The 'Rainbow Spring'

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JA
• Judgment Date: 29 July 2003
• Neutral Citation: [2003] SGCA 31
• Docket Number: Civil Appeal No 119 of 2002
• Date: 29 July 2003
• Year: 2003
• Published date: 17 December 2003
• Plaintiff Counsel: Kenneth Lie, Tan Hui Tsing (Joseph Tan Jude Benny)
• Citation: [2003] SGCA 31
• Defendant Counsel: Tan Kian Sing, Loh Wai Yue (Rajah & Tann)
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether plaintiffs concluded charterparty with shipowners or another party,Action in rem,Admiralty and Shipping,Whether defendant liable in personam for claim,Agency,Undisclosed,Admiralty jurisdiction and arrest,Principal,ss 3(1)(h), 4(4) High Court (Admiralty Jurisdiction) Act (Cap 123, 1985 Rev Ed),Duty of disclosure,When charterparty concluded,Contract,Relevant principles in determining whether defendant is undisclosed principal,Meaning of "clean fixed" in shipping practice,Whether s 4(4) of the High Court (Admiralty Jurisdiction) Act satisfied,Practice and procedure of action in rem,Whether discretion exists to set aside warrant of arrest on independent ground of breach of duty to disclose,Formation,Whether plaintiff has power to issue warrant of arrest under O 70 r 4 Rules of Court (Cap 322, R 5, 1997 Rev Ed)

Delivered by Judith Prakash J

Introduction

1 The respondents in this appeal are Rainbow Spring Shipping Ltd Inc (‘RS Shipping’), the eponymous owners of the vessel Rainbow Spring. The appellants are Admiral Chartering Ltd (‘Admiral’) who time chartered the vessel in January 1998. One of the main issues in the appeal was whether Admiral had chartered the vessel from RS Shipping or from another company called Oriental Shipway Inc (‘Oriental’).

2 The issue arose in this way. In May 2000, pursuant to a voyage charter between Admiral as disponent owner and a sub-charterer, the vessel carried fertiliser from Chile to ports in South America. The cargo was discharged in a damaged condition and the sub-charterer subsequently made claims against Admiral. In October 2001, Admiral filed an in rem writ in the High Court against the vessel claiming that it was entitled to be indemnified by the owners of the vessel against the sub-charterer’s claim as this had arisen from the owners’ breach of the main time charter. Shortly thereafter, Admiral applied for the arrest of the vessel. The vessel was arrested on 31 December 2001.

3 On 14 January 2002, RS Shipping applied for an order dismissing this action and for a further order that the warrant of arrest be set aside. The common ground of both applications was that the requirements for in rem jurisdiction over the vessel as set out in s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123) (‘the Act’) had not been complied with. This was because RS Shipping was not the party who would be liable in personam for the damage sustained by Admiral since it was not the party with whom Admiral had contracted under the time charterparty. As an alternative it was asserted that the warrant of arrest at least should be set aside because Admiral had failed to disclose material facts in the affidavit that it had filed in support of the issue of the warrant of arrest.

4 The assistant registrar who heard the application found in favour of Admiral on the jurisdiction point. She, however, set aside the warrant of arrest on the ground of material non-disclosure. In addition, she ordered Admiral to pay damages for wrongful arrest. Both parties appealed against her decision.

5 The appeal was heard by Belinda Ang, JC. The judge decided that Admiral had failed to demonstrate an arguable case that RS Shipping was the party who would be liable in personam for Admiral’s claim. In her view, the evidence established that the time charter in respect of the Rainbow Spring had been made between Oriental as owners of the vessel and Admiral as charterers. Accordingly, Admiral was not able to invoke the court’s admiralty jurisdiction against the vessel under s 4(4) of the Act. On this basis, the judge upheld the setting aside of the warrant and, additionally, set aside the writ. The judge considered the alternative ground of non-disclosure and found that it had not been made out. Finally, she held that it could not be said that the arrest of the vessel was so obviously groundless as to amount to mala fides or crassa negligentia implying malice. Accordingly, the decision of the assistant registrar on wrongful arrest was reversed.

6 Admiral appealed. We dismissed the appeal and now give our reasons.

Background facts

7 RS Shipping is a company incorporated in Panama. At the time of its arrest, the vessel was registered at the Port of Hong Kong and RS Shipping was its registered owner. Oriental is a company incorporated in Liberia. Kingstar Shipping Limited (‘Kingstar’) is a Hong Kong company which acted as the agent of RS Shipping and Oriental in relation to operational matters arising in connection with the vessel including the fixing of charters for the vessel. The person who tied these disparate corporate entities together was one Mr Tam Kwong Lim who was simultaneously a director of RS Shipping, a director and shareholder of Kingstar, and also a director and shareholder of Oriental.

