Facts
The defendants were the registered and beneficial owners of the
vessel Malik Al Ashtar in the port of Malta. United Arab Shipping Company
(UASC) was the registered ship manager of the vessel at the material time.
The second intervener, OW Bunkers Middle East DMCC (OWB), was
registered with the Dubai Multi Commodities Centre in the United Arab Emirates.
OWB's main business was as a wholesaler of petroleum products, including the
supply of bunkers to vessels calling at UAE ports. OWB had been in a
contractual relationship with UASC for numerous purchases and the supply of
bunkers to vessels managed by UASC, including the vessel at hand, at UAE ports.
Around October 9 2014 UASC placed an order with OWB for the
purchase and delivery of 2,500 metric tonnes of bunkers to be delivered to the
vessel on October 14 2014 at the Khor Fakkan Port in the United Arab Emirates
for $1,310,774.03.
Around October 15 2014 OWB's bunker barge MT NILE delivered
2,468.5 metric tonnes of bunkers to the vessel.
On October 15 2014 OWB issued UASC an invoice for $1,310,774.03
for the delivery of the subject bunkers, payment of which was to be made to OWB
by November 14 2014.
On November 7 2014 the defendants received a notice of lien
dated November 7 2014 for the bunkers from plaintiff Vitol, wherein the
defendants were notified of OWB's purchase order dated October 9 2014 and sales
confirmation dated October 9 2014, which stated that the plaintiff (as the
seller) had sold and delivered the subject bunkers to OWB (as the buyer) for
$1,303,368.53.
The plaintiff contended that as the physical supplier, it owned
the bunkers. Further, the plaintiff's notice of lien stipulated that it had
exercised a lien over the bunkers, and that the defendants should pay the
plaintiff and not OWB.
Through its London solicitors, the plaintiff sent an email dated
November 12 2014 demanding payment of $1,303,368.53 allegedly owed by OWB, to
be paid by the defendants to the plaintiff.
The defendants also received separate letters from the first
intervener, OWB's chargee bank ING Bank NV Netherlands, giving notice to the
defendants that all of OWB's rights in respect of the supply contract and
payments due for the subject bunkers were assigned by way of security to the
first intervener pursuant to an English omnibus security agreement dated
December 19 2013.
The plaintiff subsequently commenced an in rem action in
the Malaysian courts against the vessel, which was arrested at Port Klang,
Selangor on February 16 2015.
The defendants applied to set aside or strike out the
plaintiff's action on the basis that the plaintiff had wrongly brought its claim,
as they had no contractual nexus with the plaintiff for the purchase and supply
of the bunkers.
While the hearing for the defendants' application was pending,
the interveners (ING and OWB) commenced a separate admiralty action in the
Malaysian courts and arrested the vessel on June 21 2015 as security for their
claim for the purchase price of the bunkers. The vessel was released on
provision of fresh alternative security by the defendants.
The interveners were granted leave to intervene and applied for
summary judgment pursuant to Order 14, Rule 1 and Order 27, Rule 3 of the Rules
of Court 2012. Vitol was granted leave to intervene in the ING suit.
The court granted summary judgment in the ING suit in favour of
the interveners against the defendants for the full purchase price of the
subject bunkers with interest and costs.
In light of the above facts, two applications were then filed
before the Kuala Lumpur High Court:
·
the plaintiff's application to amend its statement of claim; and
·
the defendants' application to set aside the writ in rem
and warrant of arrest or, alternatively, to strike out the writ in rem and
the statement of claim, as amended, together with damages and/or expenses
incurred.
Application to amend statement of claim
The plaintiff applied to amend its statement of claim to include
Clause L4 of OWB Group's terms and conditions, which bound the defendants and
OWB by Vitol's general terms and conditions for the supply of the subject
bunkers. The plaintiff sought a declaration that it had lawful ownership and
title to the bunkers and was entitled to costs therein.
The defendants and interveners were of the view that the
proposed amendment was a tactical manoeuvre to avoid having the plaintiff's
case struck out.
The court agreed with the defendants and interveners, holding as
follows:
Ø The
crux of the defendants' position was that there was no contractual relationship
between the plaintiff and the defendants.
Ø The
relevant contract for the subject bunkers was at all times between the
defendants and OWB.
