The "Trade Resolve"

CourtHigh Court (Singapore)
JudgeChan Seng Onn JC
Judgment Date29 April 1999
Neutral Citation[1999] SGHC 109
Citation[1999] SGHC 109
Defendant CounselTimothy Tan and Mohamed Goush Marikan (Khattar Wong & Pnrs),Ho Meng Third (Chan Kwek & Chong)
Plaintiff CounselGoh Kok Leong and John Wang (Ang & Pnrs)
Published date19 September 2003
Docket NumberAdmiralty in Rem No 74 of 1999
Date29 April 1999
Subject MatterCarriage of goods by sea,Warrant of arrest,When court's admiralty jurisdiction considered to be invoked,Action in rem,Admiralty jurisdiction and arrest,Whether defendants can waive irregularity of service of writ and yet challenge validity of arrest,Whether arrest effected outside territorial waters of Singapore,Whether wrongful arrest,Lien on cargo for unpaid demurrage,Admiralty and Shipping

: The defendants, Transport Hellenic Inc, Panama, were the owners of the vessel Trade Resolve (`the vessel`). The plaintiffs, Kian Guan Industries Pte Ltd, were the holders of the bill of lading No 1 dated 23 October 1998, Fujairah (`bill of lading`) for 36,432.289 metric tonnes (35,856.787 litres) of off-specification fuel oil (`oil cargo`) loaded on board the vessel sometime in October 1998 at Fujairah for carriage to off port limits at Singapore (`the nominated discharge port`). Loyoil LLC (`Loyoil`) was named in the bill of lading as the shippers. The plaintiffs were the notify party. The consignee was to be named to the order of United Overseas Bank Ltd, Singapore.

By way of a contract dated 22 December 1998, Loyoil sold the oil cargo to Wah Yuen Petroleum Marine Pte Ltd (`the interveners`), who in turn sold it to the plaintiffs on 3 January 1999.
When the vessel arrived and anchored off port limits, Singapore, at the bearing, Latitude 01 degrees 13.3 minutes North, Longitude 103 degrees 34.86 minutes East, the interveners pumped 4,671 cubic meters of their own emulsified and recovery oil into the vessel for blending with the plaintiffs` oil cargo. The blending was carried out pursuant to some prior arrangement between the interveners and the plaintiffs.

After blending, a substantial quantity of the blended oil was discharged onto another vessel, the Obo Gallantry.
Sometime on 30 January 1999, the master of the vessel stopped the discharge on the instructions of the charterers, Aris Shipping Ltd, Abu Dhabi (`the charterers`). Remaining on board were some 13,500 to 15,000 metric tonnes of the blended oil, which had now become the subject of dispute among the parties to this action.

Reasons for stopping the discharge

The defendants initially allowed the blending operations to be carried out on the understanding that they would be paid the demurrage and detention charges under the charterparty, and that such allowance was without prejudice to their exercising a lien over the cargo. This factual assertion was to some extent corroborated by the telex on 26 January 1999 from the interveners stating that there was a promise that instructions to the master of the vessel to discharge the cargo would be given once the letter of credit (`LC`) payment advice was received, and that the required LC for part payment of the demurrage claims had been declared by them. The interveners then asked for discharge of the blended cargo by 26 January 1999. In para 5 of their telex, the interveners stated that:

Regarding the demurrage claims, as agree by your goodself, accept our bank guarantee. We will still perform our bank guarantee, but you have to release the cargo 39,000 mts to our vsl MT Belgallantry. And the balance you can hold until you had received our bank guarantee. (For the balance demurrage will be base on the last time sheet and make payment to you.)

The interveners further represented, by way of an OCBC bank remittance advice stamped 22 January 1999, that a remittance of US$100,000 had been made in favour of the defendants or Loyoil.
This representation was subsequently discovered to be false as no such sum was remitted. When the charterers and defendants realised that the demurrage had not been paid by the interveners, the master of the vessel was immediately ordered to cease discharging the blended cargo to preserve the defendants` lien for the unpaid demurrage.

These events led to the following fax dated 9 February 1999 from the charterers` and Loyoil`s English solicitors`, Holman Fenwick & Wilans, to A Bilbrough & Co Ltd, where it was stated that:

7 On or about 24 December 1998, Loyoil entered into a sale contract with Wah Yuen Petroleum Pte Ltd (WY), the terms of which provided in summary that the cargo would be sold for US$1,139,000, that the discharge would take place during the period 24 to 27 December, that the sellers would pay for the demurrage on the vessel for this period, but thereafter demurrage would be for the account of the buyer.

8 Unfortunately, WY delayed in two respects. First, they did not open the letter of credit until 21 January 1999 and payment was not received until 29 January, and secondly, they did not provide off take vessels until end January. It follows that under the side contract, WY is responsible for demurrage for that period.

