The “Xin Chang Shu”

• Jurisdiction: Singapore
• Judge: Steven Chong J
• Judgment Date: 04 December 2015
• Neutral Citation: [2015] SGHC 308
• Year: 2015
• Date: 04 December 2015
• Published date: 08 December 2015
• Hearing Date: 25 September 2015,23 September 2015
• Plaintiff Counsel: Lawrence Teh and Khoo Eu Shen (Rodyk & Davidson LLP)
• Citation: [2015] SGHC 308
• Defendant Counsel: Toh Kian Sing SC, Koh See Bin and Tan Yong Jin Jonathan (Rajah & Tann Singapore LLP)
• Court: High Court (Singapore)
• Docket Number: Admiralty in Rem No 239 of 2014 (Registrar’s Appeal No 226 of 2015)

Steven Chong J: Introduction

The law on wrongful arrest was developed to protect shipowners against malicious arrests or arrests brought with “so little colour” or “so little foundation” that implies malice on the part of the arresting party.

Proof of actual malice is often difficult to establish, especially at the interlocutory stage, where most applications for wrongful arrest are pursued. However, the malice threshold can be satisfied by inference in circumstances where the case is so hopelessly bereft of merit that it warrants a finding that the claim is seriously lacking in “colour” or “foundation”.

Ship arrest is an extremely draconian remedy. It can be very disruptive and may inflict severe economic hardship on the shipowner’s trade and operations. In order for the protection against this draconian measure to be meaningful and effective, the judicial threshold should not be set too high so as to render the right to damages practically illusory.

In appropriate cases, where the threshold has been crossed, the court should express its opprobrium towards the arresting party’s conduct by ordering it to be accountable for the damages occasioned by its wrongful arrest. Indeed, our courts have in a number of cases held the arresting party accountable for wrongful arrest.

After considering the facts and the arguments presented by the parties, I am satisfied that the line was crossed in this case. Not only was the arrest pursued, inter alia, on a false and/or factually and legally misconceived premise, there was also non-disclosure of material facts at the ex parte stage where the warrant of arrest was sought. The plaintiff must therefore bear the damages arising from the wrongful arrest of the vessel, Xin Chang Shu (“the Vessel”).

Factual background

On 19 November 2014, the plaintiff commenced admiralty in rem proceedings against the defendant claiming US$1,768,000 for the supply of 4,000 metric tonnes of marine bunker fuel to the Vessel. The claim was based on a contract for the supply of bunker fuel entered into between the plaintiff and OW Bunker Far East (Singapore) Pte Ltd (“OW Singapore”) (“the Contract”). The plaintiff claims that OW Singapore was the defendant’s agent and entered into the Contract on the defendant’s behalf.

Prior to the arrest of the Vessel (on 10 December 2014), the parties exchanged a series of correspondence in which the defendant made its position and defence clear. Specifically, the defendant clearly informed the plaintiff of the following:¹ OW Singapore was not the defendant’s agent and did not contract with the plaintiff in that capacity. The defendant only dealt and contracted with OW Bunker China Limited (“OW China”), not OW Singapore or the plaintiff. The plaintiff was not only one, but two layers removed from the defendant in the chain of bunker supply contracts. The defendant had contracted with OW China who had in turn contracted with OW Singapore and who eventually contracted with the plaintiff in respect of the same bunker supply but on different terms.

In the same chain of correspondence, the parties also negotiated the provision of alternative security to the plaintiff. No agreement was, however, reached prior to the arrest of the Vessel. The plaintiff insisted that the terms of the security should answer to any judgment “by any court or arbitral tribunal of competent jurisdiction”, but the defendant was willing to furnish security that would answer only to a judgment of the Singapore court.² Thus, on 9 December 2014, the plaintiff obtained a warrant of arrest and proceeded on 10 December 2014 to arrest the Vessel. On 12 December 2014, the parties agreed that the defendant would furnish security by way of payment into court in the sum of US$2.6 million to secure the release of the Vessel, and the Vessel was duly released on the same day. The Vessel was thus arrested for approximately three days.

Shortly after, on 15 December 2014, the plaintiff filed Summons No 6218 of 2014 (“SUM 6218/2014”) for a stay of proceedings in favour of arbitration under ss 6 and 7 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”). On 29 December 2014, in Summons No 6364 of 2014 (“SUM 6364/2014”), the defendant applied to strike out the proceedings, set aside the warrant of arrest, and applied for damages for wrongful arrest.

