The "Eagle Prestige"

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 23 March 2010
• Neutral Citation: [2010] SGHC 93
• Date: 23 March 2010
• Docket Number: Admiralty in Rem No 233 of 2008 (Registrar’s Appeal No 178 of 2009)
• Published date: 01 April 2010
• Plaintiff Counsel: Vivian Ang, Leona Wong and Henry Ng (Allen & Gledhill LLP)
• Hearing Date: 20 May 2009,27 May 2009,29 May 2009
• Defendant Counsel: Timothy Tan and Magdalene Chew (AsiaLegal LLC)
• Court: High Court (Singapore)
• Subject Matter: Admiralty and Shipping

Belinda Ang Saw Ean J:

This Registrar’s Appeal No 178 of 2009 (“RA 178”) was brought by the plaintiff, T S Lines Ltd, to reverse a decision of the Assistant Registrar (“AR”) made on 13 May 2009 to set aside the arrest of the Eagle Prestige renamed Engedi. The main question in the appeal concerned the degree of disclosure required on an application for a warrant of arrest. On 29 May 2009, I allowed the plaintiff’s appeal with costs of the appeal and below to be taxed, if not agreed. I now publish the reasons for my decision.

Background facts and circumstances leading to the arrest of the Eagle Prestige

By way of summary, the proceedings herein arose out of the grounding of the TS Bangkok in Tanjong Priok, Indonesia, on 10 November 2007 which resulted in hull and propeller damage to the vessel. At all material times, the plaintiff was the disponent owner of the TS Bangkok. By a time charterparty dated 22 May 2007 (“the May sub-charter”), the plaintiff sub-chartered the TS Bangkok to the defendant, EP Carriers Pte Ltd (“EP Carriers”).

On arrival at Tanjong Priok, the TS Bangkok grounded whilst berthing thereby sustaining hull and propeller damage. The damage was later repaired in Hong Kong. The head owner of the TS Bangkok sought to recover the costs of the repairs related to the grounding from the plaintiff who, in passing on the claim to EP Carriers, inter alia, brought an action in rem against the defendant’s vessel, the Eagle Prestige, the short title of which is Admiralty In Rem No 233 of 2008 (“Adm 233”).

It is the plaintiff’s case that in breach of the May sub-charter, EP Carriers had directed the TS Bangkok to berth at Tanjong Priok, an unsafe port/berth. The principal claim was put forward on the basis that the defendant’s orders to berth the TS Bangkok at Tanjong Priok amounted to breach of the charterparty terms because it was an unsafe port/berth; alternatively, the loss was sustained as a consequence of complying with the orders of EP Carriers as charterer of the TS Bangkok. In correspondence, the plaintiff also claimed the sum of US$42,753.94 being outstanding charges and expenses due under the May sub-charter. Before me, however, the arguments centred on the principal claim which, according to the endorsement of claim, was for damages and/or an indemnity for breach of contract and/or duties contained in or evidenced by the May sub-charter.

The Eagle Prestige was first arrested in Singapore waters on 8 January 2009 by the master and crew in Admiralty in Rem No 9 of 2009 for unpaid wages (“Adm 9”). On 17 February 2009, the master and crew applied for the vessel to be sold pendente lite. Eventually, the claim in Adm 9 was amicably resolved and the Eagle Prestige was released from arrest on 27 February 2009. Adm 9 was discontinued on 3 March 2009. On the same day of her release, the plaintiff arrested the Eagle Prestige in Adm 233 for breach of the May sub-charter in respect of the vessel TS Bangkok.

Fortunately for the plaintiff, the writ in rem in Adm 233 was issued on 2 December 2008 before the vessel’s ownership changed on 22 December 2008. At the time of the plaintiff’s arrest, not only had the ownership of the Eagle Prestige changed, by 17 February 2009, EP Carriers was in provisional liquidation by way of a creditors’ voluntary winding up, and provisional liquidators were also appointed.¹ It appears that the creditors approved the liquidation of EP Carriers on 6 March 2009.

The circumstances leading to the plaintiff’s arrest of the Eagle Prestige were recounted in the two affidavits of Li Kang-Lin (“Li”), both filed on behalf of the plaintiff on 27 February 2009. I begin at the point when the plaintiff received notice of the grounding claim from the head owner’s P&I Club, The Swedish Club. In formally denying liability under the head charter of the TS Bangkok between the head owner and the plaintiff, the UK P&I Club (on behalf of the plaintiff), in its fax of 6 October 2008 requested, inter alia, details of the damage and the subsequent repairs. In addition, the UK P& I Club referred to a possible defence to the damage claim. The last paragraph of the fax read as follows:²

… we find that there is a special provision in Clause 90 [of the Head Charterparty] which states that “The Charterers shall not be responsible for… loss or damage to the vessel and/or other objects arising from perils insured by customary policies of insurance” and Clause 102 states that the owner has a proper hull insurance against all hull risks. As the repair costs arising out of the ship’s damage is well covered by the ship’s Hull insurance policy, Clause 90 will take effect and the [plaintiff] is not responsible for the [head owner’s] loss covered by their insurer.

