The "Kiku Pacific"

• Jurisdiction: Singapore
• Judgment Date: 27 April 1999
• Date: 27 April 1999
• Docket Number: Civil Appeal No 305 of 1998
• Court: Court of Appeal (Singapore)

The “Kiku Pacific”

[1999] SGCA 96

Yong Pung How CJ

,

M Karthigesu JA

and

L P Thean JA

Civil Appeal No 305 of 1998

Court of Appeal

Admiralty and Shipping–Admiralty jurisdiction and arrest–Action in rem–Test for wrongful arrest–Malice or gross negligence implying malice–Whether malice or gross negligence implying malice in arresting vessel existed

The vessel, Kiku Pacific, was owned by the appellant. The respondent, Fal Energy Co Ltd (“Fal”), a United Arab Emirates (“UAE”) company carrying on the business of fuel and oil supplies, claimed that the appellant had failed to pay for marine oil supplied. The appellant disputed Fal's claim, having paid to their agent the price of the marine oil supplied. Pending resolution of the dispute, theappellant offered security but Fal rejected it. In March 1996, the appellant offered Fal a letter of undertaking with provision for the claim to be subject to English jurisdiction. Fal wanted a first class bank guarantee and for the claim to be subject to UAE jurisdiction. Fal later arrested Kiku Pacific in Singapore. It was released after the appellant provided a letter of undertaking identical to that offered in March 1996, except for the claim being made subject to Singapore jurisdiction. The trial judge dismissed Fal's claim for the price of marine oil and the appellant's counterclaim for damages for wrongful arrest. There was no order as to costs for the counterclaim. Fal's appeal was dismissed in Civil Appeal No 298 of 1998. This was the appellant's appeal against the trial judge's decision.

Held, dismissing the appeal:

(1) The term “reasonable or probable cause” was not appropriate in the context of wrongful arrests of a vessel. Rather, the test for an action for wrongful arrest to succeed was whether there was mala fides or gross negligence implying malice in bringing the action or in rejecting any security offered for release of the vessel: at [29] and [30].

(2) Fal did not bring the action maliciously or with such gross negligence as to imply malice. Although Fal asserted that it had a maritime lien against the appellant when it plainly had no such clam under Singapore law, that was not the sole basis of its claim, which also proceeded on the basis that its delivery of marine oil was “on the faith and credit of the vessel”. Further its claim involved a relatively complicated set of facts and required a complex analysis of contractual matters on which views might differ and change. Although its factual matrix had changed, the changes were within the periphery of the essential facts. Such changes were made to enable its lawyers to succeed in making the owner contractually liable using the best possible arguments and did not imply that Fal was malicious or grossly negligent in bringing its action: at [30] to [32] and [36].

(3) Fal's refusal of the security was neither malicious nor so grossly negligent as to imply malice. When Fal refused the security offered by the owner in March 1996, it was uncertain where the vessel would be arrested. It had good reason and was clearly entitled to insist on UAE jurisdiction. Its subsequent acceptance of a similar undertaking with Singapore jurisdiction did not taint the initial rejection with malice or gross negligence. Fal's decision to arrest the vessel in Singapore was constrained by the commercial realities of the vessel's routes and the opportunities that presented themselves for an arrest: at [40] and [41].

(4) Fal's case was not entirely without merit and it should be awarded the costs of the counterclaim: at [45].

Evangelismos, The (1858) 12 Moo PC 352; 14 ER 945 (folld)

Evmar, The [1989] 1 SLR (R) 433; [1989] SLR 474 (distd)

Herniman v Smith [1938] AC 305 (refd)

Hicks v Faulkner, The (1881) 8 QBD 167 (refd)

Kommunar (No 3), The [1997] 1 Lloyd's Rep 22 (refd)

Margaret Jane, The (1869) LR 2 A & E 345 (folld)

Maule, The [1995] 2 HKC 769 (refd)

Mitchell v Jenkins (1833) 5 B & Ad 588; 110 ER 908 (distd)

Ohm Mariana ex Peony, The [1992] 1 SLR (R) 556; [1992] 2 SLR 623 (distd)

Strathnaver, The (1875) 1 App Cas 58 (folld)

Victor, The (1866) 71 Lush 72; 167 ER 38 (distd)

Volant, The (1864) 22 BR & L 321; 167 ER 385 (refd)

Walter D Wallet, The [1893] P 202 (distd)

Yuta Bondarovskaya, The [1998] 2 Lloyd's Rep 357 (refd)

Steven Chong SC and Chua Choon King (Rajah & Tann) for the appellant

Haridass Ajaib and R Srivathsan (Haridass Ho & Partners) for the respondent.

M Karthigesu JA

(delivering the grounds of judgment of the court):

1 This was an appeal from the decision of Choo Han Teck JC in the matter of Admiralty in Rem No 389 of 1996, where the learned judge dismissed the appellants' counterclaim for damages for wrongful arrest. We heard the appeal on 5 April 1999 and dismissed it. We now give our reasons.

