The "Makassar Caraka Jaya Niaga III-39"

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 29 August 2012
• Neutral Citation: [2012] SGHC 175
• Docket Number: Admiralty in Rem No 175 of 2009 (SUM 699/2011)
• Published date: 12 September 2012
• Year: 2012
• Citation: [2012] SGHC 175
• Plaintiff Counsel: Leong Kah Wah and Dedi Affandi (Rajah & Tann LLP)
• Defendant Counsel: Prem Gurbani and Tan Hui Tsing (Gurbani & Co)
• Subject Matter: Admiralty and shipping,sheriff's expenses
• Court: High Court (Singapore)

Judith Prakash J: Introduction

On 19 February 2011, Megastar Shipping Pte Ltd (“Megastar”) applied by summons (SUM 699/2011) in this admiralty action for the following orders: For liberty to intervene in these proceedings and to enter an appearance as intervener; For an order that the sum of US$497,081.23 being expenses incurred by Megastar between 16 May 2009 and 30 July 2010 for the preservation and maintenance of the vessel “Makassar Caraka Jaya Niaga III-39” (“the Vessel”) rank as Sheriff’s expenses; For the costs of the application.

I first heard the summons on 8 March 2011 at which time I granted leave to Megastar to intervene in the proceedings. I then gave directions for the filing of affidavits in relation to the second prayer on the summons. The affidavits were duly filed and substantive arguments on the application were heard in August 2011 and in February 2012. I now give my decision on the application.

At this point, I should state that at about the same time as it started this action, ANL Singapore Pte Ltd (“the plaintiff”), had commenced similar admiralty proceedings in Admiralty in Rem No 181 of 2009 against the ship or vessel “Pontianak Caraka Jaya Niaga III-34” (“MV Pontianak”) which was a sister ship of the Vessel. MV Pontianak was arrested shortly after the writ was issued and Megastar issued a summons to intervene in those proceedings and for similar relief in respect of expenses incurred on behalf of MV Pontianak as asked for in these proceedings.

I heard Megastar’s applications in respect of the Vessel and in respect of MV Pontianak at the same time as all parties agreed that the relevant facts and legal issues were the same. It was only the figures that changed. The judgment that follows deals, however, only with the claim in respect of the Vessel.

Background

The following facts are largely undisputed. By way of an agency agreement dated 28 October 2008 between PT Djakarta Lloyd (Persero) (“DJL”), an Indonesian company, and Megastar, a Singapore company, Megastar agreed to provide agency services in Singapore to DJL in respect of vessels which were owned, operated, chartered and/or otherwise managed by DJL. Pursuant to this agreement, Megastar acted as the agent of the Vessel when it called at Singapore.

On 16 May 2009, during a visit to Singapore, the Vessel was arrested at the instance of ANL Singapore Pte Ltd, the plaintiff in this action who claimed amounts allegedly due under a slot charter-party. The owners of the Vessel did not enter an appearance and, on 27 August 2009, the plaintiff applied for judgment and for an order for the sale of the Vessel.

On 11 September 2009, DJL intervened in the action and, some two weeks later, it applied for the arrest of the Vessel to be set aside. As a result, the application for the sale of the Vessel had to be held in abeyance. DJL’s setting aside application was successful initially, the arrest being set aside on 15 January 2010. The plaintiff appealed and its appeal was dismissed by Tan Lee Meng J (“the Judge”) on 18 May 2010. The plaintiff then applied for further arguments.

On 30 July 2010, Megastar ceased to be the agent of the Vessel and Sinoda Shipping Agency Pte Ltd (“Sinoda”) was appointed as Sheriff’s agent for the Vessel while it remained under arrest.

The further arguments were heard by the Judge on 19 October 2010 and the plaintiff succeeded in persuading the Judge to change the earlier decision and to allow the appeal. This meant that the arrest was not set aside. The plaintiff was then able to proceed with its application for a judicial sale of the Vessel. This application was granted on 12 January 2011.

At about the end of January 2011, Sinoda repatriated the original crew of the Vessel. This crew had been serving on the Vessel at the time of arrest and had continued to work on board throughout the arrest. It was replaced by a skeleton crew provided by Sinoda.

In March 2011, the Vessel was sold at a price of $1,810,000. The proceeds of sale were inadequate to cover all the claims against the Vessel. Megastar claimed that it had expended some US$497,081.23 for the maintenance and preservation of the Vessel whilst it was under arrest and should be reimbursed that amount. If Megastar’s expenditure was admitted as part of the Sheriff’s expenses, then what would be left for the plaintiff and the other claimants against the Vessel would be very little. Accordingly, Megastar’s application was resisted by the plaintiff and by the second intervener, Kim Tiong Enterprises Pte Ltd (“KTE”) who associated itself with the plaintiff’s arguments.

