The "Inai Selasih" (ex "Geopotes X")

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 25 July 2005
• Neutral Citation: [2005] SGHC 132
• Date: 25 July 2005
• Subject Matter: Plaintiff knowingly mounting arrest of ship on basis of sham bareboat charter,Wrongful arrest,Admiralty and Shipping,Section 3(1)(h) High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed),Whether plaintiff acting mala fides or crassa negligentia,Section 4(4) High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed),Parties entering into agreement for dredging and reclamation works,Admiralty jurisdiction and arrest,Plaintiff agreeing to supply dredges,Action in rem,Plaintiff relying on sham charterparty to assert defendant liable in personam,Whether agreement relating to use or hire of ship,Whether plaintiff discharging burden of proof that defendant charterer of, in possession or in control of ship
• Docket Number: Admiralty in Rem No 149 of 2004
• Published date: 26 July 2005
• Defendant Counsel: Niru Pillai and Liew Teck Huat (Niru and Co)
• Court: High Court (Singapore)
• Plaintiff Counsel: Gerald Yee and Adam Abdul Rahim (Joseph Tan Jude Benny)

25 July 2005

Belinda Ang Saw Ean J:

1 This was an appeal by the defendant from the decision of the assistant registrar who refused its application to set aside the Writ of Summons and Warrant of Arrest of the Inai Selasih in respect of the plaintiff’s claim against the defendant for, inter alia, breach of and moneys owed under the terms of a memorandum of understanding dated 29 November 2002 entered into by the plaintiff and the defendant (“the MOU”). The plaintiff is Jan De Nul NV (“JDN”), a Belgian company specialising in dredging operations around the world. In this action in rem, the defendant is named as the owner of the Inai Selasih. The defendant, Inai Kiara Sdn Bhd (“IK”), is in the business of carrying out dredging and land reclamation works in Malaysia.

2 In the Indorsement to the Writ of Summons, the claim was put in this way:

The Plaintiffs’ claim against the Defendants who are the owners of the ship or vessel M.V. “INAI SELASIH” EX “GEOPOTES X” (Port Klang Marine Registry Official No. 330407) is for:

(1) Damages for breach of an agreement dated 29^th November 2002 entitled “Memorandum of Understanding” (“MOU”) relating to the use or hire of the Plaintiff’s vessel(s) and/or for outstanding charter hire due and payable from the Defendants in respect of “INAI SEROJA”;

(2) Further and/or alternatively, for breach of fiduciary duty;

(3) Interest; and

(4) Costs

3 Prior to the arrest of the Inai Selasih, JDN on 4 June 2004 wrote to IK giving notice to terminate the MOU if the sum of €9,551,929.85 was not paid by 18 June 2004. In the same letter, JDN alluded to the purchase of two dredgers by IK as evincing its intention not to honour cl 3.2 of the MOU. On the same day, Inai Kiara (L) Ltd (“IK Labuan”), as owner of the Inai Seroja, demanded from IK payment within 14 days of €8,025,473.38 being moneys due under a bareboat charterparty dated 18 April 2003 and entered into between IK and IK Labuan (“the Charterparty”) failing which the Inai Seroja would be withdrawn from the charter. On 12 June 2004, the Inai Seroja was sold to Port Louis Maritime, a subsidiary of JDN.

4 In the Affidavit leading the Warrant of Arrest, IK was said to have defaulted in its obligations under the MOU in that it had failed or refused to pay JDN moneys due under the MOU, which at 1 June 2004 totalled €9,551,929.85. The arrest affidavit was affirmed by Adam Abdur Rahim (“Rahim”), an associate in the firm of M/s Joseph Tan Jude Benny. It was not disputed that the arrest of the Inai Selasih was to obtain security for arbitration in Switzerland. In the Request for Arbitration dated 20 July 2004, the contents of which Bruno Van Den Eede (“Eede”), the financial administrator of JDN, adopted in his first affidavit of 26 July 2004, the amount owing as at 18 June 2004 was stated to be €9,428,962.17. The relief sought in the Request for Arbitration included payment of the sum of €9,428,962.17 together with interest for late payment as well as loss of income and profit arising from the termination of the MOU.

5 JDN arrested on 13 July 2004 the Inai Selasih on the basis that the MOU was an agreement relating to the use or hire of the Inai Seroja within the definition of s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“the Act”) and JDN was entitled to arrest the Inai Selasih, a vessel beneficially owned by IK at the time when this action was brought. At the time when the cause of action arose, IK was the charterer of or in possession or in control of the ship Inai Seroja and was the person who would be liable to JDN in an action in personam. Rahim deposed that the Inai Seroja was chartered on demise to IK pursuant to the Charterparty. Eede iterated in his Affidavit of 26 July 2004 that IK’s status as charterer was as shown in the Charterparty.

