The "PWM Supply" ex "Crest Supply 1"

• Jurisdiction: Singapore
• Judge: Tan Lee Meng SJ
• Judgment Date: 23 June 2016
• Neutral Citation: [2016] SGHC 117
• Plaintiff Counsel: Christopher Anand s/o Daniel, Ganga d/o Avadiar and Harjean Kaur (Advocatus Law LLP)
• Docket Number: Admiralty in Rem No 26 of 2011
• Date: 23 June 2016
• Hearing Date: 23 May 2016,22 November 2012,17 July 2012,27 July 2015,20 July 2012,23 November 2012,18 July 2012,04 March 2013,07 March 2013,16 July 2012,01 July 2015,03 July 2015,19 July 2012,02 July 2015
• Subject Matter: Action in rem,Rules in awarding,Loss of chance,Admiralty jurisdiction and arrest,Proof of actual damage,Damages,Admiralty and Shipping
• Year: 2016
• Citation: [2016] SGHC 117
• Defendant Counsel: Lawrence Teh Kee Wee, Loh Jen Wei and Khoo Eu Shen (Dentons Rodyk & Davidson LLP)
• Court: High Court (Singapore)
• Published date: 05 August 2016

Tan Lee Meng SJ:

The plaintiff, A.K.N. Marine Supplies Pte Ltd (“AKN Marine”), instituted Admiralty in Rem No 26 of 2011 (“the present action”) against the “PWM Supply” (“the Vessel”) to recover the cost of services rendered and expenses incurred as the ship manager and/or agent of the Vessel. The defendant, PWM Singapore Pte Ltd (“PWM”), was the owner of the Vessel before she was sold by the Sheriff after Deutsche Bank Nederland NV (“Deutsche Bank”), the bank that financed the purchase by PWM of the Vessel, applied for the judicial sale of the Vessel. PWM, who contended that the judicial sale would not have been necessary if AKN Marine had not impeded its efforts to sell the Vessel to Kith Marine & Engineering Pte Ltd (“Kith Marine”) at a price higher than that obtained in the Sheriff’s sale, counterclaimed against AKN Marine for damages, which included the difference between the price offered by Kith Marine and that obtained in the Sheriff’s sale.

The trial was completed three years ago in March 2013 and the parties were directed to file written submissions by 15 April 2013. However, before the written submissions were filed, PWM’s directors passed a resolution on 26 March 2013 to have the company wound up voluntarily and on 5 April 2013, Borrelli Walsh Pte Ltd was confirmed as PWM’s liquidator. This resulted in a statutory stay of the proceedings pursuant to section 299(2) of the Companies Act (Cap 50, 2006 Rev Ed).

On the liquidator’s application, the stay of proceedings was lifted on 24 September 2013. After the lifting of the stay, matters were held in abeyance for more than 16 months as AKN Marine discharged three sets of solicitors before appointing their present solicitors, Advocatus Law LLP, who played no part in the trial in 2013.

Even after the closing submissions were finally filed, AKN Marine and the liquidator took some time to try and resolve their differences in order to reach a settlement. However, by November 2015, the court was informed that no settlement could be reached.

Background

AKN Marine, which carries on business as, inter alia, ship managers and/or agents, is part of the AKN Group of Companies (“the AKN Group”) set up by Mr Jamalediin Emtiyaz (“Jamal”) in several countries. According to AKN Marine, the AKN Group is run like a family business and consists of companies set up by Jamal, who provides the funds to set up a company within the group and appoints one of his family members to run it. It was asserted that, as a general rule, Jamal would hold 85% of the shares in the companies he set up while the remaining 15% would be allotted to the family member asked to run the company in question to motivate that family member to treat that company as his own in order to maximise profits.

AKN Marine’s directors are Jamal and his cousin, Mr Emtiaz Hamed (“Hamed”). Hamed, the present chief executive officer (“CEO”) of AKN Marine, holds 15% of the shares of AKN Marine while Jamal holds the remaining 85%.

At the material time, PWM’s directors were Jamal’s brother, Mr Mark Nezam Emtiaz (“Mark”), and Mr Foroughmand Arabi Amir Yadollah (“Arabi”). Arabi was formerly associated with AKN Marine. He was a director of AKN Marine and was also its CEO from 2005 until he was removed from his positions in AKN Marine in 2010.

Although the present action ostensibly involves a dispute between two companies, it has its roots in an extremely bitter feud between the two siblings, Jamal and Mark. Jamal claims to have given Mark around US$13.16m to set up and operate Pacific World Marine LLC (“Pacific World”), a United States company that owns PWM. Jamal’s claim to 85% of the shares of PWM and its parent company, a claim denied by Mark and PWM, is not the subject matter of this suit. Nonetheless, Jamal’s attempt to get Mark to acknowledge his 85% shareholding in PWM should be borne in mind for a more complete picture of the savagery of the dispute between the two brothers in this suit.

The background of the dispute between AKN Marine and PWM, shorn of details, is as follows. On 10 February 2006, AKN Marine agreed to purchase the Vessel, which was then named “Crest Supply 1”, from Pacific Crest Pte Ltd (“Pacific Crest”), for US$4.5m. On 24 March 2010, the agreement for the sale and purchase of the Vessel was amended to reflect the Vessel’s change of name from “Crest Supply 1” to “PWM Supply”.

