The "Asia Star"

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 27 March 2007
• Neutral Citation: [2007] SGCA 17
• Citation: [2007] SGCA 17
• Defendant Counsel: R Govintharash (Gurbani & Co)
• Plaintiff Counsel: Thio Ying Ying, Edgar Chin and Tan Yeow Hiang (Kelvin Chia Partnership)
• Published date: 29 March 2007
• Docket Number: Civil Appeal No 81 of 2006
• Date: 27 March 2007
• Subject Matter: Whether coating failure was of such magnitude as to undermine contract for coated tanks or affecting vessel's cargoworthiness,Whether contractual agreement to cancel fixture without liability existing,Admiralty and Shipping,Fixture note for vessel stating tanks epoxy coated,Carriage of goods by sea,Fixture incorporated in Vegoilvoy form,Whether elements of clause to trigger its efficacy existing,Voyage charterparties

27 March 2007 Judgment reserved.

Belinda Ang Saw Ean J (delivering the judgment of the court):

1 This is an appeal by the appellants, Shun Da Marine Transportation Co (S) Pte Ltd, against the decision of the trial judge (“the judge”) in which the judge held the appellants (“the Owners”) in breach of a fixture, the terms of which were contained in a fixture note dated 15 November 2003: see [2006] 3 SLR 612. The respondents, Pacific Inter-Link Sdn Bhd, were the charterers of the product tanker, the Asia Star.

Background facts

2 The dispute arose out of the following circumstances. On 15 November 2003, the Owners chartered the Asia Star to the respondents (“the Charterers”) for the carriage of refined bleached and deodorised palm oil (“RBD palm oil”) of between a minimum of 21,500mt and a maximum of 22,000mt to be loaded at one to two safe ports at Belawan in Indonesia, and in Malaysia, and for discharge at one to three safe ports (at the Charterers’ option) in the Gulf of Aqaba, in the eastern Mediterranean Sea, in Turkey, and at Odessa in Russia. The main terms of the fixture were contained in a fixture recap (ie, the fixture note dated 15 November 2003) and were otherwise on the terms of the Vegoilvoy Tanker Voyage Charterparty 1950 (“the Vegoilvoy form”).

3 On 14 January 2004, the Asia Star arrived at Belawan and the Owners gave notice of readiness to load the cargo of RBD palm oil. She berthed on 19 January 2004 and her cargo tanks were thereafter inspected by a surveyor from ITS Testing Services (M) Sdn Bhd (“ITS”) on behalf of the Charterers. The inspection was to ensure that (a) there was no rust in the cargo tanks; (b) the coatings were intact with no loose scales and blistering; (c) no residue of previous cargoes was left in the tanks; and (d) the tanks were dry after cleaning operations. The surveyor, Zulkiflee bin Jamal (“Zulkiflee”), promptly reported to the Charterers the poor condition of the cargo tanks due to the failure of the coatings by as much as 40%. There was rust on the exposed mild steel surfaces, loose scale and blistering of the coatings. Underneath the blisters were the residues of previous cargoes. It was not surprising that the Charterers cited poor tank condition as a reason for not accepting the vessel for loading and, instead, called upon the Owners to provide a substitute vessel. We pause here to mention that the Charterers had reason to be cautious as cl 17(b) of the Vegoilvoy form could operate to bar a claim for cargo contamination once the tanks were accepted by their surveyor. It subsequently transpired that Jason Wang Jian Jun (“Jason Wang”), the assistant business manager of CSC Oil Transportation (S) Pte Ltd (“CSC Oil”), the vessel’s operators and managers, requested the vessel’s protection and indemnity club (“P&I Club”) to send a surveyor to determine the condition of the cargo tanks. A surveyor from PT Buana Multiguna Inspection & Testing (“BMI”), the surveyors who were appointed by the P&I Club, boarded the vessel at Belawan and confirmed that her cargo tanks were unfit to load RBD palm oil. The attending surveyor’s findings coincided with the results of Zulkiflee’s inspection. Spica Services (Indonesia), the local correspondents for the P&I Club, in a fax dated 19 January 2004, copied the following report to CSC Oil:

Attached is copy of surveyor prelim findings for your reference.

From the surveyor findings it appeared that the tanks [are] not suitable ... for loading edible oil, hence ... required to coat before loading the cargo.

[emphasis added]

4 Jason Wang thereupon cancelled the fixture via e-mail on 19 January 2004. In the same e-mail, the Charterers were told that no substitute vessel was available. Notwithstanding the cancellation advice and Jason Wang’s earlier remark that further cleaning would not improve the state of the tanks’ coating, the vessel carried out further tank cleaning. On 20 January 2004, the Charterers were invited to again inspect her cargo tanks the very same evening. However, no re-inspection took place by the deadline imposed on the Charterers and the Asia Star left port the next day.

5 The Charterers commenced this action claiming loss and damage stemming from their inability to fulfil their respective contractual obligations to their suppliers and Turkish buyers following the cancellation of the fixture. The trial before the judge was on the question of liability alone with damages, if any, to be assessed separately.

