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

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 02 February 2006
• Neutral Citation: [2006] SGCA 4
• Citation: [2006] SGCA 4
• Date: 02 February 2006
• Published date: 02 February 2006
• Plaintiff Counsel: Jude Benny and Adam Abdur Rahim (Joseph Tan Jude Benny)
• Docket Number: Civil Appeal No 41 of 2005
• Defendant Counsel: N K Pillai and Liew Teck Huat (Niru and Co)
• Court: Court of Appeal (Singapore)
• Year: 2006

2 February 2006

Chao Hick Tin JA (delivering the judgment of the court):

1 This was an appeal by Jan De Nul NV, the plaintiff/appellant, against the decision of the High Court setting aside the in rem Writ of Summons filed by the appellant against Inai Kiara Sdn Bhd, the defendant/respondent, for damages for the non-payment of charter hire due under an agreement relating to the use or hire of the appellant’s dredger. The High Court had also set aside the Warrant of Arrest issued at the instance of the appellant in the action in respect of the respondent’s vessel, the Inai Selasih, and ordered that damages, to be assessed, be awarded to the respondent. We heard the appeal on 21 November 2005 and allowed it only to the extent that we set aside the order as to damages made in favour of the respondent in relation to the arrest of the Inai Selasih. We did not think that damages should be awarded against the appellant. However, we affirmed the decision to set aside the Writ and the Warrant of Arrest. We now give the reasons for our decision.

The background

2 The appellant, a Belgian company, ran a worldwide business in dredging and land reclamation. The respondent, a Malaysian company, was also involved in a similar business in its own country. From 2001, the respondent had chartered dredgers from the appellant to undertake its projects. In 2002, the respondent wanted to obtain a 15-year concession from the Malaysian authorities to carry out public dredging and reclamation works in the country. However, it was a requirement of the authorities that the dredgers to be used for the works should be Malaysian-registered and Malaysian-owned. In order to satisfy that requirement, the respondent entered into a special arrangement with the appellant which was set out in a memorandum of understanding (“MOU”).

3 The preamble to the MOU and cl 3.1 stated that the parties were to associate themselves into “an unincorporated cooperation” (“the Co-operation”) for the deployment of two dredgers, ie, the JFJ De Nul and the Vesalius. Each party would have an equal interest in the Co-operation. However, for the purpose of showing to the Malaysian authorities that the requirement as to local registration and ownership of the dredgers was satisfied, the MOU also provided an “external framework”. In short, this external framework was only for show. Therefore, cl 3.11 of the MOU had to provide that the Co-operation “shall be a silent and secret cooperation”. However, it was provided under cl 13.2 that any dispute under the MOU should be resolved by arbitration in Zurich, Switzerland, under the International Chamber of Commerce Rules of Arbitration.

4 The external framework contemplated under the MOU was, in brief, as follows. First, a company was to be incorporated by the respondent and a fiduciary of the appellant in the British Virgin Islands. This was later changed to Luxemburg (“the Luxemburg company”). It was to be a bearer share company and 99% of the bearer shares in the Luxemburg company were to be held by the respondent and 1% by the fiduciary. Second, the respondent and the Luxemburg company were to jointly incorporate a company in the Federal Territory of Labuan under the Offshore Companies Act 1990 (Act No 441 of 1990) (M’sia) (“the Labuan Company”). The Labuan company was the entity which would, in name, own the two dredgers. The respondent would hold 51% of the shares of the Labuan company and the Luxemburg company, 49%. Third, through some documentary transactions, the Labuan company would become the legal owner of the dredgers. Fourth, the Labuan company would have the dredgers registered in Malaysia and charter the dredgers to the respondent pursuant to a charterparty.

5 This was broadly the external framework. However, eventually, only one dredger, the JFJ De Nul, was required by the respondent to carry out the works. JFJ De Nul was renamed Inai Seroja by the Labuan company.

6 What is described in [4] above, was the framework for the world to see. But the real arrangement under the MOU was that the appellant would retain ownership of the Inai Seroja. Through a series of instruments executed by the respondent and the Labuan company, and the handing over of the certificates in relation to the bearer shares of the Luxemburg company, the appellant, in fact, had the control and management of the Labuan company.

