The "STX Mumbai"

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 27 June 2014
• Neutral Citation: [2014] SGHC 122
• Published date: 31 July 2015
• Docket Number: Admiralty in Rem No 204 of 2013 (Registrar’s Appeal No 297 and 298 of 2013)
• Year: 2014
• Court: High Court (Singapore)
• Hearing Date: 19 May 2014,08 November 2013,21 February 2014
• Plaintiff Counsel: Navinder Singh and Amirul Hairi (Navin & Co LLP)
• Defendant Counsel: Moses Lin and Jeremy Leow (Clasis LLC)
• Citation: [2014] SGHC 122

Belinda Ang Saw Ean J: Introduction

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.

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

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 concluded on 16 May 2013 by STX Corporation, an entity that had placed the order for the bunkers acting as agent for the defendant.

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.

It is noteworthy that the Bunker Supply Agreement did not provide for prescribed events of default designed to trigger early termination or an acceleration of the defendant’s unilateral obligation to pay before the fixed date of 16 June 2013. The plaintiff’s approach taken in argument was that the fixed payment date was overridden by a set of circumstances sufficient to create or give rise to a semblance of refusal to pay as amounting to a repudiatory breach. The alternative ground was that the insolvency of STX Pan Ocean Pte Ltd (“STX Pan Ocean”) rendered or made it impossible for the defendant to make payment on 16 June 2013, and as an anticipatory breach of the payment obligation had occurred, the plaintiff was allowed to and did treat the Bunker Supply Agreement as discharged. In support of this “impossibility of performance” ground, it relied on Ship and Bunker’s news report of 12 June 2013 as well as STX Corporation’s failure to make payment in relation to STX Alpha on 10 June 2013.

The plaintiff argued that the doctrine of anticipatory breach was triggered on either ground to establish a valid cause of action on 14 June 2013. It was thus entitled to arrest STX Mumbai even though the fixed payment date of 16 June 2013 had not expired.

I now come to the set of circumstances that the plaintiff said formed the basis of repudiation by anticipatory breach on the part of the defendant − they concerned the financial difficulties of STX Pan Ocean and the STX Group of Companies (“STX Group”) that led the plaintiff to believe that the defendant would not pay on 16 June 2013. It is the plaintiff’s pleaded case that the defendant, STX Pan Ocean and STX Corporation were all part of the STX Group. At the relevant time, STX Pan Ocean was insolvent.

Besides the STX Mumbai, STX Corporation also contracted for the supply of bunkers on behalf of the registered owners of four other vessels, namely, STX Alpha, STX Delicata, Asita Sun and Cape Race. In relation to STX Alpha, the plaintiff did not receive payment of the bunker price totalling US$250,353.58 on the due date of 10 June 2013. On 11 June 2013, the plaintiff sent an e-mail to STX Corporation demanding prompt payment of the price of bunkers supplied to STX Alpha. STX Corporation was notified that the plaintiff was prepared to arrest the STX Alpha if payment was not received by 14 June 2013.

The plaintiff subsequently learnt from Ship & Bunker’s news report dated 12 June 2013 that STX Pan Ocean’s financial difficulties caused it to file for bankruptcy protection in South Korea on or about 10 June 2013. The same news report covered the arrest of the vessel New Ambition in Seattle for unpaid bunkers in excess of US$1m; that the particular bunker supplier’s arrest of New Ambition was made possible because of a contractual “acceleration of payment” clause that made all invoices immediately payable in the event of “a change in the financial circumstances of the buyer that might reasonably jeopardise their ability to pay.”¹ As stated, there was no similar acceleration of payment clause in the Bunker Supply Agreement.

