Admiral Shipping v. "Rainbow Spring" CofA

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DMC/SandT/03/44
Admiral Chartering Ltd v Owners of Ship or Vessel "Rainbow Spring"
Singapore Court of Appeal: Yong Pung How CJ, Chao Hick Tin JA, Judith Prakash J:  29 July 2003
Joseph Tan Jude Benny, for Admiral/Plaintiff
Rajah & Tann, for RSSL/Defendant
ARREST OF DEFENDANTíS VESSEL FOR ACTION IN REM BASED ON TIME CHARTERPARTY Ė WHETHER DEFENDANT WAS CONTRACTING OWNER UNDER TIME CHARTERPARTY SO THAT IN REM JURISDICTION AGAINST VESSEL WAS ESTABLISHED Ė WHETHER WARRANT OF ARREST TO BE SET ASIDE IN THE EVENT OF NON-DISCLOSURE OF MATERIAL FACTS
Summary
Admiral, as time charterer of "Rainbow Spring", brought an in rem action against and arrested the vessel for damages for breach of the time charterparty. Her registered owners, Rainbow Spring Shipping Ltd Inc ("RSSL") entered appearance and applied to set aside the writ of summons and the warrant of arrest on the ground that RSSL was not a party to the time charterparty. Under section 4(4) of the Singapore High Court (Admiralty Jurisdiction) Act (cap 123) (the "Act"), the court only has jurisdiction to entertain an action in rem for breach of charterparty if the person who would be liable in personam on the claim is the owner of the vessel, both when the cause of action arose and when the action was brought.

DMC Rating Category: Developed

This case note has been supplied by Ang and PartnersAng and Partners, the International Contributors for Singapore

Facts
Admiral time chartered "Rainbow Spring" in 1998 and sub-chartered her in 2002 on a voyage charter to carry a cargo of crystalline potassium nitrate from Chile to Costa Rica and Guatemala. The vessel had been the subject of a chain of charter contracts. The vessel was demised chartered by RSSL, her registered owners, to Emerald as head charterer. Emerald sub-chartered the vessel to Oriental. Oriental in turn sub-chartered the vessel to Admiral.

The cargo sustained wet damage and Admiralís sub-charterer commenced arbitration in New York against Admiral for damages. Admiral commenced an action in rem against "Rainbow Spring" and arrested her in 2001. After security was provided for her release by West of England P&I on behalf of its member, RSSL, RSSL entered appearance and applied to set aside the writ of summons and the warrant of arrest on the ground that it was not a party to the time charterparty, and therefore, the court had no jurisdiction to entertain an action in rem against its vessel. Under the High Court (Admiralty Jurisdiction) Act, the plaintiff who brings an action in rem for breach of a charterparty must establish that the person who would be liable in personam is the owner of the vessel at the time the cause of action arose and also when the action is brought.

RSSL also alleged that the warrant of arrest ought to be set aside because Admiral had failed to disclose material facts in its affidavit supporting the arrest. RSSL claimed damages for wrongful arrest.

The main issue was whether a charter contract between Admiral and Oriental was concluded by an exchange of fax and telex between Admiralís brokers and Orientalís agent (who was also agent for RSSL). Admiral argued that there was no concluded contract with Oriental at this point.

The assistant registrar who first heard the application found in favour of Admiral on the jurisdiction point but set aside the warrant of arrest on the ground of material non-disclosure. She also ordered Admiral to pay damages for wrongful arrest.

On appeal, the first appellate judge held that Admiral had failed to demonstrate an arguable case that RSSL was the party who would be liable in personam for Admiralís claim. Thus, Admiral was not able to invoke the courtís admiralty jurisdiction against the vessel. The judge upheld the setting aside of the warrant of arrest and, in addition, set aside the writ. However, the judge held that there was no material non-disclosure and that the arrest was not so obviously groundless as to amount to bad faith or gross negligence implying malice. She therefore reversed the assistant registrarís decision on wrongful arrest.

Admiral appealed. At the appeal, Admiral obtained leave to introduce a new argument that at all material times, Oriental, whose name appeared on the fixture, was acting as agent for RSSL who was the undisclosed principal. The Court of Appeal dismissed the appeal and upheld the judgeís decision to set aside the writ and the warrant of arrest on the same ground, namely that Admiral had not shown arguable case that RSSL would be liable in personam on the claim.

Judgment
1. The Court of Appeal agreed with the judge below that the fixture was concluded when Admiralís brokers confirmed in a telex dated 9 January 1998 that the charter was "clean fixed" with "Oriental Shipway Inc" identified as the contracting owners. The court further agreed that "clean fixed" in chartering parlance is used to signify a binding charterparty contract or concluded fixture.

2. The court rejected the argument that the word "recap" (recapitulation) in the telex meant that there was no agreement at the time of the telex. In shipping parlance in fact the opposite appears to be the case in that the recapitulation only takes place after the contract has been concluded.

3. It is established law that negotiating parties may conclude a contract that binds each of them even though there are some terms that are yet to be agreed. The important question is whether the parties by their words and conduct have made it clear, objectively, that they intend to be bound despite the unsettled terms. The terms that were left to be decided were, essentially, minor terms. The main terms, chief among which were the vessel to be chartered, the period of charter, the charter hire and the time of delivery, as well as many less important terms, had been agreed.

4. To show that there was an undisclosed principal, Admiral had to show that Oriental was acting as an agent and further, that it was acting as an agent within the scope of its actual authority. It was incumbent on Admiral to show an arguable case of actual authority being vested in Oriental to contract on behalf of RSSL. Yet, no submissions on this requirement were made by Admiral nor was there any evidence that Oriental had intended to act on behalf of RSSL.

5. Further, Orientalís role as charterer under a string of chain charters is incompatible with any notion of Oriental also being an agent for RSSL when Oriental entered into the sub-charter with Admiral.

6. Although the Court of Appeal did not have to deal with the alternative ground for setting aside the warrant of arrest for non-disclosure of material facts, it did so because the judge below had commented on it and arguments on this issue had been addressed by RSSL. The court agreed with the judge below that the issue of a warrant of arrest in Singapore (unlike England) is a discretionary remedy and therefore, full material disclosure of material facts is required.

7. A material fact is a fact which should be properly taken into consideration when weighing all the circumstances of the case, though it need not have the effect of leading to a different decision being made. The failure on the part of Admiral to disclose the exchange of correspondence was a material non-disclosure. In further disagreement with the observation of the judge below, the Court of Appeal held that the courts must retain the discretion to set aside an arrest for non-disclosure if the facts warrant it notwithstanding that otherwise they would have jurisdiction over the matter and that the procedure in the Rules had been followed.

Comment
Although the Court of Appeal held that there had been a material non-disclosure, it did not have to consider whether Admiral ought to pay damages for wrongful arrest, as there was no appeal by RSSL against the decision of the judge below that the arrest was not wrongful.

 

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