Facts
In the recent case of SK B&T Pte Ltd v Owners of Silver
Moon of Port Klang ([2017] 8 MLJ 455), the plaintiff was a company
registered in Singapore and the defendant was the registered owner of the
vessel Silver Moon. On January 8 2016 the plaintiff and defendant entered into
a time charter party, whereby the defendant agreed to time charter the vessel
to the plaintiff for three months, with a view to a further six months in charters
as an option. The plaintiff had purchased 4,000 kL of marine gas oil (the
cargo) from Chemoil International Pte Ltd on January 12 2016, with the
intention of shipping onboard the vessel. On loading the cargo onboard in the
Port of Banyan, Singapore, the terminal issued an electronic bill of lading to
Chemoil International. The plaintiff paid for the cargo in full and the bill of
lading was endorsed to the plaintiff, meaning that the plaintiff was the owner
of the cargo onboard the vessel.
The plaintiff had instructed the defendant to head to the South
Indian Ocean for cargo operations near Male, Maldives. Despite having received
the instructions, on January 8 2016 the vessel deviated towards Tanjung Pinang,
Indonesia, as a port of refuge, and eventually berthed at Johor Port to deal
with multiple repair works, including:
·
an oil leak from the cargo tanks;
·
seawater ingress into the cargo tanks;
·
failure of the vessel's generator;
·
flooded cabin rooms; and
·
damage to the vessel's hull owing to the port side lifeboat
being in contact with the boat davit.
In view of the vessel being unseaworthy, and as a result of
being off-hire for more than seven days, the plaintiff contended that the
defendant was in repudiatory breach of the time charter party and therefore
terminated it on February 15 2016. The plaintiff demanded security of $2
million in the form of a bank guarantee.
Due to the defendant's failure to provide security, the
plaintiff invoked the admiralty jurisdiction of the high court pursuant to
Section 24(b) of the Courts of Judicature Act 1964 and Sections 20(2)(h) and
21(4) of the Senior Courts Act 1981, and had the vessel arrested.
As the defendant failed to agree or cooperate with the
ship-to-ship transfer of the cargo, the plaintiff applied for an ex parte
order to transfer the cargo to another vessel, MT Wooshin Ace. The plaintiff's
grounds for the application were that if the cargo continued to remain onboard
the vessel in its present unsafe and unseaworthy condition, the cargo was
likely to be damaged and deteriorate in quality, materially reducing its value
and incurring further losses to the plaintiff. There was also the potential
risk of oil pollution from the onboard cargo, making it an urgent necessity to
move the cargo to another ship. The plaintiff had incurred and continued to
incur substantial losses caused by the delay and non-delivery of the cargo. It
would have been just and expedient to allow the application for transshipment
to resolve the situation. On February 23 2016 the plaintiff's application was
allowed.
The defendant made an application under Order 32, Rule 6 and
Order 92, Rule 4 of the Rules of Court 2012 for:
·
the order granted ex parte to be set aside;
·
the plaintiff to transfer the cargo from MT Wooshin Ace back to
the Silver Moon; and
·
the plaintiff to pay damages to the defendant for wrongfully
inducing the court to grant the ex parte order.
It was not disputed that the plaintiff had the legal right to
ask for the discharge of the cargo, which was not under arrest. Nevertheless,
the defendant contended that the application should not be made and granted ex
parte, but should have been served on the defendant. The defendant also
contended that the application under Order 70, Rule 11 of the Rules of Court
2012 and under Section 11 of the Arbitration Act 2005 would not allow the
plaintiff to apply for an ex parte order, as the property referred to the
writ of summons, the warrant of arrest and the plaintiff's supporting
affidavits referring to the Silver Moon, not the cargo. Because the plaintiff
knew that the defendant had refused the transhipment of the cargo, the
plaintiff obtained the ex parte order.
The defendant proposed that the plaintiff was liable to pay the
remaining two months' hire in view of the termination of the time charter
party. Pending termination, the defendant claimed a possessory lien over the
cargo pursuant to Clause 26 of the time charter party.
The court held that the plaintiff, as owner of the cargo, had
the legal right to ask for the discharge of the cargo, which was not under
arrest, as provided by the Admiralty Practice Direction 1/2012. The direction
reads as follows:
"F. Discharge of Cargo
23. Upon arrest of a ship, the ship shall not be allowed to work
without the Sheriff's express permission. If the ship has commenced loading
before arrest takes place, then immediately after execution of the arrest
warrant, the Sheriff or Assistant Sheriff shall direct the master to cease all
cargo loading operations.