On 13 June 2013, the plaintiff demanded immediate payment of bunker invoices (before their fixed due dates) in respect of the invoices relating to bunkers supplied to the STX Mumbai, STX Delicata, Asita Sun and Cape Race. Collectively, the plaintiff sought global payment of US$2,845,987.78 by 13 June 2013, failing which it would accept the registered owners’ non-payment of the respective invoice sums as repudiation of the contracts arising from the registered owners’ “anticipatory breaches”.²

Notably, the e-mail of 13 June 2013 attaching the plaintiff’s letter of demand to STX Corporation in relation to the STX Mumbai was sent at 5.36 pm (which was 6.36 pm in Seoul, South Korea). The demand for payment in respect of the STX Mumbai was addressed to STX Corporation and the defendant. However, the e-mail was only sent to STX Corporation in Seoul and not to the defendant.

In the demand letters, the plaintiff highlighted the failure to promptly make payment on 10 June 2013 for the bunkers supplied to STX Alpha and STX Pan Ocean’s purported financial difficulties (see [9] above) as grounds for claiming anticipatory breach, thereby allowing them to override the fixed payment dates to call for immediate payment. As a reminder, apart from STX Alpha, no other payments were contractually due: the fixed payment date under the Bunker Supply Agreement in relation to STX Mumbai was 16 June 2013 and the fixed payment date was 23 June 2013 in respect of the Cape Race, STX Delicata and Asita Sun.

No payment was received on 13 June 2013 from the defendant. It was not surprising seeing that the e-mail was despatched to the offices of STX Corporation after 6.36pm Seoul time. On the morning of 14 June 2013, the plaintiff issued in rem proceedings and arrested STX Mumbai in the afternoon. On 22 July 2013, STX Mumbai was released after the defendant provided security for the plaintiff’s claim.

I pause here to mention that only STX Delicata was owned by the defendant and STX Pan Ocean was listed as “group owner” of STX Delicata. Not only was STX Pan Ocean not listed as “group owner” of STX Alpha, Cape Race and Asita Sun, the defendant was also not the owner of these three vessels.

According to the plaintiff, its Sea-web ship search results listed STX Pan Ocean as “group owner” of STX Mumbai. The significance of STX Pan Ocean’s status as “group owner” was not entirely developed in argument seeing that the arrest affidavit singled out the defendant as the person liable in personam and the beneficial owner of the STX Mumbai. Its Statement of Claim simply averred that the “STX Mumbai is related to STX Pan Ocean”. If anything, the “group owner” structure without more was, at best, a parent company with its subsidiaries carrying on their businesses as separate legal personalities to the parent company and hence can sue and be sued in their own right. This view is reinforced by the plaintiff’s case against the defendant as the registered owner of STX Mumbai and person liable in personam to pay for the bunkers supplied to STX Mumbai. There was no attempt to lift the corporate veil to legally implicate STX Pan Ocean in any way.

The basis of the defendant’s striking out application

The defendant took issue with some of the factual assertions. For instance, STX Corporation was not its agent and that the STX Mumbai was, at all relevant times, demised chartered to STX Pan Ocean. The bunkers were ordered through a chain of bunker supply contracts between STX Pan Ocean, STX Corporation and the plaintiff. As such, there was arguably no contractual relationship between the plaintiff and the defendant. Furthermore, the defendant never received notice demanding payment of bunkers on 13 June 2103. Above all, there was no valid cause of action on 14 June 2013.

Nonetheless, the defendant sought to strike out this in rem action on the footing that even if the factual background had the legal consequences alleged by the plaintiff, the claim was still bound to fail because insolvency as a matter of law could not amount to anticipatory breach and the plaintiff had no valid cause of action on 14 June 2013 to seek early payment or to recover damages equivalent to the invoice sum. Put another way, the defendant contended that that the plaintiff’s claim of anticipatory breach was legally unsustainable even assuming that STX Pan Ocean was insolvent as at 14 June 2013. Accordingly, the in rem action being legally unsustainable was bound to fail.

For the purposes of the striking out application, the defendant submitted that payment for the bunker supplied to STX Mumbai was not due and owing on 14 June 2013. Thus, the in rem action was wrongly constituted. In addition, the plaintiff had acted in bad faith when it arrested the STX Mumbai.

It is important to bear in mind the assumptions that were to be made for the striking out application that was confined to the legal...