Ø OWB,
which had a direct contractual nexus with the defendants, was entitled to the
price for and title to the bunkers.
Ø The
plaintiff's argument regarding the title of the subject bunkers in the ING suit
was a "non-starter" and the plaintiff – in order to avoid having its
statement of claim and writ struck out – sought to take advantage of the
judgment in Canpotex Shipping Services Ltd v Marine Petrobulk(2)
two months after it was issued and after judgment was granted in the ING suit
to include completely new causes of action.
Ø The
proposed amendments were meant to tailor the claim to fit the judgment in Canpotex;
hence, the addition of statements was meant to establish a direct contractual
relationship between the plaintiff and the defendants and a contractual lien
over the bunkers.
Ø This
was not the basis on which the vessel was arrested.
The original pleadings were founded on grounds of title,
conversion and interference. However, the affidavit for the warrant of arrest
alleged only a cause of action for the conversion of the bunkers by the
defendant. The plaintiff sought to include two substantially new direct
contractual claims via Clause L4 of the OWB Group's terms and conditions and a
contractual lien. In doing so, it sought to make the defendants party to the
Vitol-OWB contract and to establish a direct contractual claim by the plaintiff
against the defendant, in accordance with Canpotex.
The court found that the plaintiff's application was made in bad
faith, as the basis of invoking the admiralty jurisdiction was different from
what was asked. As such, the application was dismissed with costs.
Application to set aside the writ in
rem and warrant of arrest.
In respect of admiralty cases, the Singapore Court of Appeal had
previously held in the case of the Bunga Melati 5(3)
that there were two ways in which an action could be said to be unsustainable:
·
legally unsustainable – if "it may be clear as a matter of
law at the outset that even if a party were to succeed in proving all the facts
that he offers to prove he will not be entitled to the remedy that he
seeks"; or
·
factually unsustainable – if it is "possible to say with
confidence before trial that the factual basis for the claim is fanciful
because it is entirely without substance, [for example, if it is] clear beyond
question that the statement of facts is contradicted by all the documents or
other material on which it is based".
In considering the defendants' application, the court
deliberated on the following issues individually:
· Agency – was OWB contracting on behalf of the defendants when it
entered into the contract with the plaintiff for the sale of the bunkers
(Vitol-OWB contract)?
· Conversion – did the plaintiff have title over the bunkers and,
by using the bunkers, had the defendants converted them?
· Unjust enrichment – were the defendants liable to the plaintiff
for unjust enrichment?
· Direct contract (proposed amendment) – did the plaintiff have a
direct contract with the defendants via Clause L4?
· Lien (proposed amendment) – did the plaintiff have a lien over
the bunkers?
In addressing the above issues, the court found as follows.
Agency relationship
The court found that there was no evidence that the defendants
and OWB had ever agreed that OWB would contract on the defendants' behalf when
OWB entered into the Vitol-OWB contract. In particular, there was no document
conferring actual authority on OWB to contract on behalf of the defendants.
Further, there were no representations by the defendants that OWB had actual or
apparent authority to enter into any agreements on its behalf.
Conversion claim
The plaintiff sought to rely on Clause 11.2 of its general terms
and conditions to impose a contractual lien over the bunkers.
The conversion argument had previously been raised in PST
Energy Shipping LLC v OW Bunker Malta Limited "Res Cogitans", which
involved a clause similar to that of Clause 11.2. In PST Energy Shipping
Judge Males held that, despite the presence of such a clause, the owners were
not liable to the physical supplier for the tort of conversion, as they had
consented to the use of the bunkers by the vessel. The physical suppliers knew
that the bunkers were for consumption by the vessel.
In the case at hand, the court was of the view that the
plaintiff had known and accepted that OWB was a trader, not an end user, and
that it would contract with the owners of the vessel to which the bunkers would
be delivered. Further, it held that the contract with the owners would
authorise them, expressly or by necessary implication, to consume the bunkers
immediately. As such, the court held that the defendants were not liable to the
plaintiff as the physical supplier for the tort of conversion, as the plaintiff
had consented to the use of the bunkers by the vessel.