The fixture note dated 15 November 2003

6 It was common ground that the chartering agreement was evidenced by a fixture recap of 15 November 2003 which also expressly incorporated a number of clauses from the Gold River/Pacific Interlink charterparty dated 16 January 2003 (“Gold River charterparty”). In addition, the standard printed clauses of the Vegoilvoy form were incorporated by reference. No formal charterparty was drawn up or, if one was in fact drawn up, it was not executed.

7 Although there was an option in the fixture for the Owners to substitute the carrying vessel, the fixture identified the vessel Asia Star by name with her particulars listed in the fixture as follows:

Vessel: MT ASIA STAR ...

BUILT 1982/ FLAG SINGAPORE

DWT 22,756 MT AT DRAFT 10.009M

LOA 157.60M/BEAM 22.96M

CUBIC CAPACITY (98% EXCL SLOP TANK) 24,581.34 M3

EPOXY COATED/COILED

In this fixture, the word “Vessel” followed by a punctuation mark (colon) is a descriptive provision akin to and is typical of clauses that ordinarily list a vessel’s particulars and are often introduced with the words “vessel’s description” or “description of vessel”. In this judgment, the entire provision as reproduced above will be referred to as “the vessel’s description”. The allusion to “epoxy coated/coiled” in the provision pertains to two matters: first, “epoxy coated” is a reference to the vessel’s epoxy-coated cargo tanks and second, the word “coiled” is a reference to the heating coils for the purposes of heating the cargo. As the dispute only concerns the epoxy coating, for convenience, the stipulation as to epoxy-coated tanks will hereafter be referred to as the “vessel’s description (epoxy coated)”.

8 The other special provisions relate to the details of the cargo to be lifted, the last three cargoes previously loaded including loading and discharge ports, laycan, laytime and demurrage. There is also a warranty that the last three cargoes of any substitute vessel would be “FOSFA acceptable”, ie, that the last three cargoes of any substitute vessel would be those found on the Federation of Oils, Seeds and Fats Association Ltd’s (“FOSFA”) international list of acceptable cargoes.

9 The fixture recap incorporated several clauses from the Gold River charterparty and they include the freight provision, prohibition against commingling, and additional provisions as to loading and discharge, including the following provisions:

4. Vessel’s last three cargoes in tanks, lines and pumps under this charterparty were clean, unleaded and suitable for carriage of refined vegetable oil in bulk …

5. Vessel is to clean vessel’s tanks, lines and pumps to charterer’s surveyor’s full satisfaction.

10 Finally, we come to the standard printed terms of the Vegoilvoy form. Part 1 consists of the lettered clauses which represent the variables in the charterparty. In this case, the variables such as the description of vessel, load port and discharge port (see [7] and [8] above), are laid out in the fixture recap. Nonetheless, the preamble of the Vegoilvoy form, which mirrors the common law position, provides that, in the event of conflict, the provisions of Part 1 shall prevail over those contained in Part 2 to the extent of such conflict. Part 2 of the Vegoilvoy form comprises the standard printed clauses. The relevant standard printed clauses read:

1. Warranty. (a) The Owner shall, before and at the commencement of the voyage, exercise due diligence to make the Vessel seaworthy, properly manned, equipped, and supplied for and during the voyage, and to make the pipes, pumps, and heater coils tight, staunch, and strong, in every respect fit for the voyage, and to make the tanks, holds, and other spaces in which cargo is carried fit and safe for its carriage and preservation.

(b) It is understood that if the tank or tanks, into which the particular cargo covered by this Charter is to be placed, upon testing prove to be defective the Owner undertakes to execute the necessary repairs, provided repairs can be effected within 24 hours and at reasonable expense; otherwise, Owner has the option of cancelling this Charter in which case no responsibility shall rest with the Vessel, Owners, or Agents.

15. Cleaning. Prior to loading. Charterer shall inspect the designated tanks for the purpose of determining that they are in suitable condition for the loading and carriage of the cargo specified hereunder. Acceptance of the tanks by Charterer’s representative shall be conclusive as to their suitability for such purposes. If Charterer’s representative does not accept the tanks as suitable for the cargo, the Owner shall have the right, as its option, to cancel this Charter Party, without any resulting liability on the part of either party, or to again clean the tanks, subject to inspection as above.

17. General Exceptions Clause. (a) Neither the Vessel nor the Master or Owner shall be or shall be held liable for any loss of or damage or delay to the cargo or for any failure in performing hereunder arising or resulting from:— … unseaworthiness of the Vessel whether existing at the beginning of the voyage or developing during the voyage unless caused by want of due diligence on the part of the Owner to make the Vessel seaworthy or to have her properly manned, equipped, and supplied; …

(b) The tanks having been inspected by the Charterer’s inspector as to tightness and cleanliness, notwithstanding any other provision of this Charter, neither the Vessel nor the Owner shall...