The "Makassar Caraka Jaya Niaga III-39"

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 19 October 2010
• Neutral Citation: [2010] SGHC 306
• Plaintiff Counsel: Toh Kian Sing SC, Leong Kah Wah and Koh See Bin (Rajah & Tann LLP)
• Docket Number: Admiralty in Rem No 175 of 2009 (Registrar’s Appeal No 16 of 2010)
• Date: 19 October 2010
• Hearing Date: 20 August 2010,21 May 2010,11 August 2010,24 February 2010,18 May 2010
• Subject Matter: Admiralty and Shipping
• Year: 2010
• Citation: [2010] SGHC 306
• Defendant Counsel: Gan Seng Chee and Leong Kai Yuan (Ang & Partners)
• Court: High Court (Singapore)
• Published date: 21 October 2010

Tan Lee Meng J: Introduction

The appellant, ANL Singapore Ltd (“ANL”), instituted Admiralty in Rem No 175 of 2009 (“Adm No 175”) against the owners of the vessel, “Makassar Caraka Jaya Niaga III-39” (the “Makassar”). ANL contended in its Statement of Claim that the respondent, PT Djakarta Lloyd (Persero) (“PTDL”), an Indonesian State-owned company, owed it US$719,440.17 for slot fees due and owing under invoices rendered pursuant to a slot charterparty entitled “AAX Main Agreement”, which was entered between the parties on 1 January 2008.

On 16 May 2009, ANL arrested the Makassar, which was registered in PTDL’s name, as security for its claim.

PTDL intervened in the action and claimed that although the Makassar was registered in its name, it was actually owned by Indonesia (the “State”). PTDL asserted that it is merely the State-appointed operator of the said vessel.

On 24 September 2009, PTDL filed SUM 5039/2009. In this Summons, PTDL sought to have the Makassar released and the arrest set aside. It also sought an order that ANL’s application for default judgment and sale of the vessel and all further proceedings be stayed in favour of foreign arbitration.

On 15 January 2010, the Assistant Registrar set aside the arrest of the Makassar and ordered the release of the vessel on the ground that the requirements under s 4 (4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“the Act’) had not been satisfied. He also ordered that ANL’s application for default judgment and sale of the Makassar and all further proceedings be stayed in favour of foreign arbitration.

Dissatisfied with the Assistant Registrar’s decisions, ANL filed RA 16 of 2010 for the purpose of appealing against his decisions. After hearing further arguments on the matter, I reserved judgment and now set out my final conclusions and the reasons for my conclusions.

Whether the writs and arrests should be set aside

The Makassar was arrested pursuant to s 3(1)(h) and s 4(4) of the Act. The relevant part of s 3(1) of the Act provides:

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;

Section 4(4) of the Act provides:

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

(a) the claim arises in connection with a ship and (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.

[emphasis added]

ANL arrested the Makassar on the basis that PTDL is its beneficial owner. In The Pangkalan Susu/Permina 3001 [1977-1978] SLR(R) 105 (“Pangkalan Susu”), Wee Chong Jin CJ explained what “beneficial ownership” entails at [9]:

The question is what do the words "beneficially owned as respects all the shares therein" mean in the context of the Act. These words are not defined in the Act. Apart from authority, we would construe them to refer only to such ownership of a ship as is vested in a person who has the right to sell, dispose of or alienate all the shares in that ship. Our construction would clearly cover the case of a ship owned by a person who, whether he is the legal owner or not, is in any case the equitable owner of all the shares therein. It would not, in our opinion, cover the case of a ship which is in the full possession and control of a person who is not also the equitable owner of all the shares therein. In our opinion, it would be a misuse of language to equate full possession and control of a ship with beneficial ownership as respects all the shares in a ship. The word "ownership" connotes title, legal or equitable whereas the expression "possession and control", however full and complete, is not related to title. Although a person with only full possession and control of a ship such as a demise charterer, has the beneficial use of her, in our opinion he does not have the beneficial ownership as respects all the shares in the ship and the ship is not "beneficially owned as respects all the shares therein" by him within the meaning of s 4(4).

The ascertainment of beneficial ownership of a vessel is a matter of Singapore law as it relates to the admiralty jurisdiction of the Singapore courts. While the court will, in the case of foreign ships, take into account relevant aspects of the relevant foreign law for a better picture of how ships may be owned or transferred in order to determine who has the beneficial ownership under that foreign law, Singapore law, being the lex fori, cannot be supplanted.