6 It was not in dispute that under ss 3(1)(h) and 4(4)(b) of the Act, JDN must establish:

(a) that the claim arises out of an agreement relating to the use of the Inai Seroja;

(b) that the claim arises in connection with the Inai Seroja ;

(c) that IK would be liable on the claim in an action in personam;

(d) that when the cause of action arose IK was the charterer of the Inai Seroja ; and

(e) that at the time when the writ was issued, IK was the beneficial owner of the Inai Selasih.

7 JDN must establish all five conditions. Mr Liew Teck Huat, who appeared with Mr Niru Pillai for IK, submitted that the first, third and fourth conditions were not satisfied. The other conditions as listed were not in issue. For the reasons given below, I allowed IK’s appeal as the fourth condition required by s 4(4) of the Act was not established. JDN has appealed against my decision.

8 I shall first consider the claim under s 3(1)(h) of the Act. Mr Gerald Yee for JDN contended that the court had jurisdiction under s 3(1)(h) in that the MOU was an agreement for the use of the Inai Seroja, an identified ship. IK argued that the court had no jurisdiction. Both sides cited The Eschersheim [1976] 1 Lloyd’s Rep 81 where the English Court of Appeal held that in deciding whether a particular agreement was an agreement relating to the use of a ship or not, the court should look at the substance of the matter.

9 Although it was not disputed that the Inai Seroja was the ship in connection with which the claims under the MOU arose, Mr Liew took the position that the MOU was plainly not an agreement to hire a ship. Nor was it an agreement relating to its use. The MOU evidenced a joint venture whereby IK was to secure contracts for dredging and land reclamation works in Malaysia, particularly in port projects, and JDN on the other hand was to provide the dredgers, equipment and technical assistance. The deployment of two dredgers by JDN was incidental to its participation in the aforementioned dredging and reclamation contracts. The MOU was not an agreement to charter the two dredgers identified in the MOU and no charter hire was payable to JDN. Profits, if, any, were to be shared equally from income from dredging and reclamation contracts secured by IK. Furthermore, JDN had the right not to participate in any dredging and reclamation contracts secured by IK if JDN was unwilling to agree to any of the terms of the dredging and reclamation contracts secured by IK. That right, so the argument went, reinforced IK’s position that the MOU was not confined to the hire or use of JDN’s dredgers. JDN, in one of the minutes of meeting with IK, proposed the setting up of a joint management team for the joint venture which was to be tasked with running the day-to-day business of “the Cooperation” as the unincorporated venture under the MOU was known by. Apart from integration of staff for “the Cooperation” within IK, a management committee was to be formed by staff of IK and JDN. Whenever staff or personnel were required for work to be carried out under “the Cooperation”, the management committee would pool the resources of IK and JDN. To illustrate the point that the joint venture was for mutual benefits and profits and not limited to the use or hire of the Inai Seroja, Mr Liew referred to one of the pro forma invoices exhibited by JDN which showed that the joint venture included other services like the provision of services of a surveyor to carry out a preliminary inspection on the tug Winstar Reliance and the barge Winstar 2308.

10 JDN did not dispute IK’s characterisation of the MOU as a joint venture but its argument was that the joint venture was in relation to the use of the Inai Seroja and thus within the scope of s 3(1)(h). In my view, a joint venture involving the use of an identifiable ship, in a proper case, is capable of coming within this head of jurisdiction. But not any involvement will suffice. The question is thus whether there is some reasonably direct connection with the use of the vessel and the joint venture. Each case will depend on its facts.

11 The expression “relating to” in s 3(1)(h) was given a narrower construction than the expression “arising out of” in Gatoil International Inc v Arkwright-Boston Manufacturers Mutual Insurance Co (The Sandrina) [1985] 1 Lloyd’s Rep 181. In that case the House of Lords held that a contract of insurance was not connected with the carriage of goods in a ship in a sufficiently direct sense to be capable of falling within para (e) of s 47(2) of the Administration of Justice Act 1956, the Scottish equivalent of our s 3(1)(h). Lord Keith of Kinkel stated at 187:

It is necessary to attribute due significance to the circumstance that the words of the relevant paragraphs speak of an agreement “in relation to” not “for” the carriage of goods in a ship and the use or hire of a ship. The meaning must be wider than would be conveyed by the particle “for”. It would, on the other hand, be unreasonable to infer from the expression actually used, “in relation to”, that it is intended to be sufficient that the agreement in issue should be in some way connected, however remotely, with the carriage of goods in a ship or with the use or hire of a ship, and I think there is much force in the view expressed by Lord Wylie in The Aifanourios, 1980 S.C. 346 as to the inference to be drawn from the presence of certain other paragraphs in s 47(2). There must, in my opinion, be some reasonably direct connection with such activities. An agreement for the cancellation of a contract for the carriage of goods in a ship or for the use or hire of a ship would, I think, show a sufficiently direct connection. It is unnecessary to speculate what other cases might be covered. Each case would require to be decided on its own facts. As regards the contract of insurance founded on in the instant appeal, I am of the opinion that it is not connected with the carriage of goods in a ship in a sufficiently direct sense to be capable of coming within par.(e).

12 I therefore turn to the MOU. The recital included the statements that JDN was desirous of providing two dredgers to ...