The ‘STX Mumbai’

• Jurisdiction: Singapore
• Judgment Date: 27 June 2014
• Date: 27 June 2014
• Docket Number: Admiralty in Rem No 204 of 2013 (Registrar's Appeals Nos 297 and 298 of 2013)
• Court: High Court (Singapore)

The ‘STX Mumbai’

[2014] SGHC 122

Belinda Ang Saw Ean J

Admiralty in Rem No 204 of 2013 (Registrar's Appeals Nos 297 and 298 of 2013)

High Court

Admiralty and Shipping—Admiralty jurisdiction and arrest—Wrongful arrest—No cause of action at time of arrest—Whether arrest of vessel was wrongful

Civil Procedure—Striking out—Striking out of action in rem under O 18 r 19 Rules of Court (Cap 322, R 5, 2006 Rev Ed) or court's inherent jurisdiction—Shipowner applying to strike out bunker supplier's action—Whether bunker supplier had reasonable cause of action—Order 18 r 19 Rules of Court (Cap 322, R 5, 2006 Rev Ed)

Contract—Discharge—Anticipatory breach—Bunker supplier demanding immediate payment of debt before due date following news of insolvency—Whether insolvency amounted to anticipatory breach—Contract—Discharge—Anticipatory breach

Contract fully performed by bunker supplier and unilateral obligation was for shipowner to make payment on fixed date—Whether anticipatory breach applied to executed contracts

The defendant's vessel was arrested by the bunker supplier on 14 June 2013, two days before a debt owed to it would become due, pursuant to an in rem writ filed on the same day (‘the relevant time’). The plaintiff's in rem action was based on the defendant's anticipatory breach of an obligation to pay the price of bunkers supplied to the vessel. To establish its case of anticipatory breach, it argued that the fixed payment date was overridden by circumstances that gave rise to a renunciation of the obligation to make payment. The plaintiff claimed that the non-receipt of payment on 13 June 2013 following a letter of demand for immediate payment sent on the same day was indicative of the defendant's intention not to make payment on the due date. The alternative ground was that the alleged insolvency of a holding company of the defendant, STX Pan Ocean Pte Ltd (‘STX Pan Ocean’), rendered the defendant incapable of making payment on the due date.

In this action, the defendant applied to strike out the plaintiff's claim and set aside the warrant of arrest on the ground that no valid cause of action arose at the relevant time. The main argument was even if the factual allegations were assumed in favour of the plaintiff, it still had no valid cause of action in seeking early payment because insolvency as a matter of law could not amount to anticipatory breach.

In addition, the defendant applied for damages for wrongful arrest to be awarded arguing that the plaintiff had acted in bad faith in arresting the vessel.

Held, allowing the application:

(1) A claim would be legally unsustainable if it was clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offered to prove he would not be entitled to the remedy that was sought (The Bunga Melati 5[2012] 4 SLR 546): at [24] .

(2) A repudiatory breach entitled the innocent party a right to terminate the contract. Repudiatory breach arose where a party by its words or conduct renounced its contractual obligations. It might also be committed when one party acted in such a way as to make it impossible for it to perform its contractual obligations. Both scenarios constituted anticipatory breach if they occurred before the arrival of the time of performance: at [26] to [30] .

(3) Insolvency did not by itself repudiate the contract. The exception was where the contract provided for insolvency as an event of default or where an acceleration of payment clause was available: at [37] and [53] .

(4) The plaintiff was not entitled to rely on STX Pan Ocean's insolvency for the purposes of issuing the letter of demand for early payment. First, short of lifting the corporate veil, insolvency could not be imputed to the defendant which was a separate legal entity. Secondly, even if the defendant were insolvent, an act of insolvency was insufficient to evince an intention not to perform the contract. Since the letter of demand was without legal basis, the non-receipt of payment could not be construed as a renunciation of the defendant's contractual obligation: at [32] to [43] .

(5) The plaintiff's alternative ground based on the defendant's prospective inability to make payment by reason of STX Pan Ocean's insolvency was also legally unsustainable: at [44] .

(6) An insolvent party might still be capable of completing a contract. This principle applied to both executed and executory contracts alike. Impossibility of performance might have arisen from a running contract that required continuing performance over a period of time, but the present case was clearly distinguishable as the defendant had only an obligation to make payment on a fixed date: at [45] to [50] , [54] and [55] .

(7) The plaintiff acted with bad faith in obtaining a warrant of arrest when it had no valid cause of action. The tight deadline was designed to create a semblance of refusal to pay. There was also wrongful continuance of arrest. An inquiry as to the damages for wrongful arrest was accordingly ordered: at [76] to [84] .

[Observation: Executed contracts were capable of forming an exception to the doctrine of anticipatory breach. Where one party had fully performed his obligations under the contract and the only obligation was for the other party to make payment at a future date, the innocent party might nevertheless have to wait for the arrival of the time of performance before taking action. On balance, there was a strong case for the exception to apply in the present case: at [54] to [74] .]