Basis of Megastar’s application

Megastar stated that during the period from 16 May 2009 to 30 June 2009 it had incurred expenditure for the Vessel under the following categories: Crew transport expenses. Crew’s medical expenses. Bunker supplies to and for the Vessel. Water supplies to and for the Vessel. Launch services for the Vessel. Crew’s wages. Megastar’s fees for services provided in attending to the Sheriff during arrest.

Megastar produced a letter dated 30 June 2009 from DJL directing it to look to the Sheriff for reimbursement of all expenses incurred for the maintenance and preservation of the Vessel during the period of her arrest. Megastar did not, however, contact the Sheriff at this time. It was only on 17 May 2010 (more than ten months later) that Megastar’s solicitors wrote to the Sheriff stating that Megastar had, with the Sheriff’s knowledge and consent, expended sums during the period of the arrest of the Vessel and MV Pontianak which were in the nature of Sheriff’s expenses. The letter asked for urgent confirmation that expenses were approved as Sheriff’s expenses. The Sheriff’s reply stated that Megastar had to intervene in the two admiralty actions and obtain court orders in order to be able to treat its expenses as Sheriff’s expenses.

Megastar’s position is that all the expenses it incurred were necessary expenses to keep the Vessel and the crew safe during the period of the arrest and would have been incurred by the Sheriff in any event. Megastar therefore argues that its claim is well founded and that the objections of the plaintiff and KTE were not reasonable.

It should be noted that during the first hearing in August last year, various factual queries were raised by the plaintiff in relation to Megastar’s application. As a result, Megastar asked for leave to file a further affidavit. Subsequently, both Megastar and the plaintiff filed further affidavits and these were before me at the second hearing of the application.

Basis of the plaintiff’s objections

Initially it appeared that the plaintiff was only questioning the quantum of Megastar’s claim. At the first hearing of the application, however, it became plain that the plaintiff also objected in principle to the claim.

The plaintiff’s grounds for opposing Megastar’s application are: Megastar’s conduct was wholly inconsistent with that of a Sheriff’s agent. It was, in essence, acting as the shipowner’s agent during the relevant period of the arrest. The equities of the case must be scrutinised since the proceeds from the Vessel would be seriously depleted if Megastar’s application is allowed. The equities of this case do not favour Megastar because there is little evidence that the shipwners were insolvent or had abandoned the Vessel. Moreover, Megastar had kept silent about its potential claims until a very late stage. In any event, Megastar’s claim should be reduced because its expenses were not necessary, reasonable or proper expenses to be incurred by the Sheriff in carrying out his duties. Megstar’s claim was questionable because: it appeared from the documents disclosed that part of Megastar’s claim relating to crew wages and disbursements were cash advances in the nature and form of loans from Megastar to DJL; there was evidence that DJL or another third party was putting Megastar in funds to bear the expenses; and Megastar had been reimbursing a third party for crew wage expenses.

The law

Generally speaking, a ship’s agent who incurs expense to provision, maintain and preserve a vessel has a contractual claim against the owners of the vessel and an admiralty claim against the res itself which can be enforced by arrest. Once the vessel is arrested, however, the agent’s claim enjoys no special priority and ranks pari passu with those of other statutory lienees. This applies whether the services provided to the vessel took place while the vessel was trading or after it was arrested. However, if the services are provided to a vessel under arrest at the behest of the sheriff, or pursuant to an order of court authorising the same, the costs of such services will rank as sheriff’s expenses and will enjoy priority above all other claims against the ship.

Even if the Sheriff has not given prior authorisation for the expenditure to be incurred, he may adopt those expenses as Sheriff’s expenses thereby conferring priority on them. In The Aquarius III [2002] 2 SLR(R) 347 (“The Aquarius III”), the interveners, the crew of the vessel, applied for an order that the crew’s post-arrest wages and disbursements be treated as Sheriff’s expenses. The court allowed the application, holding that the Sheriff’s agents had adopted the crew (at [50]):

[They] knew the requirement of the relevant regulation [of minimum manning of an arrested vessel], as must the Sheriff. They were content to let the interveners stay on board to meet the requirement ...

I was of the view that the interveners had effectively been adopted by ... the agent of the sheriff, to meet the requirements, and it did not lie in the mouth of [the sheriff’s agent] to suggest otherwise.

In certain situations, the court will allow certain expenses incurred in respect of an arrested vessel to rank as Sheriff’s expenses, even though the Sheriff has not...