Projector SA v Marubeni International Petroleum (S) Pte Ltd (No 3)

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 25 January 2005
• Neutral Citation: [2005] SGCA 5
• Docket Number: Civil Appeal No 42 of 2004
• Date: 25 January 2005
• Published date: 26 January 2005
• Year: 2005
• Plaintiff Counsel: Lawrence Teh and Sean La'Brooy (Rodyk and Davidson)
• Citation: [2005] SGCA 5
• Defendant Counsel: Ian Koh and Werner Tsu (Drew and Napier LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether appropriate to grant interim mandatory injunction under the circumstances,Whether more appropriate to order inquiry as to damages suffered,Whether appellant discharging obligations under letter of indemnity to provide on demand bail or security to prevent arrest of vessel or to secure release of vessel unconditionally,Applicable principles for granting of interim mandatory injunction,Mandatory injunction,Whether appellant given sufficient time to discharge obligations before respondent obtained interim mandatory injunction,Appeal against High Court judge's refusal to unconditionally discharge interim mandatory injunction,Injunctions,Whether mandatory injunction improperly obtained

25 January 2005

Chao Hick Tin JA (delivering the judgment of the court):

1 This appeal was against the decision of the High Court refusing:

(a) to lift unconditionally an ex parte interim mandatory injunction (“IMI”) granted against the appellant; and

(b) to order an inquiry as to damages suffered by the appellant on account of the grant of the IMI.

Instead, the court decided to defer these questions to the trial judge. We heard the appeal on 24 November 2004 and dismissed it for the reasons which follow.

The background

2 The appellant, a Belize company with its head office in London and a branch office in Singapore, was in the business of trading in oil and petroleum products. The Singapore branch office had two local employees. Its directors were all resident outside Singapore. The respondent, a Singapore company and a member of the Japanese Marubeni group of companies, is also engaged in the petroleum business.

3 In June 2003, the respondent time-chartered the vessel, Dynamic Express, from Mitsui OSK Lines Ltd (“Mitsui”). On 3 July 2003, the respondent, in turn, sub-chartered the vessel to the appellant for the carriage of gas oil from Taiwan to South Korea. The voyage charterparty provided that should the appellant request for delivery of cargo without the production of original bills of lading (“B/Ls”), the appellant would give an indemnity to the respondent.

4 Upon the cargo’s arrival at South Korea, the appellant asked for the delivery of the cargo without the production of the four relevant B/Ls. As a consideration for acceding to the request, and as provided for in the voyage charterparty, the appellant issued two letters of indemnity (“LOI”) to the respondent.

5 Under the terms of the LOI, the appellant agreed in cll 4 and 5 that:

4. If the vessel or any other vessel or property belonging to you should be arrested or detained or if the arrest or detention thereof should be threatened, to provide on demand such bail or security as may be required to prevent such arrest or detention or to secure the release of such vessel or property and to indemnify you in respect of any loss, damage or expense caused by such arrest or detention whether or not the same may be justified.

5. As soon as all original B/Ls for the above goods shall have arrived and/or come into our possession, to produce and deliver the same to you whereupon our liability hereunder shall cease.

[emphasis added]

6 Upon the issue of the LOI, the cargo was accordingly discharged to Petaco Petroleum (“Petaco”) in South Korea without the production of the original B/Ls. On 24 November 2003, two banks, which were holding two of the four original B/Ls, had the vessel arrested in South Korea. On 28 November 2003, the respondent obtained from Tay Yong Kwang J an ex parte IMI against the appellant requiring the latter to, inter alia:

(a) pay two sums, ie, US$1,125,981.32 and US$1,509,011.67, into the South Korean court through Mitsui in order to procure the immediate release from arrest of the vessel; or

(b) pay the said two sums to Mitsui or the respondent to enable bank guarantees to be furnished to the banks who had the vessel arrested;

(c) in addition to (a) or (b), take all steps which shall include paying all such sums as may be required to obtain the release of the vessel.

7 The IMI was served on the appellant on 2 December 2003. On the same day, the appellant filed an urgent application to set aside the IMI (“the discharge application”). On 5 December 2003, the discharge application came before Choo Han Teck J who ordered that the IMI be suspended except the part which required the appellant to pay the cash deposit into court. He also gave directions as to the filing and service of affidavits by the parties. On the same day, the necessary security in cash was furnished by the appellant through Mitsui to the South Korean court and the vessel was accordingly released.

8 On 19 May 2004, the discharge application came up for further hearing before Belinda Ang Saw Ean J and the orders she made were the subject of the present appeal. The substance of the orders was to the following effect:

(a) that the IMI granted on 28 November 2003 be discharged on the condition that the cash deposit in the South Korean court be retained to abide by the outcome of the proceedings in Korea;

(b) that prayers 3 (relating to an inquiry as to damages suffered by the appellant) and 5 (relating to costs) be reserved to the trial judge; and

(c) that there be liberty to apply for further orders for both parties.