On 28 April 2006, PWM was incorporated. On that day, AKN Marine agreed to let PWM take over the purchase of the Vessel from Pacific Crest for US$4.5m. A novation agreement dated 20 June 2006 was executed by the relevant parties to have PWM recorded as the purchaser of the Vessel.

To finance the purchase of the Vessel, PWM entered into a credit agreement for a loan of US$2.7m (“the loan”) from Hollandsche Bank-Unie NV (“Hollandsche Bank”), which was subsequently acquired by Deutsche Bank. Under the agreement with Hollandsche Bank, two of Jamal’s companies within the AKN group, namely, A.K.N. World Trade Pte Ltd (“AKN World”) and A.K.N. Offshore Supplies & Services Pte Ltd (“AKN Offshore”), assumed joint and several liability for the loan to PWM. This showed how closely the AKN Group and PWM worked together before Jamal and Mark parted company.

As the loan of US$2.7m was insufficient to pay for the Vessel, which cost US$4.5m, PWM also took a loan from Mr Hesamedin Emtiaz (“Hesam”), who is the brother of Jamal and Mark. Apparently, Hesam transferred around US$2.1m to PWM to pay for part of the purchase price for the Vessel as well as for bunkers and additional charges.

On 16 May 2006, by way of a BIMCO Standard Ship Management Agreement (“the Management Agreement”), PWM appointed AKN Marine as the Vessel’s managers with effect from 1 June 2006. The agreed annual management fee was US$110,400, to be paid in monthly instalments of US$9,200. Under the Management Agreement, AKN Marine undertook to deal with, among other things, crew management, technical management, insurance and the future sale of the Vessel.

Earlier on, on 8 March 2006, by way of a BIMCO Standard Ship Agreement, AKN Marine had sub-contracted the management of the Vessel to Strato Maritime Services Pte Ltd (“Strato Maritime”). The sub-contract (the “Strato Agreement”) was entered into in anticipation of the Management Agreement, which was concluded on 16 May 2006. Under the Strato Agreement, Strato Maritime was entitled to US$8,000 per month for its management services.

On 23 June 2006, the Vessel was registered in PWM’s name and renamed “PWM Supply”.

As ship managers of the Vessel, Strato Maritime, incurred expenses and paid for disbursements. It issued a monthly invoice to AKN Marine, accompanied by a summary of the expenses, purchase orders, invoices from others and bunker delivery notes. AKN Marine would pay Strato Maritime the sums claimed and present the same documents to PWM for reimbursement. This was the practice from 2006 to 2012.

On 26 November 2010, AKN Marine’s Finance Manager, Mr Chris Yeo Wei Hock, who was then also a director of PWM, emailed Mark to ask for the payment by the end of November 2010 of US$191,426.28 allegedly owed by PWM to AKN Marine. A Statement of Accounts tabling the expenses incurred by the ship managers was enclosed.

PWM replied that it needed time to scrutinise the accounts submitted by AKN Marine and clarifications were sought on alleged discrepancies in the said accounts. PWM also wanted AKN Marine to forward supporting documents for the disbursements. Between May 2010 and April 2011, AKN Marine’s invoices in relation to the management of the Vessel were not paid by PWM despite repeated requests for payment.

In the meantime, charter rates had dropped drastically and the Vessel was no longer on charter as from September 2010. PWM decided to sell the Vessel but the response from potential buyers was poor. By January 2011, the Vessel remained unsold.

On 16 January 2011, AKN Marine’s Hamed emailed Mark and said that Jamal intended to arrest the Vessel unless PWM paid the amount owed to AKN Marine. Hamed suggested that the dispute between the parties be resolved by Mark agreeing to transfer 85% of the shares of PWM to Jamal. This proposal was not accepted by Mark.

PWM asked Deutsche Bank to defer the payment of the January 2011 instalment payment. On 1 February 2011, Deutsche Bank rejected the request for deferment and gave PWM two months to sell the Vessel.

On 2 February 2011, Mark emailed Hamed to say that if AKN Marine tried to arrest the Vessel, Deutsche Bank would foreclose on the loan facility and a distressed sale of the Vessel would leave insufficient funds for PWM to pay AKN Marine.

On 7 February 2011, AKN Marine commenced the present action to recover the monies claimed by it from PWM. However, the writ was not served at this juncture.

On 21 February 2011, Oon & Bazul LLP (“O & B”), acting on behalf of both Jamal and the AKN Group, wrote to Mark to assert that all the funds for setting up, maintaining and operating PWM had been provided by Jamal and to demand that Mark transfer 85% of the shares of PWM to Jamal on the ground that Mark held 85% of the shares of PWM on trust for Jamal.

On 21 February 2011, PWM entered into a Memorandum of Agreement (“MOA”) with Kith Marine for the sale of the Vessel at US$3.2m. The MOA specifically stated that Kith Marine had the power to act on behalf of Wayneridge Inc Fze. Under the MOA, Kith Marine was entitled to inspect the Vessel, put four of its representatives on board the Vessel to familiarise themselves with the Vessel and conduct sea trials. The stated date for delivery of the Vessel to the buyer under the MOA was between 25 and 28 February 2011. Kith Marine paid a deposit of US$320,000 to PWM.

PWM alleged that AKN Marine made numerous efforts to obstruct the sale of the Vessel to Kith Marine by failing, refusing and/or neglecting to give it access to the Vessel to enable Kith...