade.

For the sake of completeness we set out paras 5 and 6 of the affidavit of Eka Jaya`s director.

5 I am advised by the defendants` (Eka Jaya`s) solicitors and verily believe that the function of cl 4 of the bill of lading - the demise clause - is to make it clear that the shippers` contract of affreightment is with and only with the owners of the vessel. In other words, notwithstanding that it was the charterers` bill of lading, as the vessel was under a time-charter, the charterer (Samudera) cannot be sued if the goods are lost or damaged. Clause 4 does not, as the plaintiffs (Cascade) appear to be suggesting, convert the defendants` obligations to collect freight on behalf of their principals to collecting freight on behalf of the plaintiffs.

6 I am further advised by the defendants` solicitors that the bill of lading freight is not payable to the plaintiffs unless they are entitled to and do give notice to the defendants to account to them in respect of freight received by the defendants. But the plaintiffs are not entitled to interfere with the `flow` of bill of

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