8 By way of a charterparty made on 25 November 1997, RS Shipping bareboat chartered the vessel to Emerald Shipping Corporation, a Filipino company that appeared not to be related to RS Shipping. The purpose of this bareboat charterparty was to enable the vessel to fly the Filipino flag and be manned by a Filipino crew. On 5 January 1998, the vessel was entered in the Register of Philippines Vessels at the Port of Manila and the certificate of vessel registry issued by the Government of the Philippines named Emerald Shipping Corporation as its ‘owner/operator’.

9 In the meantime, negotiations for the charter of the vessel had been going on between Kingstar and a company called Rodskog Shipbrokers Ltd (‘Rodskog’), charter brokers acting on Admiral’s behalf. These negotiations started in November 1997 and were carried on by fax and telex. By January 1998, the negotiations were almost complete. In a fax dated 8 January 1998, Kingstar informed Rodskog that the owners agreed on various outstanding terms subject to certain proposed additional wording and that contracting owners in respect of the charterparty would be Oriental. The fax stated:

…

Above is our best improvement after a lot of hard work internally and with our banker. Pls urge chtrs to confirm so we can go ahead making all final preparations.

Pls note owrs on c/p shall be “Oriental Shipway Inc.”

Hope this will conclude 2 months of hard negotiation.

On 9 January 1998, Rodskog replied by telex stating:

Very pleased we are now clean fixed

Charterers looking forward to a pleasant co-operation with owners and vessel

We have noted owners style for c/p being “Oriental Shipway Inc” (where registered pse) but please full style/address of managers to whom hire statements etc shall be mailed …

10 A time charter contract in the New York Produce Exchange (‘NYPE’) form was thereafter executed in respect of the charter of the vessel to Admiral. This document is dated 8 January 1998 and on the first page it is expressed to be made between ‘ORIENTAL SHIPWAY INC., LIBERIA, Owners of the good Panama/ Philippines flag Motorship “Rainbow Spring” … and ADMIRAL CHARTERING LTD., Charterers of the City of Monrovia …’. The charter was to be for a period of three years with the charterers having an option to extend it for a further year. Delivery was to take place about the end of January 1998. The execution portion was found at the bottom of the third page of the NYPE form. Appearing there is a stamp stating ‘For and on behalf of RAINBOW SPRING SHIPPING LIMITED INC by …..…’ and on this appears the signature of Mr Tam. Beside that appears the signature of the party executing the charter for and on behalf of Admiral.

11 By affidavit Mr Tam explained that the presence of RS Shipping’s stamp on the charterparty was a clerical error. He said that the document was sent to Kingstar on 16 January 1998 and he signed it on 19 January 1998 as authorised signatory of Oriental. He did not notice when he did so that the wrong stamp had been affixed to the document by a member of his secretarial staff.

12 Finally, for completeness, it should be said that on 20 January 1998, Emerald Shipping entered into a time charter with Oriental, also on the NYPE form. The terms of this charter were substantially the same as those of the time charter with Admiral. The charter period was three years with an extension, at charterer’s option of a further year, and delivery was to take place at the end of January 1998.

The issues

13 The main issue argued in the appeal by Admiral was whether RS Shipping was the party who would be liable in personam under the charterparty dated 8 January 1998. The questions that had to be considered were:

(1) whether the charter contract had been concluded by the exchange of correspondence on 8/9 January; and

(2) whether at all material times Oriental was acting as agent for RS Shipping who was the undisclosed principal.

The second question was one that was not argued before the judge and Admiral sought, and obtained, our leave to introduce this new argument at the appeal stage.

14 We also had to consider the issue of non-disclosure and the effect that such non-disclosure if established would have on the warrant of arrest. This was because in its respondent’s case, RS Shipping contended that, in the alternative, the arrest should be set aside on the ground of non-disclosure of material facts on the part of Admiral when applying for the arrest.

First issue – when was the charter contract made?

15 On the first issue, the relevant findings made by Belinda Ang JC were as follows. Noting the established position that the burden was on Admiral to establish that RS Shipping was the person who was likely to be liable in personam on the claim, she followed The Opal 3 [2002] 1 SLR 585 in stating that this burden would be discharged if Admiral showed that it had an arguable case. She then held that the charter contract was concluded by the exchange of correspondence between the agents of the respective parties before the formal charter document was drawn up and signed. In this connection, she was satisfied that by its telex of 9 January 1998, Rodskog had confirmed conclusion of the charter on behalf of Admiral by using the phrase ‘VERY PLEASED WE ARE NOW CLEAN FIXED’. The judge noted that ‘The expression “clean fixed” in chartering parlance is used to signify a binding charterparty contract or concluded fixture’. At that stage, Oriental had been named as the contracting party and this had been accepted by Admiral. RS Shipping’s stamp and signature on the contract document could not change that position.

16 On appeal, Admiral accepted that it had the burden of showing there was an arguable case that RS Shipping would be liable. It argued that the finding that the contract had been concluded by the exchange of correspondence on 8 and 9 January 1998 was erroneous for four reasons:

(1) the expression ‘clean fixed’ did not mean that there was a binding charterparty;

(2) in its telex,...