Hyundai Engineering and Construction Company Ltd v Sembawang Kimtrans (S) Pte Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Tan Lee Meng J
• Judgment Date: 30 December 2000
• Neutral Citation: [2000] SGHC 282
• Citation: [2000] SGHC 282
• Defendant Counsel: Yang Lih Shyng and Yeo Hui Leng (Khattar Wong & Partners)
• Plaintiff Counsel: CR Rajah SC (instructed) and Edmund A Hendrick (Edmund Hendrick & Partners)
• Published date: 19 September 2003
• Docket Number: Originating Motion No 8006 of 2000
• Date: 30 December 2000
• Subject Matter: Whether arbitrator's decision so obviously wrong,Interpretation of 'one-off' clauses,Whether shipowners under duty to effect policy benefiting both charterers and shipowners,Leave to appeal against award,Charterparties,Arbitrator's decision on question of fact,Award,Carriage of goods by sea,Duty of shipowners to insure vessel,Whether appeal against decision may be lodged,Applicable principles,Arbitration,Whether right of subrogation waived,Admiralty and Shipping

: The plaintiffs, who chartered a dumb barge from the defendants, sought leave to appeal against the decision of the arbitrator, to whom they referred their dispute with the defendants with respect to, inter alia, their liability for damage to the barge and for unpaid charter-hire.

Background

On 30 October 1996, the plaintiffs chartered the defendants` dumb barge, the `Kimtrans Taurus`, for the purpose of transporting rocks and stones in Sabah. The charterparty, which was on the basis of a bareboat charter, was for a period of three months, commencing on or about 30 October 1996.

The defendants, who conceded that they had a duty to insure the barge, effected an insurance policy with AGF Insurance (Singapore) Pte Ltd.

The barge was towed from Singapore to Sabah and was transporting rocks and stones along the Jerundong River in Brunei when she ran aground and was damaged. After the accident, the defendants made a claim against their insurers, who repudiated liability on the ground that it was a term of the policy that the insurance cover would cease if the barge was chartered on a bareboat basis. Apparently, the defendants had not realised this when they applied for the insurance policy.

As the defendants were unable to seek an indemnity from their insurers for their loss, they looked towards the plaintiffs for compensation on the ground that the damage in question had resulted from the plaintiffs` negligence and that the plaintiffs had breached a condition of the charterparty by failing to redeliver the barge to them in the same condition as when they took delivery, fair wear and tear excepted.

The plaintiffs, who denied that they had caused the damage to the barge, asserted that the said damage had been caused by perils of the sea. Furthermore, they contended that whatever may have been the cause of the damage, the loss would have been covered by the insurers if the defendants had fulfilled their obligation under Addendum 02 of the charterparty to take out an effective policy. As such, the plaintiffs denied any liability to the defendants for the damage to the barge.

The defendants contended that even if they had effected a valid policy, the policy would only have been for their own benefit. As such, if they had been indemnified by the insurers for their loss, the plaintiffs would have been liable to the insurers, who would have been entitled to exercise their right of subrogation against the plaintiffs. The plaintiffs retorted that the question of subrogation would not have arisen because the policy which was to have been effected by the defendants was intended to benefit both parties to the charterparty.

Apart from the question of liability for damage to the barge, the parties also had differing views as to when charterparty hire ceased to be payable. The charterparty required the plaintiffs to redeliver the barge at Singapore at the end of January 1997. The plaintiffs failed to do this and the barge, which had to be towed by the defendants from Jerundong to Singapore, was redelivered to the defendants in mid-April 1997. The plaintiffs asserted that the parties had agreed that the obligation to pay charter hire ceased on 31 January 1997. As this was denied by the defendants, a question arose as to whether or not charter hire continued to be payable after January 1997, and if it was, when it ceased to be payable.

As the charterparty provided that all disputes between the parties arising out of the charter were to be referred to arbitration in Singapore, the dispute between the parties was accordingly referred to an arbitrator.

The arbitrator`s award

The arbitrator came to the conclusion that the damage to the barge was `partly caused by the negligent use of the barge by the plaintiffs and aggravated or further caused by the heavy weather encountered at Jerundong on 25 December 1996`.

The arbitrator, who noted that the insurance policy effected by the defendant on their vessel was ineffective, rejected the plaintiffs` contention that the policy which the defendants were contractually bound to effect was intended to benefit both the shipowners and charterers. As such, he took the view that the plaintiffs were not entitled to rely on the defendants` failure to effect a valid policy to refuse to pay for the loss which was partly caused by their negligent use of the barge.

As for the defendants` claim for charter hire after the three-month period of charter, the arbitrator rejected the plaintiffs` assertion that it had been agreed that their obligation to pay charter hire ended on 31 January 1997. As such, he took the view that the defendants were entitled to charter hire for the period 1 February 1997 to the date of actual delivery, which was, in his view, 15 April 1997. The additional charter hire amounted to $32,500.

The appeal

As has been mentioned, the plaintiffs sought leave to appeal against the award of the arbitrator on two counts. The first relates to whether or not the plaintiffs were not liable for the damage caused to the vessel in view of the fact that the defendants were obliged to insure the vessel. The second relates to whether or not charter hire ended on 31 January 1997.

For the purpose of determining whether leave should be granted to a party to appeal against the award of an arbitrator, much depends on whether the dispute in question concerns the interpretation of `one-off` clauses or standard terms. Rather less strict criteria have to be met in the case of an application for leave to appeal where standard term clauses are concerned. In this case, both the plaintiffs and the defendants accepted that the clauses which governed their rights were `one-off` clauses. As far as such clauses are concerned, the following words of Lord Diplock in The Nema; Pioneer Shipping v BTP Tioxide [1982] AC 724, ought to be borne in mind:

Where ... a question of law involved is the construction of a `one-off` clause the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong: But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave; the parties should be left to accept, for better or for worse, the decision of the tribunal that they had chosen to decide the matter in the first instance ...

The plaintiffs` liability for damage to the vessel

It is common ground that the defendants were obliged to insure the vessel and that they failed to effect a valid policy because the policy effected by them afforded no cover to a vessel chartered on a bareboat basis. As such, whether or not the plaintiffs are liable to the defendants for the damage...