The "Jarguh Sawit"

• Judge: Karthigesu JA
• Judgment Date: 01 December 1997
• Neutral Citation: [1997] SGCA 59
• Citation: [1997] SGCA 59
• Defendant Counsel: Ian Ng (Cooma Lau & Loh)
• Published date: 17 March 2004
• Plaintiff Counsel: C Arul and Cheryl Ann Yeo (C Arul & Partners)
• Date: 01 December 1997
• Docket Number: Civil Appeal No 188 of 1996
• Court: Court of Appeal (Singapore)
• Subject Matter: Defence and counterclaim,Arrest of vessel,Amendments to include defence and counterclaim accruing before issue of writ but defendant acquiring rights after receiving writ,Judgments and orders,Admiralty jurisdiction and arrest,Amendment,Pleadings,O 12 Rules of Court 1996,Question of jurisdiction dismissed at interlocutory stage,Whether issue of jurisdiction can be raised at trial,When conditions should be imposed on leave to defend,Jurisdiction,Admiralty and Shipping,Defence pleading lack of jurisdiction,Mortgagee's claim,s 3(1)(c) High Court (Admiralty Jurisdiction) Act (Cap 123),Whether circumstances raise suspicion to impose conditional leave to defend despite a secured claim,Whether jurisdiction procedural or substantive issue,Civil Procedure,Whether jurisdiction is properly invoked,O 20 Rules of Court 1996,Submission,Conditional leave to defend,Ship's mortgage not registered,Whether mortgagee has good and arguable case

[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.]

Judgment reserved.

Karthigesu JA (delivering the judgment of the court):

1 This was an appeal against the decision of CR Rajah JC on certain interlocutory matters. It is necessary to set out the facts in the context in which this dispute arose.

2 By a memorandum of agreement dated 7 May 1992, the respondents, Navigation Maritime Bulgare (“NMB”) agreed to sell to Oxford Jay International Pte Ltd (“OJI”) the Bulgarian registered vessel Vidima, now known as Jarguh Sawit, after two changes of name (“the vessel”). By an addendum to the memorandum of agreement (“the first addendum”) of the same date, it was agreed that the vessel would be sold fully Lloyd’s Register Class.

3 On 27 July 1992, OJI paid NMB 10% of the purchase price of US$2.12m as a deposit. The balance of 90% was not paid by OJI. Instead, by a loan agreement of the same date, NMB agreed to advance a loan equivalent to the balance of the purchase price to OJI. The loan was to be repaid in six instalments at six monthly intervals commencing six months after the date of drawdown at 6% interest.

4 The loan was secured by a mortgage over the vessel executed on 17 August 1992. By a deed of covenants collateral to the instrument of mortgage, OJI agreed, inter alia:

(1) to keep the vessel registered as a Republic of Singapore Ship and to do or suffer to be done nothing whereby such registration may be forfeited or imperiled (cl B);

(2) not to mortgage, charge or otherwise assign the vessel without the prior consent of NMB (cl K); and

(3) to register the mortgage under the Singapore Merchant Shipping Act (cl P).

5 The vessel arrived in Singapore on 5 October 1992. However, NMB were unable to deliver the vessel as a Lloyd’s Register Class vessel as the vessel had not been upgraded to comply with the Lloyd’s classification requirements. This prevented OJI from registering the vessel under s 358 of the Merchant Shipping Act (Cap 179) as a Republic of Singapore ship. The Singapore Registry of Ships did not recognise class certificates from the Bulgarian Registry for the purpose of registering a vessel in Singapore. We note by way of aside that the law on ship registration has now been changed by amendments to the statute introduced in 1997. The present dispute arose under the old law. As a consequence of NMB’s breach, OJI were unable to register the mortgage as the then s 377 (now s 25) only permitted registration of a mortgage of a Singapore-registered ship.

6 The position was thus that the vessel continued to be registered in Bulgaria and the mortgage was not registered, whether in this jurisdiction or elsewhere. The mortgage appeared to remain unregistered at the time of the appeal. Prima facie, this amounted to a breach by OJI of cll B and P of the deed of covenants, albeit occasioned by NMB’s own failure to deliver a Lloyd’s Class vessel.

7 OJI and NMB attempted to resolve the matter. It was agreed that the vessel would not be reclassed with Lloyd’s but with Germanischer Lloyd’s (“GL”). However, before this could be done, the vessel had to undergo technical modifications.

8 Slightly more than a month after the vessel was delivered, on 17 or 18 November 1992, it was allegedly agreed that the cost of the modifications would be borne by OJI and NMB jointly in the following manner:

(1) OJI would bear the first US$20,000 of upgrading the vessel;

(2) the next US$30,000 would be borne equally by OJI and NMB; and

(3) as regards any costs in excess of US$50,000, OJI would bear 25% of the sum and NMB the balance.

9 Repairs were done at Keppel Shipyard and the cost of the necessary repairs amounted to S$148,051. Expenses incidental to the repairs amounted to S$875,293.10. The cumulative cost of repairs and incidental expenses was S$1,023,344.10, or US$639,590.06 (based on a US$1=S$1.60 exchange rate). This amount was to be shared by OJI and NMB in the agreed proportions.