To explain the effect of Indonesian law relevant to the present proceedings, the parties each called an expert witness. ANL’s expert witness, Mr M Husseyn Umar (“Mr Husseyn”), has had much experience in legal and commercial work relating to shipping. He was the former Head of the Legal Division of the Indonesian Ministry of Sea Communications, a former Director for Maritime State Enterprises at the Ministry of Communications, a former President Director of PT Pann Ship Finance and Leasing Corporation, a former President Director of PT PELNI National Shipping Co, and presently a member of the Indonesian National Arbitration Board as well as partner of a Jakarta law firm, M/s Ali Budiadjo Nugroho, Reksodiputro.

PTDL’s expert witness was Mr Ari Wahyudi Hertanto (“Mr Ari”), a lawyer at Syahmirza Irsan Attorneys at Law, Jakarta. ANL’s counsel, Mr Toh Kian Sing SC (“Mr Toh”), pointed out that it was not apparent from Mr Ari’s curriculum vitae that he had any special or relevant expertise with respect to the admiralty law issues in this case. In Pacific Recreation Pte Ltd v SY Technology Inc and another appeal [2008] 2 SLR(R) 491 (“Pacific Recreation”), V K Rajah JA stressed at [66] that an expert “must show that he is a person specifically skilled in such foreign law” and at [67] that an expert should also show “the precise manner, and not merely the general area of inquiry” in which he or she would be of use to the court. It appears from Mr Ari’s curriculum vitae that he graduated from the University of Indonesia with a law degree in 1998 and a Masters in Business Law in 2005, that he practised law for a few years before becoming a partner at his present law firm, and that he taught “General Theory of State” as well as “Pancasila (Indonesian) Ideology”. I thus agreed with Mr Toh that there are valid questions about Mr Ari’s suitability as an expert witness for the purpose of the present proceedings, which involves a determination of the beneficial ownership of the vessel.

To ascertain who is the beneficial owner of a vessel, the court may trace the history of ownership of the vessel from the time of its construction: see The Andres Bonifacio [1993] 3 SLR(R) 71. In the present case, it is relevant that in 1989, the Indonesian government launched a five-year plan called the “Caraka Jaya III Implementation Program” (“Caraka Jaya III”) to strengthen the Indonesian national shipping sector. A State-owned company, PT PANN (Persero) Multi Finance (“PT Pann”), was designated as the implementing agency for Caraka Jaya III. The Indonesian government obtained two offshore loans for Caraka Jaya III. It then entered into two subsidiary loan agreements with PT Pann on 27 September 1993 and 6 October 1993 to sub-loan the offshore funds to the latter to finance the construction of the vessels in question.

Subsequently, PT Pann faced financial problems and was unable to complete the construction of the Caraka Jaya III vessels. On 2 September 1996, PTDL was directed by the Indonesian Minister of Finance to take over the duties and responsibilities of PT Pann. While the relevant shipbuilding contracts were first entered into between the shipyards and PT Pann, they were transferred to PTDL with the tacit approval of the shipyards in question. The Indonesian government provided loans to PTDL to complete the construction of the vessels.

On 25 February 1998, the Makassar was delivered to PTDL by the shipyard. On 22 October 1998, the Makassar was registered in PTDL’s name at the Jakarta registry.

Under Singapore law, a registered owner of a vessel is, without more, its beneficial owner and the party who asserts otherwise has the burden of rebutting this presumption. The significance of this presumption of ownership has been reiterated in a number of cases. In The Kapitan Temkin [1998] 2 SLR(R) 573 (“The Kapitan Temkin”), G P Selvam J stated at [7]:

What is a prima facie case to establish jurisdiction depends on the facts of the case…. [T]he certificate of registration is important documentary evidence in deciding who the beneficial owners of a ship for purposes of jurisdiction are, especially when it is produced and relied upon on behalf of the State or a department which issued the certificate. It is so because the certificate of registration is also a certificate of ownership…. It is not conclusive but furnishes at least prima facie evidence of the registered owner being the true owner, thus resulting in a shifting of the burden of proof. Whoever, without being registered, claims ownership must displace that ...