The decision below and the appeals before me

The plaintiff’s application for a stay of proceedings in favour of arbitration (ie, SUM 6218/2014) and the defendant’s application to strike out the proceedings, to set aside the warrant of arrest and for damages for wrongful arrest (ie, SUM 6364/2014) were heard together by the assistant registrar (“the AR”). In The “Xin Chang Shu” [2015] SGHCR 17 (“the AR’s judgment”), the AR decided as follows: the writ was struck out for being frivolous and/or vexatious pursuant to O 18 r 19(1) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) but not on the basis that s 4(4) of the High Court Admiralty Jurisdiction Act (Cap 123, 2001 Rev Ed) (“the HC(AJ)A”) had not been complied with; the security provided to the plaintiff by way of payment into court be returned to the defendant; the stay application was dismissed; there was no material non-disclosure on the plaintiff’s part, and therefore, the warrant of arrest was not set aside; and damages for wrongful arrest were not awarded.

Dissatisfied with the AR’s decision, both the plaintiff and the defendant appealed. In Registrar’s Appeals No 224 and 225 of 2015 (“RA 224/2015” and “RA 225/2015” respectively), the plaintiff appealed against the AR’s decision in striking out its writ and in dismissing its stay application. In Registrar’s Appeal No 226 of 2015 (“RA 226/2015”), the defendant appealed against the AR’s decision in not awarding damages for wrongful arrest, and in not setting aside the writ and warrant of arrest on the basis of lack of admiralty jurisdiction and material non-disclosure respectively. At the appeal hearing, the defendant withdrew their appeal against the AR’s finding that the court had admiralty jurisdiction.

After hearing the parties on 23 September 2015, I dismissed the plaintiff’s appeals in RA 224/2015 and RA 225/2015 while I reserved judgment in relation to RA 226/2015.

I shall briefly explain my grounds for dismissing RA 224/2015 and RA 225/2015 because it has a material bearing on my present decision in RA 226/2015. In dismissing the plaintiff’s appeals in RA 224/2015 and RA 225/2015, I agreed with the AR’s reasoning, which I found to be commendably clear. In brief, the AR found that the plaintiff’s claim, premised on the agency of OW Singapore, was both legally and factually unsustainable: Based on the authority of Yongnam Development Pte Ltd v Somerset Development Pte Ltd [2004] SGCA 35, the defendant had to be aware of the plaintiff’s mistaken belief for acquiescence on the defendant’s part to constitute estoppel by representation (the AR’s judgment at [50]–[52]). No representation could be inferred from the defendant’s silence or omission to disabuse the plaintiff of its mistaken belief unless the defendant was aware of the plaintiff’s mistaken beliefs and had a duty to disclose certain facts (the AR’s judgment at [53] and [57]). The uncontroverted evidence was that there was no direct communication between the plaintiff and the defendant until the plaintiff sent its letter of demand dated 12 November 2014 to the defendant (the AR’s judgment at [65]). Even taking the plaintiff’s evidence at its highest, there was nothing to show that the defendant was aware of the involvement of OW Singapore and the plaintiff in the supply of the bunkers (the AR’s judgment at [68] and [69]). The evidence on the chain of back-to-back sale and purchase agreements for the bunkers was not challenged by the plaintiff. The AR found that there was no overarching agreement between the plaintiff and defendant via the agency of OW Singapore. First, under the back-to-back contracts, the bunkers were sold at different prices; under the Contract dated 30 September 2014 (US$442 per metric tonne), the agreement between OW Singapore and OW China dated 30 September 2014 (US$445 per metric tonne) and the agreement between OW China and the defendant dated 26 September 2014 (US$469 per metric tonne). Second, there is no evidence that the sales documentation issued by the plaintiff were ever transmitted to the defendant before the plaintiff’s 12 November 2014 letter of demand. Third, none of the sales documentation issued by OW Singapore referred to the defendant as the buyer of the bunkers (the AR’s judgment at [72]–[74]).

To this, I would add that based on the affidavit of John Kevin Phillips (“Mr Phillips”) dated 8 December 2014 filed in support of the application for a warrant of arrest (“the arrest affidavit”), the plaintiff relied on two key facts to support its agency claim: Its General Terms and Conditions for Sale and Delivery of Marine Bunkers from Big Port Service DMCC (incorporated by reference into the “Bunker Sales Confirmation” dated 25 September 2014 issued by the plaintiff and accepted by OW Singapore) (“GTC”) which asserted that OW Singapore was contracting as agent on behalf of the shipowner (ie, the defendant)³. The alleged supply of certain commercial details by OW Singapore, which purportedly gave the plaintiff the appearance that OW Singapore was fully authorised to conclude the Contract on the defendant’s behalf.⁴ This position was maintained on appeal.⁵ Notably, the plaintiff never asserted that the defendant did or said anything to lead the plaintiff to believe that OW Singapore was acting as its agent. As the AR noted, the plaintiff relied solely on the defendant’s omission to act (see the AR’s Judgment at [55]–[56]).

At the hearing before me, the defendant’s counsel, Mr Toh Kian Sing SC (“Mr Toh”), pointed out that the commercial details referred to...