7 With the external arrangement in place, the respondent was able to obtain the concession from the Malaysian authorities to undertake public dredging and reclamation works. The appellant alleged that by early June 2004, substantial sums were overdue from the respondent in respect of the Inai Seroja. On 4 June 2004, the appellant gave notice to the respondent that it would terminate the MOU if a sum of approximately €9.5m was not paid within 14 days. On the same day, the Labuan company also gave notice of termination of the charterparty if the outstanding sum of €8m due under the charterparty was not paid. The respondent denied owing the appellant, or the Labuan company, the sums claimed by them and instead accepted their conduct in stopping the Inai Seroja from carrying on with the works as an act in repudiatory breach of the MOU and the charterparty respectively.

8 Consequently, on 13 July 2004, the appellant instituted the present admiralty action against the respondent claiming, inter alia, damages for breach of the MOU and/or for the outstanding sums due for the hire of the Inai Seroja. On the same day, the appellant arrested a vessel, the Inai Selasih, which was owned by the respondent, as security for an arbitration in Switzerland. The appellant contended that the admiralty jurisdiction of the High Court could be invoked pursuant to s 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“the Act”). Furthermore, it claimed that it was entitled to arrest the Inai Selasih under s 4(4)(b) of the Act as the respondent was liable in personam to the appellant, being the charterer of (relying on the charterparty between the Labuan company and the respondent) or in possession of the Inai Seroja.

9 On 5 August 2004, the assistant registrar disallowed the respondent’s application to have the action struck out/set aside and to set aside the Warrant of Arrest. The respondent successfully appealed against the decision. Belinda Ang Saw Ean J held that the appellant had failed to prove that the respondent was the charterer of or was in possession of the Inai Seroja when the cause of action arose as required under s 4(4)(b) of the Act because the evidence in fact showed that the charterparty was a sham giving rise to no rights and obligations. Thus, she set aside the Writ and the Warrant of Arrest. She would also have set aside the Warrant of Arrest on the ground of non-disclosure of material facts. She further ordered that there be an order for damages against the appellant on the ground that the appellant had relied on a document, the charterparty, which was a sham. Thus, there was evidence of mala fides on the part of the appellant.

Issues

10 Before us, the appellant contended that the judge erred in setting aside the Writ and the Warrant of Arrest, and in ordering the payment of damages by the appellant to the respondent. At this juncture, we ought to clarify that there appeared to be a misunderstanding by the parties as to the order made by the judge. They thought that the judge had struck out the Writ when she intended only to set aside the Writ. This is apparent from a perusal of her Grounds of Decision (reported at [2005] 4 SLR 1).

11 The appellant submitted that at the time the cause of action arose the respondent was the charterer of, or was in possession or control of, the Inai Seroja. There was nothing bogus about the arrangement which the appellant and the respondent had entered into as reflected in the MOU. As regards the question of damages, the appellant argued that it had made full disclosures of the terms of the MOU to the court, including the internal and external arrangements, when it obtained the Warrant of Arrest against the Inai Selasih.

Nature of the arrangement

12 The relevant provisions of the Act read:

3 — (1) The admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims:

…

(h) any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;

…

[4 —] (4) In the case of any such claim as is mentioned in section 3(1)(d) to (q), where —

…

(b) the person who would be liable on the claim in an action in personam (referred to in this subsection as the relevant person) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,

an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against —

(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of that ship under a charter by demise; or

(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it.

13 It was not in dispute that the basis of the claim of the appellant was that the MOU related to the use or hire of the Inai Seroja and that the respondent was the charterer or in possession of the Inai Seroja. The judge quite rightly pointed out that for the appellant to bring the case under ss 3(1)(h) and 4(4)(b) of the Act, the appellant must satisfy the following:

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

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

(c) that the respondent was liable on the claim in the action in personam;

(d) that when the cause of action arose, the respondent was the charterer of the ...