It was common ground that the head charter and May sub-charter were back to back, and there was a comparable provision in the May sub-charter. Capital Gate Holdings Pte Ltd (“Capital Gate”) who intervened in the proceedings alleged that cl 90 was a complete defence to the plaintiff’s claim, and as such was a material fact that should have been (but was not) disclosed in the affidavits leading the warrant of arrest (see [98]–[111] below).

On 6 November 2008, The Swedish Club, on behalf of the head owner, replied rejecting the alleged defence with the counter argument that “the damage caused by the ship’s grounding [was] a peril that [was] covered under the prevailing c/p.” The Swedish Club also stated that the head owner had already notified EP Carriers of the repairs made to TS Bangkok, and that surveyors on behalf of EP Carriers had duly attended the surveys carried out in connection with the repairs. In short, the grounding damage was notified to the defendant and its liability insurers. On 10 November 2008, the plaintiff passed on the head owner’s claim of US$ 481,572.19 to the defendant. In particular, the UK P&I Club on behalf of the plaintiff wrote as follows:³

As [the plaintiff’s] C/P terms with you are on back to back basis and in other words [the plaintiff] is entitled to bring an indemnity claim on similar grounds as contended by the headowner against you, we are grateful that you can confirm to furnish an acceptable form of security for the owner’s claim plus interest and costs to [the plaintiff].

EP Carriers had presumably notified the claim to its insurers because some 18 days later, QBE Marine Underwriting Agency Pte Ltd (“QBE”), a subsidiary of QBE Insurance (International) Limited, responded in an email to the plaintiff’s Hong Kong lawyers, DLA Piper (“DLA”). The email of 28 November 2008 stated:⁴ (1) We are considering your security wording in detail and please give us time to revert on the same latest next by Wednesday…

…

Ernest, you know us very well. We will not run away from our responsibilities as we consider ourselves as reputable insurers. Please rest assured we will sort out the security issue and hence please do not in the meantime take pre-emptive action against the Insured’s vessel.

Since security was not forthcoming, the plaintiff went ahead to file the writ in rem against the Eagle Prestige on 2 December 2008. The picture that emerged was a pattern of unfulfilled assurances from the defendant’s insurers, QBE, over the security issue. DLA sent reminders to QBE on 4 December 2008, and again on 8 December 2008. On 11 December 2008, QBE replied to DLA stating that they were still in discussions with EP Carriers on this claim and asked that they be given time till the next day at which time they said that DLA would receive a substantive response on the security demanded from their lawyers in Singapore. However, no positive response on security as promised materialised.

In the meantime, unbeknown to the plaintiff, EP Carriers had, on 22 December 2008, sold the Eagle Prestige to the intervener “in consideration of the sum of one dollar (US$1.00) … and other good and valuable consideration …”.⁵ The shipping manager of Capital Gate, Tan Siew Ling (“TSL”) was the deponent of all the affidavits filed on behalf of the intervener. It is apposite to note that the only reason why TSL said she was in a position to testify on matters involving the defendant was because she was a director of EP Carriers from March 2001 to March 2009, and I noted from the documents that the bank facilities provided by United Overseas Bank (“UOB”) continued to be guaranteed by TSL and two others. The bill of sale of the Eagle Prestige was co-signed by TSL in her capacity as director of EP Carriers.

TSL had deposed in her 4th affidavit that the defendant’s liability to UOB in the region of US$10.335m and S$1.61m was assumed by Linford Pte Ltd following an Assignment and Novation Agreement dated 24 December 2008 (“Novation Agreement”). Furthermore, ownership of the Eagle Prestige was transferred to Capital Gate as nominee of Linford Pte Ltd. The Novation Agreement was executed by TSL on behalf of EP Carriers. Tan Eng Joo, a director of EP Carriers signed the Novation Agreement on behalf of Linford Pte Ltd in his capacity as director of the company. Tan Eng Joo is also the sole shareholder of Linford Pte Ltd, a company newly incorporated in Singapore on 11 November 2008. It was a term of the Novation Agreement that Linford Pte would provide security in favour of UOB. Linford Pte Ltd agreed to give security by way of a legal mortgage on Eagle Prestige. Linford Pte Ltd was to procure its nominee, Capital Gate, to execute a first priority statutory mortgage over the Eagle Prestige. As TSL acknowledged in her affidavit, the value of the vessel was S$1.8m (and not US$8.2m as stated in the UOB facility letter dated 19 December 2008), and it was not surprising to find UOB requiring additional security to cover the indebtedness, namely a fresh legal mortgage on the same office property belonging to Eagle Stevedoring (Pte) Ltd and the same residential property of Tan Kheng Chong and Lim Guat. Furthermore,...