Agra Bank, Ex parte; Re Barber & Co (1870) LR 9 Eq 725 (refd)

Agra Bank, Re; Ex parte Tondeur (1867) LR 5 Eq 160 (refd)

Asphaltic Wood Pavement Co, Re; Lee & Chapman's Case(1885) 30 Ch D 216 (distd)

Brown Paper Mill Co v Irvin 146 F 2 d 232 (8th Cir, 1944) (refd)

Chalmers, Ex parte; Re Edwards (1873) LR 8 Ch App 289 (refd)

Foran v Wight (1989) 168 CLR 385 (refd)

Goh Hooi Yin v Lim Teong Ghee [1990] 3 MLJ 23 (distd)

Hochster v De la Tour (1853) 2 El & Bl 678; 118 ER 922 (refd)

Jennings' Trustee v King [1952] Ch 899 (refd)

Le Tarte v W Side Dev 855 A 2 d 505 (N H, 2004) (refd)

Mackenzie v Rees (1941) 65 CLR 1 (refd)

Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR (R) 663; [2008] 1 SLR 663 (folld)

Melanson v Dominion of Canada General Insurance Co [1934] 2 DLR 459 (refd)

Morgan v Bain (1874) LR 10 CP 15 (refd)

Moschi v Lep Air Services Ltd [1973] AC 331 (not folld)

Pitts v Wetzel 498 S W 2 d 27 (Tex Civ App - Austin, 1973) (refd)

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 57 ALR 609 (refd)

Rawson v Hobbs (1961) 107 CLR 466 (refd)

RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR (R) 413; [2007] 4 SLR 413 (folld)

Shanti Kant Jinghan v Owners or other persons interested in the vessel ‘Indera Pertama’[1989] 3 MLJ 58 (refd)

Sharjade Pty Ltd v The Commonwealth of Australia [2009] NSWCA 373 (refd)

Stapleton, Ex parte; Re Nathan (1879) 10 Ch D 586 (refd)

Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 (refd)

Tan Hock Keng v L & M Group Investments Ltd [2002] 1 SLR (R) 672; [2002] 2 SLR 213 (distd)

Bunga Melati 5, The [2012] 4 SLR 546 (folld)

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

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

Kiku Pacific, The [1999] 2 SLR (R) 91; [1999] 2 SLR 595 (refd)

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

Universal Cargo Carriers Corp v Citati [1957] 2 QB 401 (refd)

Vasiliy Golovnin, The [2008] 4 SLR (R) 994; [2008] 4 SLR 994 (folld)

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 (refd)

Zdan v Hruden (No 2) (1912) 4 DLR 255 (refd)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 12 r 7, O 18 r 19

Navinder Singh and Amirul Hairi (Navin & Co LLP) for the plaintiff

Moses Lin and Jeremy Leow (Clasis LLC) for the defendant.

Belinda Ang Saw Ean J

Introduction

1 In this in rem action, the plaintiff, Transocean Oil Pte Ltd, based its case on an anticipatory breach of a unilateral obligation to pay money at a fixed date. The question in Registrar's Appeal No 297 of 2013 (‘RA 297’) was whether the ingredients of a repudiatory breach were present so that the plaintiff was right to treat the contract as repudiated as a result of an anticipatory breach of contract. As the competing arguments unfolded, the circumstances relied upon by the plaintiff did not give rise to a repudiatory breach by the defendant, POS Maritime VX SA and, hence, the doctrine of anticipatory breach was not triggered. Accordingly, the defendant succeeded in striking out this in rem action on the ground that there was no valid cause of action at the time the in rem writ was filed on 14 June 2013. For these reasons, the plaintiff's appeal in RA 297 against the assistant registrar's striking out order was dismissed on 19 May 2014.

2 As a consequence of the striking out of the in rem writ, the defendant's cross-appeal in Registrar's Appeal No 298 of 2013 (‘RA 298’) that sought to set aside the warrant of arrest was allowed. Furthermore, an inquiry as to damages for wrongful arrest was ordered on appeal.

The plaintiff's basis of the defendant's anticipatory breach

3 In this in rem action against the defendant as the registered owner of the vessel, STX Mumbai, the plaintiff claimed the price of bunkers supplied to the vessel on 18 May 2013 pursuant to a bunker supply agreement (‘Bunker Supply Agreement’) concluded on 16 May 2013 by STX Corporation, an entity that had placed the order for the bunkers acting as agent for the defendant.

4 By the terms of the sale, the price of the bunkers in the total sum of US$571,451.68 was payable on 16 June 2013. However, the plaintiff issued in rem proceedings two days earlier on 14 June 2013 and arrested the STX Mumbai on the same day.

5 It is noteworthy that the Bunker Supply Agreement did not provide for prescribed events of default...