9 The original Notice of Appeal filed by the appellant related only to the order set out in sub-para (b) of [8] above. On 27 October 2004, this court, pursuant to the appellant’s Notice of Motion, gave leave to the appellant to amend the Notice of Appeal to encompass also sub-para (a).

The decision below

10 As would have been apparent, the effect of the orders made by Ang J on 19 May 2004 was to postpone the decisions on the substantive issues, namely, whether the IMI was properly obtained, whether the condition imposed to have the IMI discharged was warranted and whether there should be an inquiry as to damages suffered by the appellant on account of the issue of the IMI and the consequential question of costs. She was of the opinion that the decisions on these questions, the main one of which was whether the respondent had acted reasonably in applying for the IMI, should be reserved to the trial judge after hearing full evidence. Moreover, such a course would be expedient as it would avoid going into the issues twice. In any event, at the time, security had already been furnished by the appellant and the vessel had been released from arrest. The IMI had effectively been spent.

11 As regards that part of the order which imposed the condition that the money deposited into the South Korean court should be left unaffected, the judge so decided for two reasons. First, it was not entirely clear whether the security paid into the Korean court, although paid in the name of the shipowner, Mitsui, could nonetheless be withdrawn by the party who actually provided the funds. Second, the appellant’s counsel informed the court that the appellant was willing to leave the security in place but he had no instructions from his client to give an undertaking to the court that if the IMI were to be discharged unconditionally, the security would not be withdrawn.

The appeal

12 By the amended Notice of Appeal, the appellant effectively appealed against all the orders made by Ang J. While the appellant alleged that it was willing, pursuant to its obligation under the IMI, to furnish the security to obtain the release of the vessel, it objected to the grant of the IMI which it said had tarnished its reputation and undermined its integrity. The grant of the IMI implied that the appellant was an entity which was not good for its word.

13 The appellant contended that at the time the respondent applied for the IMI, the appellant was not in breach of cl 4 of the LOI. The respondent’s demand to the appellant to post bail by way of cash deposit was only made on 27 November 2003 and that demand was only received by the appellant the next day, which was also the day on which the respondent applied for the ex parte interim relief. The appellant should have been given a reasonable time within which to comply with the demand and the appellant, in fact, furnished the security within a reasonable time, with the vessel being released from detention on 5 December 2003. The appellant asserted that the security it eventually furnished to the Korean court was not because of the IMI but because it had wanted, at all material times, to fulfil its obligations. The appellant had not breached its obligations under the LOI.

14 Relying on Chuan Hong Petrol Station Pte Ltd v Shell Singapore (Pte) Ltd [1992] 2 SLR 729 (“Chuan Hong”) and Singapore Press Holdings Ltd v Brown Noel Trading Pte Ltd [1994] 3 SLR 151 (“SPH Ltd”), the appellant argued that Ang J, instead of adjourning the matter to the trial judge, should have undertaken a proper balancing exercise to determine whether, instead of issuing the IMI, awarding damages would have provided the respondent with an adequate remedy. Counsel contended that if such an exercise was undertaken by Ang J, she would have found that damages would have been an adequate remedy and thus it was improper, he said, for Ang J to adjourn everything to the trial judge.

Was there a breach of the LOI?

15 It would be recalled that the obligation of the appellant under the LOI was not merely to secure the release of the vessel after arrest but also to prevent its arrest. Thus, to determine whether there was a basis for the respondent to invoke the jurisdiction of the court, it was necessary to look at what transpired before the vessel was arrested by the two banks who held the original B/Ls, as well as shortly thereafter.

16 On 5 November 2003, Shin Han Bank advised the respondent that it was the holder of bill of lading no KAKR-001 and demanded payment or the delivery of the goods. It also informed the respondent that Petaco, to whom the goods were delivered, was in insolvency. The respondent forwarded this letter to the appellant for action pursuant to cl 4 of the LOI.

17 On 6 November 2003, the respondent received a similar letter from Cho Hung Bank with regard to bill of lading no DMEXP-A which the respondent again forwarded to the appellant, stating that “per your LOI … we hereby hold you fully responsible and liable for all loss or damages which may be incurred as a result”.

18 On 17 November 2003, the shipowner, Mitsui, informed the respondent that the original B/Ls had not yet been surrendered and that Petaco had become insolvent. Mitsui also expressed its concern over the possibility of the holders of the B/Ls making claims against it. On the same day, the respondent enquired of the appellant as to the whereabouts of the...