However, if at the time of the arrest, the cargo which is not
under arrest is being unloaded by the cargo owners and the Sheriff or Assistant
Sheriff allows the unloading to continue, he shall require the cargo owners or
demise charterers of the ship or their agents to furnish a letter of indemnity
with regard to the Sheriff's liability if there is an accident whilst unloading
cargo. However, if unloading is not permitted or ceased at the Sheriff's
direction, a person who is entitled to immediate possession of the cargo may
have the cargo discharged from the ship without intervening in the action by
requesting the Sheriff or Assistant Sheriff or the arresting party to take
appropriate steps to enable the cargo to be discharged. If the Sheriff or
Assistant Sheriff or the arresting party considers the request to be reasonable
and the cargo owners give an undertaking to pay the Sheriff's costs and
expenses, the Sheriff or Assistant Sheriff or the arresting party shall apply
to Court for appropriate orders. Alternatively, the cargo owners can intervene
in the action and apply to the Court to discharge the cargo from the ship. The
costs of discharging the cargo shall be the responsibility of the cargo owners."
The defendant contended that pursuant to Order 70, Rule 11, the
plaintiff's application should not have been made and granted ex parte,
but should have been served on the defendant. Order 70, Rule 11, reads as follows;
"(O
70, r 11) Applications with respect to property under arrest
11(1)
The Sheriff may at any time apply to the Court for directions with respect to
property under arrest in an action and may, or, if the Court so directs, shall
give notice of the application to all of the parties to every action against
the property and all persons who have entered a caveat which is still in force.
(2)
The Sheriff shall send a copy of any order made under paragraph (1) to all the
parties to every action against the property to which the order relates and to
all persons who have entered a caveat, which is still in force.
(3)
A person other than the Sheriff may make an application under this rule by
notice of application in the action in which the property is under arrest and
the notice of application together with copies of any affidavits in support
shall be served upon the Sheriff and all parties to every action against the
property and all persons who have entered a caveat which is still in force
unless the Court otherwise orders on an application made ex
parte.
The defendant stated that Order 70, Rule 11(1) referred to
directions regarding 'property under arrest' (ie, the Silver Moon, not the
cargo). There was therefore no provision to allow the plaintiff to file an
application for the discharge of the cargo.
The court was of the view that Order 70, Rule 11 and Paragraph
23 of the Admiralty and Maritime Claims Practice Direction 1/2012, provided
that the owners of the cargo (which was not under arrest) could apply to the
court for a discharge of the cargo by way of a notice of application. The court
held that Order 70, Rule 11(3) allowed a person other than the sheriff to make
an application by notice of application for release of the cargo, allowing the
court to grant an application made ex parte.
The court held that as the cargo was not under arrest, the
plaintiff's application was allowed because:
·
it was undisputed that the cargo belonged to the plaintiff;
·
the cargo was in a distressed situation and urgent circumstances
compelled the prompt discharge of the cargo; and
·
the defendant was notified of this but refused to cooperate.
The court maintained that it was right that, under such urgent
and special circumstances, the court issued the order based on an application
made ex parte.
The court next considered whether the defendant had a possessory
lien over the cargo pursuant to Clause 26 of the time charter party, whereby
"owners shall have a lien upon all cargoes and all freights, sub-freights
and demurrage for any amounts due under this charter".
The defendant believed that the plaintiff was liable to pay the
remaining two months' hire in view of the termination of the time charter party.
Pending the settlement of the remaining two months under Clause 26, the
defendant claimed a possessory lien over the cargo.
The court held that the defendant's notice of lien was issued on
March 7 2016, whereas the cargo was transshipped onto MT Woshin Ace eight days
earlier on February 27 2016, when the defendant's notice of lien was issued and
the defendant was no longer in possession of the cargo. As such, there was no
longer any issue regarding the possessory lien. The court referred to TR
Hamzah & Yeang Sdn Bhd v Lazar Sdn Bhd ([1985] 2 MLJ 45), in which Caldwell
v Sumpters ([1972] Ch 478) had been quoted, regarding the fact that the
court had held that possessory liens depend on the claimant retaining
possession of the property in question. A possessory lien is lost if the
claimant parts with possession of the property without making any reservation
regarding its entitlement of a lien over the property.
However, in this case, the defendant maintained that the notice
issued by its former solicitors demanding counter security following an arrest
could be considered a notice of lien. The court disagreed and held that the
notice made no reference to Clause 26 of the time charter party and did not reserve
the defendant's rights to exercise a lien over the cargo.
The court stated that there was no merit in the defendant's
application and dismissed it with costs.
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