The facts

2 The appellants are the owners of the vesselKiku Pacific (“the owners”). The respondents are Fal Energy Co Ltd (“Fal”), a company incorporated in Sharjah, United Arab Emirates (“UAE”), carrying on the business of fuel and oil supplies.

3 On 28 December 1995 at 1.41pm, the agents of Fal in the United Kingdom received a telex from Martin Millard of Marine Supplies Services Ltd (“MSSL”). MSSL were the brokers for Forsythe International UK Ltd (“Forsythe”). In the telex, MSSL made an offer on behalf of Forsythe to purchase 100mt of diesel oil at US$193 per ton and 500-600mt of intermediate fuel oil at US$118 per metric ton (“the marine oil”). This offer was accepted by the agents of Fal through a telex on the same day at 2.10pm.

4 At 1.50pm of that same day, MSSL sent a telex to Albany Bunkers Ltd (“Albany”), who were the brokers for the owners. The telex contained an offer from Maritime Brokers Ltd (“Maritime”) to sell the same quantity of diesel oil at US$190 and the same quantity of intermediate fuel oil at US$116.50 to Tankers Pacific Management, who were the managing agents of the Kiku Pacific.Albany replied on the same day by telex to accept the offer.

5 From the owners' investigations subsequent to the dispute between the parties, it was revealed that there was a series of back-to-back contracts for the marine oil. Fal sold the marine oil to Forsythe, who in turn sold it to Wm Scollay & Co Ltd (“Wm Scollay”), who in turn sold it to South Pacific Energy Trading (“SPET”), who in turn sold it to Maritime, who in turn sold it to the owners. Neither Fal nor the owners were aware that there were intermediary parties between Forsythe and Maritime.

6 The marine oil was delivered by Fal to theKiku Pacific on 1 and 6 January 1996. Maritime received payment in full from the owners. Fal however failed to receive payment from Forsythe. Fal wrote to Albany on 16 and 19 February 1996 to seek payment from the owners. In late February 1996, representatives of Fal and the owners met in London. There the owners offered security to Fal pending resolution of the dispute but the offer was rejected. Another offer of security was made in March 1996 in the form of a letter of undertaking from the London Steamship P&I Club, with provision for the claim to be subject to English jurisdiction. The security was rejected by Fal, who wanted a first class bank guarantee, and wanted the claim to be subject to UAE jurisdiction instead of England.

7 On 8 July 1996, FAL arrested the Kiku Pacific in Singapore. The vessel was released on 10 July 1996 after the owners provided security in the form of a letter of undertaking from the London Steamship P&I Club. The letter of undertaking was identical to that offered in March 1996, except that jurisdiction was to be in Singapore.

8 In the court below, Fal brought a claim for the price of the marine oil of US$143,548.60. The owners in turn brought a counterclaim for damages for wrongful arrest.

Decision of the trial judge

9 The trial judge dismissed Fal's claim for the price of the marine oil (Fall Energy Co Ltd v Owners of the Ship or Vessel “Kiku Pacific” [1998] SGHC 370).

10 In respect of the counterclaim for damages for wrongful arrest, the trial judge took the view that the cornerstone of an action for damages for wrongful arrest was malice, or gross negligence implying malice. He rejected the use of the term “reasonable and probable cause” saying (at [13] and [14]):

[I]n my view, 'reasonable and probable' cause is the language of an action founded on malicious prosecution. It is a term that envisages a slightly higher burden of proof for a person to launch a criminal prosecution against another (presumably because of the greater stigma and consequences) than that required in civil actions. The arrest of a vessel under the admiralty jurisdiction is essentially a civil action and the requirements are understandably lower. The test for wrongful arrest in such cases is based only on whether the arresting party was actuated by malice.

A reliance on 'reasonable and probable cause' may lead to confusion and semantic arguments. A plaintiff who fails in his action fails because he has not proved his case on a balance of probabilities. That does not mean that he had no reasonable or probable cause to arrest the vessel in the first place, otherwise, every time a plaintiff fails he becomes obliged to pay damages for wrongful arrest. That is not the law. Mitchell v Jenkins (1833) 5 B & Ad 588 and Hicks v Faulkner (1878) 8 QB 167 cited by counsel were both cases concerning malicious prosecution and not the wrongful arrest of a vessel.

11 The owners referred to The Evmar [1989] 1 SLR (R) 433 at [28],where Chao Hick Tin JC (as he then was) had used the term “reasonable or probable cause”. The trial judge was of the view that under certain circumstances a refusal to accept security may be evidence of mala fides and that in those circumstances the term “reasonable or probable cause” may be relevant. The trial judge noted that Chao Hick Tin JC went on to conclude that the refusal to accept the letter of undertaking...