Legal Digest. Admiralty Law Singapore s Own Evolving Jurisprudence. Steven Chong SC. An online repository of various articles published by our lawyers

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1 An online repository of various articles published by our lawyers Admiralty Law Singapore s Own Evolving Jurisprudence Steven Chong SC 1 Rajah & Tann 4 Battery Road #26-01 Bank of China Building Singapore Tel: Fax: eoasis@sg.rajahandtann.com Website:

2 Admiralty Law Singapore s Own Evolving Jurisprudence Steven Chong, SC English decisions on shipping and admiralty law are highly persuasive in Singapore, but they are not binding on the local courts. However, the courts tend to follow UK decisions unless there is a compelling reason not to do so. Over the last 20 years, there have been several occasions where the local courts have found it necessary to depart from established UK principles and in so doing, have provided their own contribution to the continuing evolution of admiralty law. What is significant is that on some occasions, the departures initiated by the Singapore courts have been adopted and followed by other jurisdictions, including the UK. Steven Chong SC takes us through the areas where Singapore is evolving its own jurisprudence in admiralty law. Sister Ship Arrest The single decision which put the Singapore courts on the map of maritime law is The Permina 108 [1977] 1 MLJ 49. Decided in 1977, some 25 years after the Arrest Convention of 1952, the decision defined (somewhat generously at that time) the scope of the sister ship arrest rule. It now covers ships beneficially owned by the charterer of a vessel in connection with which the claim arose (sometimes described as the offending ship). There was no requirement of common ownership for both the offending and sister ships. In the process, it departed from a dictum of Lord Diplock in a UK House of Lords decision, The Eschersheim [1976] 2 Lloyd s Rep 1, which required both the offending ship as well as the arrested one to be beneficially owned by the same party. The Permina 108 decision received endorsement in a number of Commonwealth countries, including Hong Kong (The Sextum [1982] HKLR 356); New Zealand (The Fua Kavenga [1987]1 NZLR 550); as well as the UK (The Span Terza [1982] 1 Lloyd s Rep 225), where the endorsement was both judicial and legislative. Identity of the In Rem Defendant More fundamental perhaps than the sister ship arrest is the question of who is the defendant in an action in rem. This deceptively simple question has been the subject of a long line of inconsistent UK decisions extending back to the 19th century and has far-reaching conceptual and practical consequences. It is well established that the admiralty action in rem is an action against the res (usually a ship), but judges and lawyers grappled with the question of whether it is in fact the inanimate object or its owner that is actually the defendant to the action. A trilogy of Singapore Court of Appeal decisions, where the issue arose in different contexts, identified the shipowner as the defendant and not the ship: The Kusu Island [1989] 3 MLJ 257, The Fierbinti [1994] 3 SLR 864 and more recently, The Capricorn [1999] 3 SLR 721. In 1997, the UK House of Lords reached the same decision in the case of The Indian Grace [1998] 1 Lloyd s Rep 1. Page 1

3 Post-Judgment Arrest The Daien Maru 18 [1985] 2 MLJ 90; [ ] SLR 536 went counter to the UK decision of The Alletta [1974] 1 Lloyd s 40. It permitted an arrest to be made after a judgment in rem had been obtained, when security for the claim was not obtained earlier. The High Court distinguished the UK decisions which prohibited arrest after judgment on the basis that bail was provided in those instances and hence replaced the res. This was a logical extension of the concept of an action in rem: since it is an action against the res, a judgment of such an action should also be enforceable against the res by a remedy unique to the action: namely, the procedure of arrest. One Claim, One Arrest The one claim, one ship rule, although a hallowed principle in admiralty law, is often the bane of arresting parties who find that their claim is worth more than any one of the ships belonging to the defendants. In The Damavand [1993] 2 SLR 717, the Singapore Court of Appeal permitted an amendment to remove from an existing writ (which encompassed various claims) a particular claim. This was then inserted into a second writ and formed the basis of another arrest, so long as that other claim could stand as a separate cause of action and so long as security had not been obtained in the first arrest. This decision is particularly useful against a defendant who either fails to pay on more than one occasion under an agreement, or who fails to pay under different agreements: he can expect to face more than one arrest. P&I Club Letters of Undertaking In the oft-cited decision of The Arcadia Spirit [1988] 3 MLJ 262; [1988] SLR 244, the Singapore Court held that it had the jurisdiction to compel a claimant to accept a letter of undertaking from a reputable P&I Club of sound financial standing. In doing so, it departed from UK decisions, such as The Saudi Star (1983) (unreported) which held that such letters of undertaking are purely private arrangements with which the court would not interfere. Wrongful Arrest The test for wrongful arrest of a vessel dates back 150 years to the Privy Council decision of The Evangelismos (1858) 12 Moo PC 352. To succeed in a claim for wrongful arrest, the owners must demonstrate that there is either mala fides (bad faith) or crassa negligentia (gross negligence) which implies malice. Subsequent to The Evangelismos, several UK decisions have applied the test without reasonable or probable cause so as to infer malice interchangeably with the test of gross negligence. In Singapore, the phrase without reasonable or probable cause has also found favour in two local decisions - The Evmar [1989] 2 MLJ 460 and The Ohm Mariana [1992] 2 SLR 623. In 1999, the Court of Appeal in Singapore in The Kiku Pacific [1999] 2 SLR 595 settled the test once and for all. The Court of Appeal held that while the use of the term reasonable or probable cause is well established in actions for malicious prosecution (not involving vessels), they would be uncomfortable with the import of such a term into admiralty law as part of the test for wrongful arrest of a vessel. The Court of Appeal ruled that the test for wrongful arrest of a vessel Page 2