Further, in granting summary judgment in the ING suit in favour
of the interveners, the court found that there was a direct contractual nexus
between OWB and the defendants and that the plaintiff had no claim in respect
of the title to the bunkers. If the plaintiff had no title to the bunkers, then
it could not claim for conversion.
Based on this, the court agreed with the defendants and
interveners that the plaintiff's claim in the tort of conversion was both
legally and factually unsustainable.
Unjust enrichment claim
The court found that the plaintiff's sales order confirmation
and tax invoice was clear evidence that it had the intention to contract
directly with OWB only, and had indeed contracted for the supply of the bunkers
with OWB and not the defendants.
Therefore, the plaintiff had supplied the bunkers pursuant to
its contract with OWB and had no contract with the defendants. This meant that
the plaintiff should look only to OWB for payment under its contractual
bargain.
Direct contract
The plaintiff relied entirely on Clause L4 of the OWB Group's
terms and conditions to claim that the defendants were jointly liable with OWB
to pay for the bunkers, premised on Canpotex.
The court held that there was nothing to show that the
defendants had agreed to be bound by the plaintiff's terms when they entered
into a direct contract for supply of the bunkers with OWB. Further, the
defendants neither agreed nor authorised OWB to be bound by the plaintiff's
terms when OWB entered into an agreement with the plaintiff for the supply of
the same bunkers. At all material times, it was not in dispute that the
defendants were unaware of any contract for sale of the same bunkers between
the plaintiff and OWB which incorporated the plaintiff's terms.
The court was of the view that Canpotex was Canadian in
origin and had not been addressed or accepted by the English courts and
therefore did not reflect the English position on the matter, nor was it
binding on the Malaysian courts.
In respect to Clause L4(a), the court found that there was no
document or evidence which indicated any insistence by the plaintiff for the
defendants to be bound by its general terms and conditions at the time that the
OWB-Malik contract was entered into.
Further, the court held that the plaintiff was never a party to
the OWB-Malik contract, nor were the defendants a party to the Vitol-OWB
contract. As such, the plaintiff was barred by the doctrine of privity of
contract from enforcing or relying on the OWB-Malik contract. In support of its
finding, the court referred to Bacom Enterprises Sdn Bhd v Jong Chuk,
where the Court of Appeal restated the position under English law in Scruttons
Ltd v Midland Silicones Ltd.
Lien over vessel or bunkers
The court was of the view that since there was no direct
contract between the plaintiff and the defendants, a contractual lien did not
arise. Further, the court held that a lien gave no right to payment – only a
right to retain possession of the bunkers until the debt was paid by OWB. The
plaintiff had no lien over, or right to, the debt payable by the defendants to
OWB.
In respect of maritime lien, in MV HUA HONG SATU, the
presiding judge stated as follows:
"The
maritime lien is a concept peculiar to maritime law. As regards certain
maritime claims the ship or other property in respect of which the claim arises
is charged with that claim, the maritime lien being that "charge", so
that the maritime lien can be enforced by an action in rem in whosoever's hands
the property may be. The classic definition of a maritime lien was provided by
Sir John Jervis in The 'Bold Buccleugh' where he said: Having its origin in the
rule of the civil law, a maritime lien is well defined by Lord Tenterden, to
mean a claim or privilege upon a thing to be carried into effect by legal
process and Mr. Justice Story explains that process to be a proceeding in rem
and adds, that wherever a lien of claim is given upon the thing, then the
Admiralty enforces it by a proceeding in rem, and indeed is the only court
competent to enforce it... This claim or privilege travels with the thing into
whosoever's possession it may come. It is inchoate from the moment the claim or
privilege attaches, and, when carried into effect by legal process by a
proceeding in rem, relates back to the period when it first attached. There are
numerous other judicial definitions in similar terms. The claims which give
rise to maritime liens. Only a limited class of maritime liens are recognised
in English law. In The 'Bold Buccleugh' four categories were listed: (i)
damage done by a ship; (ii) salvage; (iii) seamen's wages; (iv) bottomry and
respondentia. To these must be added a fifth, statutory category: (v) Master's
wages and disbursements."
In applying the above decision, the court held that there was no
maritime lien in rem available to the supplier of bunkers in either
English or Malaysian law.
After considering the issues set out above, the court allowed
the defendants' application to strike out the plaintiff's writ and statement of
claim with costs.
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