The "Bunga Melati 5"

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 22 July 2015
• Neutral Citation: [2015] SGHC 190
• Court: High Court (Singapore)
• Docket Number: Admiralty in Rem No 21 of 2010
• Year: 2015
• Published date: 31 March 2016
• Hearing Date: 26 August 2014,29 August 2014,10 February 2015,01 September 2014,03 September 2014,27 August 2014,08 September 2014,09 September 2014,19 September 2014,04 September 2014,18 September 2014,16 September 2014,17 September 2014,02 September 2014,05 September 2014,28 August 2014,10 September 2014
• Plaintiff Counsel: Lee Eng Beng SC, Koh See Bin, Amy Seow and Matthew Teo (Rajah & Tann Singapore LLP)
• Defendant Counsel: Ang Cheng Hock SC, Yap Yin Soon, Tan Xeauwei, Edmund Tham Weiheng and Ramesh Kumar (Allen & Gledhill LLP)
• Subject Matter: Admiralty and shipping,admiralty jurisdiction and arrest,action in rem,Agency,evidence of agency,agency by estoppel
• Citation: [2015] SGHC 190

Judith Prakash J: Introduction

The question to be answered in this case is whether the defendant, a substantial shipowner and operator, has to pay the plaintiff, a marine fuel supplier, for bunkers supplied to the defendant’s ships. The answer to the question depends on the role played by an entity called MAL which ordered the bunkers from the plaintiff. Was MAL acting on its own account as purchaser or was it acting as the agent of the defendant? Alternatively, even if MAL did not have actual or apparent authority from the defendant to act as its agent, is the defendant estopped from denying MAL’s authority?

The facts The parties

The plaintiff, Equatorial Marine Fuel Management Services Pte Ltd (“EMF”), is a company incorporated in Singapore. Its business is to procure, sell and supply bunkers to ocean-going vessels.

The defendant, MISC Berhad (“MISC”), is a publicly listed company incorporated in Malaysia. It owns and operates commercial vessels and offshore floating facilities and is known to be one of the largest shipowners in the world.

MAL, whose full name is Market Asia Link Sdn Bhd, is a company incorporated in Malaysia initially for the purpose of selling spare parts for ships. In March 2005, MISC approved MAL as a registered vendor of bunkers. Thereafter, until the end of 2008, MISC purchased bunker fuels from MAL many times, pursuant to both fixed price contracts and to spot contracts.

Compass Marine Fuels Ltd (“Compass Marine”) and OceanConnect UK Ltd (“OceanConnect”) are both bunker broking companies based in London. In the period between June 2006 and September 2008, EMF delivered approximately 198,000mt of fuel to MISC vessels pursuant to bunker supply contracts brokered though Compass Marine and OceanConnect. Compass Marine and OceanConnect dealt with EMF and MAL. They had no direct dealings with MISC.

The claim

EMF’s claim has been quantified at US$21,703,059.39 plus contractual interest. It is for non-payment of fuel delivered to vessels owned or operated by MISC under three bunker contracts (“the Disputed Contracts”) that EMF had concluded with MAL. MISC’s position is that it is not liable at all under any of the disputed contracts: it was not a party to those contracts and EMF must look to MAL, the counterparty, for payment.

Two of the Disputed Contracts were fixed price contracts. Each was for the delivery of a total of 35,000mt of fuel to MISC vessels in Singapore (“the Fixed Price Contracts”). The Fixed Price Contracts were concluded with MAL through Compass Marine on 3 July 2008. The third contract was a spot contract for the delivery of 1,100mt of fuel to the vessel NAVIG8 FAITH concluded with MAL on 18 September 2008 through OceanConnect (“the Spot Contract”).

EMF says that it is clear from the evidence that MAL was holding itself out as the bunker broker for MISC when the Disputed Contracts were entered into. Further, MISC knew that MAL was contracting to purchase bunkers in MISC’s name. In addition, an employee of MISC had represented to Compass Marine in May 2006 that MAL was MISC’s bunker broker. This position taken by EMF combines actual authority, apparent authority and estoppel.

As a mainstay of its allegation that MISC knew that MAL was using its name when making purchases of bunkers, EMF also alleges that there was a special relationship and course of dealing between MISC and MAL from 2005 to 2008. MISC’s approval of MAL as its registered bunker vendor was only a formality, designed to carry into effect a plan for MISC to award bunker contracts to MAL and for MAL to generate bunker invoices to obtain financing from Affin Bank Bhd (“Affin Bank”). In order to secure the bunker contracts, MAL had to bid at the lowest prices, at a loss to itself. On its part, MISC used the low prices to justify the award of bunker contracts to MAL. MAL had to use MISC’s name in order to purchase bunkers from the market on credit since MAL was not an established bunker trader. On the ground and in the performance of the bunker contracts, MISC regarded MAL as no more than its broker.

