The "Endurance 1"

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 07 December 1998
• Neutral Citation: [1998] SGCA 73
• Date: 07 December 1998
• Subject Matter: Conversion,Civil Procedure,Admiralty and Shipping,Calculation of loss of profits on sub-charter,Charterers fail to pay charter-hire,Tort,O 22A Rules of Court,Vessel frequently breaks down from start of charter service,Charterparty,Charterers offer to settle for percentage of damages to be assessed,Whether costs on indemnity to basis be awarded,Wrongful retention of water-makers,Assessment of damages,Offer to settle,Carriage of goods by sea,Withdrawal,Whether market for water-makers exists at time of conversion,Whether vessel unseaworthy at time of delivery,Assessment of damages for wrongful withdrawal of vessel,Whether owners wrongfully withdraws vessel from charter,Whether offer serious and genuine,Owners withdraw vessel,Charterers sub-charter vessel
• Docket Number: Civil Appeal No 68 of 1998
• Published date: 19 September 2003
• Defendant Counsel: Loo Dip Seng (Ang & Partners)
• Court: Court of Appeal (Singapore)
• Plaintiff Counsel: Vivian Ang and Yap Yin Soon (Allen & Gledhill)

Judgment:

KARTHIGESU JA

(delivering the judgment of the court): This appeal is against the judgment of Lai Siu Chiu J awarding (i) damages for the loss of profit against the appellants in the sum of US$567,000 for wrongfully terminating the time-charterparty entered into between the parties and withdrawing the vessel from the charter; (ii) a sum of S$47,800 as the replacement cost of two water-makers for their wrongful conversion; (iii) interest on both sums at 6% per annum from the date of the writ (19 October 1995) to the date of judgment (13 March 1998); and (iv) costs on an indemnity basis from 17 June 1997 that being the date of an offer to settle the two claims. The appellants` counterclaim for unpaid charter-hire and damages for the wrongful arrest of the vessel was dismissed. There is no appeal against this. The appellants were however ordered to pay the costs of the counterclaim on an indemnity basis from 20 June 1997. The appellants have appealed against this order for costs.

2. The facts

The appellants, the owners of the ship or vessel `Endurance 1` ex `Tokai Maru` (hereafter `the owners`) by a time-charterparty in the SHELLTIME 4 form made on 2 February 1994 chartered the `Tokai Maru` which was later renamed `Endurance 1` (hereafter `the vessel`) in circumstances which did not affect the admiralty jurisdiction in rem of the High Court to the respondents, Cotan Petroleum Pte Ltd (hereafter `the charterers`) for a period of one year (with a further one-year extension at the charterers` option) commencing from the date of delivery of the vessel to the charterers. The daily charter-hire was US$2,000 payable in advance for a calendar month of 30 days.

3.By another time-charterparty also in the SHELLTIME 4 form and containing the identical printed and additional clauses as in the charterparty above and made on 2 February 1994 the charterers sub-chartered the vessel to Kohap (Hongkong) Limited or nominee (hereafter `the sub-charterers`) also for a period of one year (with a further one-year extension at the sub-charterers` option) commencing from the date of delivery of the vessel to the sub-charterers. The daily sub-charter-hire was US$2,800 payable in advance for a calendar month of 30 days.

4.The vessel was delivered by the owners directly to the sub-charterers at Singapore on 17 March 1994. The charterers as they were required to by cl 9 of the charterparty duly paid the owners the charter-hire for the first calendar month of 30 days in the sum of US$60,000 in advance of the date of delivery.

5.The relevant clauses of the charterparty for the purposes of this appeal are cll 1, 3 and 9. Clause 1, inter alia, provides that at the date of the delivery of the vessel under the charter `she should be tight, staunch, in good order and condition, and in every way fit for the service with her machinery, boilers, hull and other equipment in good and efficient state.` It is not disputed that the intended service of the vessel, a tanker, both under the charter and the sub-charter was to supply fuel oil to fishing vessels out at sea in the Pacific and Indian Oceans. An essential piece of equipment for this service is the pumping equipment to pump the fuel oil to the fishing vessels. Clause 3(i) provides that `throughout the charter service owners shall, whenever the passage of time, wear and tear or any event requires steps to maintain or restore the conditions stipulated in cll 1 and 2(a), exercise due diligence to maintain or restore the vessel`. Clause 3(iii) has an important bearing on the payments of hire. It reads:

If owners are in breach of their obligation under cl 3(i) (as summarised above) charterers may so notify owners in writing; and if, after the expiry of 30 days following the receipt by owners of any such notice, owners have failed to demonstrate to charterers` reasonable satisfaction the exercise of due diligence as required in cl 3(i), the vessel shall be off-hire, and no further hire payments shall be due, until owners have so demonstrated that they are exercising such due diligence.