9 Aris/Loyoil permitted discharge even though demurrage was not paid on the express understanding that demurrage would be paid before discharge was completed and on the basis of a banking slip provided by WY (Wah Yuen) on or about 21 January to the effect that a substantial amount of demurrage had been remitted from their bank in Singapore to Aris/Loyoil. In fact, this proved to be false and Aris/Loyoil had no option other than to order the vessel (the `Trade Resolve`) to cease discharge and exercise a lien over the remaining cargo of approximately 13500 MT as security for demurrage.

10 WY in turn have sold the cargo to Kian Guan Enterprises Pte Ltd (KG). In fact it was KG who opened the letter of credit in favour of Loyoil. We have not seen the sale contract between WY and KG and do not know if the demurrage terms are back to back.

On the next day, 10 February 1999, Holman Fenwick & Wilans wrote to the defendants` solicitors in New York, Richard W Bladwin Esq, stating that their clients had given the defendants a lawful order to exercise a lien over the cargo remaining on board in respect of outstanding demurrage, and if the defendants released the cargo or otherwise gave up the lien, they would be liable to damages to their clients.

Captain S Michalopulos, the operations manager of Marine Management Services MC, Piraeus, Greece, who were the managers and representatives of the shipowners of the vessel, filed an affidavit on behalf of the defendants confirming, inter alia, that the blending operation was conducted on the understanding that the defendants would be paid the demurrage due to them and that such blending was subject to the terms of both the charterparty and the bill of lading, which had incorporated all the terms of the charterparty, including the lien clause.

I noted that the plaintiffs and interveners did not file any affidavit to dispute the fact that such an understanding had been reached.
Neither had they disputed the defendants` assertion that the interveners had fraudulently represented, by way of an OCBC bank remittance advice stamped 22 January 1999, that a remittance of US$100,000 had been made in favour of the defendants or Loyoil, when there was in fact no such remittance. The plaintiffs merely denied that the defendants were entitled to exercise any lien over the cargo as against the plaintiffs for any unpaid demurrage or detention charges. In my view, this was quite different from a positive denial on affidavit (which was absent) of the abovementioned facts relied upon by the defendants to support their claim that they had a lien over the entire blended cargo remaining on board. Clearly, the court could only decide whether the defendants were entitled to a lien, which was a question of law, after a careful consideration of the relevant factual evidence. If the plaintiffs and interveners did not challenge those material facts raised on affidavit by the defendants, the court would deem those facts as unchallenged and base its decision on those unchallenged facts.

It was also not in dispute that the defendants were not paid for the demurrage that resulted from the considerable delay at the nominated discharge port, and in the light of what had transpired, the defendants claimed a lien over the blended cargo remaining on board their vessel as security for payment of the demurrage.
Counsel for the plaintiffs made clear at the hearing that they were not claiming any rights other than their lien over the entire blended cargo on board for demurrage pursuant to the demurrage and lien clauses in the charterparty. It was not their position that the plaintiffs were personally liable to pay the demurrage, for which they could bring an action against the plaintiffs, should the proceeds of sale of the retained oil cargo be insufficient to satisfy their unpaid demurrage. They simply relied on their lien to refuse further discharge of the blended oil cargo remaining on board their vessel.

Commencement of plaintiffs` action in rem

On 30 January 1999, the plaintiffs commenced this action in Admiralty in Rem No 74 of 1999 and obtained a warrant of arrest entered No 61 of 1999. The writ and the warrant of arrest were purportedly served and executed on the same day on the vessel, which was anchored at the stated location off the port limits of Singapore. The plaintiffs alleged that the defendants were liable for the wrongful detention and conversion of their cargo. The interveners intervened in the plaintiffs` action as they alleged that their emulsified and recovery oil (of 4,671 cubic meters) was still on board, albeit fully blended with the plaintiffs` fuel oil, and the defendants had refused to let them repossess their oil.

Whilst on this point, I did not think it was right for the interveners and the plaintiffs to assert as a fact that all 4,671 cubic meters of the interveners` oil was still on board following the earlier discharge of a substantial quantity of the blended oil.
Surely, a substantial part of the interveners` oil would have been discharged at the same time, since the interveners` emulsified and recovery oil and the plaintiffs` fuel oil could no longer be physically separated after the blending. Consequently, the plaintiffs` fuel oil could not have been pumped out separately leaving the entire lot of the 4671 cubic meters of the interveners` oil behind.

The defendants entered an appearance to the action on 20 February 1999.
On 6 March 1999, they filed an application to set aside the arrest on the basis that it was executed in contravention of s 65A of the Supreme Court of...

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