Given the nature of EMF’s allegations, it is necessary to describe the role of the broker in bunker supply transactions and deal with MAL’s appointment as one of MISC’s registered bunker vendors.

The role of brokers in the bunker industry

Mr Darren Middleton (“Middleton”), the owner and director of Compass Marine who appeared as a witness for EMF, described how brokers operate in relation to the supply of bunkers.

The relevant parts of his affidavit state: 7. The bunker brokers connect the sellers and the buyers. They do not take the credit risk of the buyers or the supply risk of the sellers. … 8. The first step in the brokering of a bunker supply contract is the making of an enquiry by the buyers with the bunker brokers. The bunker brokers will then contact sellers in the market place to get the best price and terms for the intended bunker purchase. The bunker brokers will collect the competing quotes and recommend sellers for the buyers’ consideration. If the buyers find an offer acceptable, the contract is concluded by way of a nomination of the sellers making the offer. 9. The bunker brokers will prepare and forward to the buyers a bunker sales confirmation to record the terms of the bunker supply. The bunker sales confirmation will usually set out the name of the buyers, the name of the sellers, the name of the vessel to be supplied, the port of supply, the estimated date of supply, the quantity and grade of fuel, the price, the name of the local agent and the terms of payment. 10. The bunker brokers will also prepare and forward to the sellers a bunker sales confirmation containing the same details. 11. The industry practice is that throughout the negotiations and performance of the bunker supply transaction, all communications are channelled through the broker or respective brokers and there would be no direct contact between the buyers and sellers. … 12. After the delivery of the bunkers, the sellers will forward to the bunker brokers their invoice together with the bunker delivery note or receipt. The industry practice is for the invoices to be issued to the buyers, care of the bunker brokers. The bunker brokers will then forward the invoices to the buyers for their attention. Where there are co-brokers, the sellers will forward to the bunker brokers their invoice, and the bunker brokers will in turn forward the invoice to their co-brokers for their onward transmission to the buyers.

How MAL became a registered vendor of bunkers

MISC has a system in place in relation to the purchase of equipment and supplies. It only makes such purchases from vendors who have been registered by it as suppliers for the particular items. Before March 2005, MAL was registered with MISC only as a ship spares supplier. MAL had been supplying MISC with spare parts since 2000, with its sales to MISC between 2000 and 2005 amounting to RM 47,988,285. On 3 January 2005, MAL wrote to MISC to “officially register its interest” in expanding its business with MISC to include the supply of bunkers. The letter included the following:

We act as principals in all transactions, not as a broker, taking all responsibilities for the sale of bunkers and lubricants in the way of quantity, quality and effective delivery procedure. We are able to offer to supply your vessels at very competitive prices with reliable and prompt service based on 30 days credit from the date of delivery. We would welcome any inquiries from you in the future. [emphasis added]

MAL’s application to be a registered vendor of bunkers was first evaluated by employees from MISC’s Central Administration Unit, who provided a preliminary assessment of MAL’s suitability. Thereafter, a Vendor Assessment Form prepared by the Central Administration Unit was sent to officers in MISC’s Procurement Services Unit who added their comments on whether MAL should be registered. The Form was then sent to the Head of Group Procurement, Tenders and Contracts (“GPTC”), who recommended MAL for registration. This recommendation was communicated to the Procurement Services Unit which then prepared and signed off on the Form before sending it to the Vendor Registration Unit. Approval was then sought from the Head of the Finance Division. Thereafter, MAL was registered in the system as a vendor of bunkers. It was informed of such registration on 24 March 2005.

Pertinent details of the Disputed Contracts

In early July 2008, following communications between MAL and Compass Marine, Compass Marine approached EMF in respect of contracts for the supply of bunkers. As a result, Compass Marine and EMF entered into the Fixed Price Contracts. The price fixed under the first of these was US$744 per metric tonne for deliveries in August 2008 and the price fixed under the second contract was US$750 per metric tonne for deliveries in September 2008.

On 3 July 2008, after the Fixed Price Contracts were concluded, Compass Marine sent e-mails to EMF confirming the terms of the agreement. Similar e-mails were also sent to MAL on the same day. On the following day, MAL responded by sending e-mails headed “Fixed Price Agreement” to Compass Marine signalling their acceptance of the price offered. In all of the above e-mails, EMF was named as the seller and MISC as the buyer under the Fixed Price Contracts. On EMF’s part, e-mails were sent by EMF to Compass Marine on 11 July 2008 to record the terms and conditions agreed.

Between 25 August 2008 and 26 September 2008, MAL sent a number of documents headed “Nomination of Bunker Supply” to Compass Marine for delivery of bunkers between 3 September 2008 and 11 October 2008 under the Fixed Price Contracts. Each of these documents set out the name of a nominated vessel, its estimated time of arrival in Singapore and the quantity of bunkers required. Each also contained instructions for...