10 We think it prudent to state that we make no findings as to the terms of the settlement agreement of 17 and 18 November 1992, the actual cost of repairs and the respective sums payable by OJI and NMB as it is unnecessary for us to do so to decide this appeal. We will, however, for present purposes, proceed on the basis of the facts as we have stated them for the convenient disposal of the appeal.

11 Interim certificates were obtained from GL on 6 January 1993. However, instead of seeking registration in the Singapore Registry (thus enabling NMB to register their mortgage), OJI transferred ownership of the vessel to the appellants, a Honduran company, on 13 July 1993. The vessel was provisionally registered at the Honduras Registry. It is unclear when NMB became aware of the transfer, but they alleged that these acts amounted to breaches of clauses K and P respectively of the deed of covenants.

12 OJI and NMB agreed in writing by a “Second Addendum to the Memorandum of Agreement” (dated 24 August 1993) that the vessel would be reclassed with GL and that payment would be made in four equal annual installments, the first being due on 1 July 1993.

13 These terms were stated to “supersede any prior understanding and or agreements of the subjects”. However, NMB argued that the repayment terms were still subject to cl 11 of the original loan agreement of 27 July 1992, which provided that if OJI failed to pay any sum due under the loan agreement, the loan would become immediately due and payable together with the accrued interest and any other amounts payable under the said loan agreement (the “acceleration clause”). Again, we make no finding as to which is the actual position.

14 However, what is clear is that OJI did not pay the instalment due on 1 July 1993. NMB alleged this was a breach of the varied repayment terms and on 1 November 1993 gave notice by telex that they considered the loan due and payable in full under cl 11. The dispute between OJI and NMB was submitted for arbitration in London in accordance with the Memorandum of Agreement.

15 OJI disputed liability under the second addendum on the basis that NMB had agreed to set off the amount it was to contribute to the cost of modification against the amount owed by OJI under the varied repayment schedule. KS Vejayakumar, the controlling shareholder and managing director of OJI, and subsequently director of Jaguh Harimau Sdn Bhd, the appellants in this appeal, deposed in an affidavit that at a meeting on 2 December 1993, OJI and NMB agreed that OJI could set off US$448,442.54 (being his calculation of OJI’s share of the costs of repair and incidental expenses of US$639,590.06) against the first installment due under the second addendum, that is, US$591,480. NMB disputed that such an agreement was ever arrived at. They relied on the loan agreement, which provided that there was to be no set-off of amounts due unless it was otherwise agreed.

16 NMB and OJI were unable to come to a compromise. On 6 October 1994, to recover the loan, which had continued to go unpaid, NMB commenced the present action and arrested the vessel. By this time, ownership of the vessel had been transferred to Jaguh Harimau Sdn Bhd, a company incorporated in Malaysia, who are the defendants to this action and the appellants in this appeal.

17 The appellants instructed solicitors who entered an appearance on their behalf. The appellants then applied to set aside the writ and arrest on the grounds that the appellants were bona fide purchasers of the vessel without notice of the mortgage, the mortgage never having been registered. The application was dismissed.

18 They appealed against the decision of the assistant registrar on the different ground that the jurisdiction of the court had been wrongly invoked as the appellants were not liable in personam on NMB’s claim, the mortgage having been between NMB and OJI, not NMB and the appellants. They contended that unless they were liable in personam, NMB were not entitled to initiate an action in rem against them.

19 Rubin J dismissed the appeal and his grounds are reported at [1995] 3 SLR 840. He held that the jurisdiction of the High Court in an admiralty action in rem is not contingent on the existence of an actionable right in personam against the shipowner. We affirmed his decision on appeal on 22 November 1995.

20 The appellants thereafter filed a defence and counterclaim alleging, inter alia, that the court did not have jurisdiction as NMB did not have a claim in admiralty in rem or in personam against the appellants. This was substantially the same argument that had earlier failed before us on appeal. NMB applied for summary judgment and also to strike out the paragraphs alleging lack of jurisdiction. They succeeded on both applications before the assistant registrar.

21 Subsequent to the assistant registrar’s order, OJI assigned all their rights, title and interest under the memorandum of agreement to the appellants by a deed of assignment dated 5 August 1996. The appellants took the view that as a consequence, they were entitled to raise against NMB all defences which would have been available to OJI on a mortgage action in personam against OJI. These defences were:

(a) that NMB had agreed to pay for the costs of classifying the vessel with Lloyd’s or GL and that they had not done so; and

(b) that when NMB arrested the vessel, no money was due from OJI to NMB under the first instalment because the money due was subject to a contractual set-off: hence, they were not in breach of the varied repayment terms.

22 The appellants also contended that the rights accruing to them under the assignment, specifically, OJI’s claim for damages against NMB for breach of the memorandum of agreement in failing to deliver a Lloyd’s class vessel, should also be adjudicated in the same proceedings.

23 Thus, in their appeal to the High Court, the appellants asked not only that the...