Furthermore, at any time while the vessel is off-hire under this cl 3 charterers have the option to terminate this charter by giving notice in writing with effect from the date on which such notice of termination is received by Owners or from any later date stated in such notice. This sub-clause (iii) is without prejudice to any rights of charterers or obligations of owners under this charter or otherwise ...

Clause 9 provides as follows:

Subject to cl 3(iii), payment of hire shall be made in immediately available funds to:

Sea Sources Trading Pte Ltd

5001 Beach Road [num ]11-14 Golden Mile Complex, S (0719)

in USD Account per calendar month in advance, less:

(i) any hire paid which charters reasonably estimate to relate to off-hire periods, and

(ii) any amounts disbursed on owners` behalf, any advances and commission thereon, and charges which are for owners` account pursuant to any provision hereof, and

(iii) any amounts due or reasonably estimated to become due to charterers under cl 3(ii) or 24 hereof (not relevant here).

any such adjustments to be made at the due date for the next monthly payment after the facts have been ascertained. Charterers shall not be responsible for any delay or error by owners` bank in crediting owners` account provided that charters have made proper and timely payment.

In default of such proper and timely payment,

(a) owners shall notify charterers of such default and charterers shall within seven days of receipt of such notice pay to owners the amount due including interest, failing which owners may withdraw the vessel from the service of charterers without prejudice to any other rights owners may have under this charter or otherwise; and

(b) (provides for the payment of interest on late payment of charter-hire: not relevant here).

6(1). The charterers` pleaded case

The charterers` pleaded case was that the owners were in breach of their contractual obligation under the charterparty to deliver a vessel which was `tight, staunch, in good order and condition, and in every way fit for the service with her machinery, boilers, hull and other equipment in good and efficient state`. This is what cl 1 of the charterparty provided. Instead the owners delivered the vessel whose cargo pumps were totally inefficient and could not pump at the rate specified in the charterparty and whose engines repeatedly broke down and several days` service of the vessel were lost. Numerous particulars were given. Further the owners had an obligation under cl 3(i) of the charterparty to exercise due diligence to maintain or restore the vessel to the condition stipulated in cl 1. The owners had failed to do this. This was a further breach of the charterparty. In consequence of these breaches the charterers could not perform their obligations to the sub-charterers who repudiated the sub-charterparty on 8 April 1994 and the charterers had lost the profits they would otherwise have earned in the sum of US$571,200 (US$800 x 714 days, ie from 8 April 1994 to 22 March 1996 - being the end date of the charterparty inclusive of the period extended by the exercise of the option).

6(2).In the alternative the charterers claimed that the owners had wrongfully withdrawn the vessel from the charterparty on or about 25 April 1994. In consequence the charterers had lost the profits they would have earned by sub-chartering the vessel on a rising market from the date of the wrongful withdrawal of the vessel for the remainder of the charter period inclusive of the period extended by the exercise of the option in the sum of US$836,400 (US$1,200 x 697 days ie from 25 April 1994 to 22 March 1996).

6(3).The final claim made by the charterers was for the conversion of the two water-makers which were placed on board the vessel by the charterers for the purposes of the sub-charterparty and which the owners failed or refused to return following the wrongful withdrawal of the vessel notwithstanding the demands of the charterers. A sum of S$47,800 was claimed as the value of the two water-makers.

7. The vessel`s condition and whether cl 3(i) applies

Several days of the trial were spent in the charterers leading evidence to prove that the vessel did not comply with the provisions of cl 1 of the charterparty, that is to say that the vessel was not in a seaworthy condition at the date of her delivery on 17 March 1994 and the owners, principally through the chief engineer of the vessel, endeavouring to refute the charterers` evidence whose principal witness was the sub-charterers` supervisor who was on board the vessel throughout safeguarding the sub-charterers` interest. The learned judge after reviewing all the evidence accepted the evidence of the charterers that the vessel broke down on the occasions recorded by the sub-charterers` supervisor. She observed that on this issue the conflict between the charterers` evidence and the owners` evidence was irreconcilable. In her grounds of judgment she said:

From my observation of the witnesses for the plaintiffs (charterers) and defendants (owners) when they testified, I believed that Jang`s (sub-charterers` supervisor) version of events was the true and accurate picture of what happened. I found that the defendants` case was riddled with inconsistencies and their witnesses were untruthful. I could not accept the engine log-book produced by Kapa (the chief engineer) as a genuine record of all the engine breakdowns and all the repairs made ...

The learned judge set out four good reasons for not accepting the chief engineer`s evidence, all going to his credibility as a witness, which the charterers were not able to refute. In the result she held that the vessel was not seaworthy at the date of delivery by virtue of the fact that the main engine was not in good order and condition. This finding was inferred from the several times the vessel broke down at sea when...