4 should be the test laid down in The Evangelismos, ie mala fides or crassa negligentia implying malice. The cases involving wrongful arrest are rather rare. However, in 1999 there were two attempts to obtain damages for wrongful arrest. It succeeded in The Trade Resolve [1999] 4 SLR 424. It is interesting to note that in The Trade Resolve, the judge relied on the test of no reasonable or probable cause and found that the arrest was wrongful. However, in my view, even if the judge had applied the test of gross negligence, he would nevertheless have reached some conclusion on the facts in The Trade Resolve. In that case, the Sheriff authorised the plaintiffs solicitors to serve the writ and arrest the vessel within port limits. The vessel was outside port limits but the plaintiffs maintained she was nevertheless within territorial waters. Despite being aware that the vessel was in fact outside port limits, the plaintiffs proceeded to arrest the vessel which the court found to be. a contemptuous act in deliberate and flagrant disregard of the limited authority granted to them. The decision of The Trade Resolve is also significant in one other respect, ie vessels can only be arrested if they are within port limits. It is irrelevant whether the vessel is within territorial waters as long as she is outside port limits. Beneficial Ownership for State-Owned Vessels In a spate of actions that arose from the demise of nationalised state-owned shipping lines in the former Soviet bloc, the High Court of Singapore in the decision of The Kapitan Temkin [1998] 3 SLR 254 departed from a number of UK decisions (including The Nazym Khikmet [1996] 2 Lloyd s Rep 362) and held that the beneficial owner of a vessel was not the State but rather the state-owned shipping line concerned. The court was not constrained by Ukrainian law (the State of Ukraine having claimed beneficial ownership of the vessel) and in the process, was able to side-step many of the troublesome aspects of foreign law that characterised the UK decisions. There is now a chink in the armour of immunity from arrest, which these former Soviet shipping lines were gradually building up on the strength of the UK decisions. Possessory Lien Possessory liens are usually asserted by shipyards who have not been paid for repairs to vessels. This is a self-help remedy long recognised by the courts. Shipyards exercising possessory liens are entitled to detain the vessel without having to arrest the vessel. On occasions, parties exercising possessory lien may need to arrest the vessel in order to obtain the assistance of the court to sell the vessel, as a right to exercise possessory lien does not carry the right to sell the vessel. The arrest of vessels by parties exercising possessory lien have created some uncertainty as to whether in arresting the vessel, the party exercising the possessory lien is deemed to have lost possession of the vessel and consequently their lien. After some uncertainty, the position is now clear, both in the UK and in Singapore, that in arresting the vessel, the possessory lienee retains his lien over the vessel The Dwina 1 [1996] 2 SLR 670. As possessory liens are recognised as self-help remedies, the courts in England have consistently held that it will not interfere to assess the value of the lien in the absence of fraud Gebruder Naf v Ploton (1890) 25 QBD 13 (CA) and Segbedzi v Glah (1989) New LJ 1303 (CA). Page 3

5 This English principle was tested in Singapore in The Solitaire. The shipyard asserted a possessory lien against the vessel in the sum of S$300 million. The shipowner applied to court to reduce the security demand and invited the court to depart from established English principles. The judge at first instance refused to do so and allowed the shipyard to retain their lien for the full amount of their security demand since there was no evidence of fraud on the part of the shipyard. In the Court of Appeal, the lien was reduced to S$125m. Unfortunately, there are no written grounds for the decision but it is clear that in doing so, the Court of Appeal departed from English principles to assess the value of the possessory lien despite the absence of fraud on the part of the shipyard. Conclusion Shipping and admiralty law will continue to be an active practice in Singapore. The shipping bar in Singapore is also growing to cope with the increasing volume of maritime work in Singapore. As demonstrated from the above overview, it is clear that Singapore courts will, when the need and occasion requires, be robust in departing from UK decisions to evolve their own jurisprudence. This article was first printed in Law Gazette, March Rajah & Tann is one of the largest law firms in Singapore. It is a full service firm and given its alliances, includi ng US premier firm Weil, Gotshal & Manges, is able to tap into a number of countries. Rajah & Tann is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealings with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The information contained in this newsletter is correct to the best of our knowledge and belief at the time of writing. Specific professional advice should be sought before any action is taken. In this regard, you may call the lawyer you normally deal with in Rajah & Tann or the Knowledge Management team at eoasis@sg.rajahandtann.com Rajah & Tann Knowledge Management. All rights reserved. Page 4