Pan United v. Cendrawasih

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DMC/SandT/04/25
Pan United Shipping Pte Ltd v. Cendrawasih 
Shipping Pte Ltd: [2004] SGHC 32
Singapore High Court: Tan Lee Meng J: 
20 February 2004
Ang & Partners for Pan United Shipping Pte Ltd
Just Law LLC for Cendrawasih Shipping Pte Ltd
SHIPPING: LOSS OF CARGO CARRIED 
BY BARGE UNDER TOW: WHETHER TUG 
AND TOW UNDER DEMISE CHARTERPARTY: CHARACTERISTICS OF DEMISE CHARTERS
Summary
Pan United brought a claim, as bill of lading holders, against Cendrawasih Shipping ("Cendrawasih") for loss of a cargo of coal that was shipped on board Cendrawasih’s tug and barge combination. Two years after the loss of cargo in question, Cendrawasih contended that they were not the party liable for the claim as the vessels were at the material time demise chartered. Pan United challenged the authenticity and existence of the alleged demise charter. Pan United also submitted that if the Court held that the vessels were on demise charter, Cendrawasih were estopped from denying that they were the contracting carrier and from relying on the demise charter to deny liability to Pan United. The judge set out certain general characteristics of demise charters and held that, in the circumstances of the present case, the vessels were not demise chartered. 

DMC Category Rating: Developed

This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore

Facts
A cargo of steaming coal in bulk was shipped on board Cendrawasih Shipping Pte Ltd’s ("Cendrawasih") barge "ASP –1" on tow by Cendrawasih’s tug "Samudra Perkasa II for carriage and delivery from Bengkulu, Indonesia to Kantang, Thailand in October 2000. The contract of carriage was contained in and/or evidenced by a bill of lading dated 11 October 2000, issued at Bengkulu. The said vessels ran aground on a coral reef in the vicinity of Aroih Raja Channel, Indonesia. As a result of the grounding, the cargo was washed overboard and lost. Pan United, as bill of lading holders, commenced this action against Cendrawasih, claiming losses in the sum of US$246,730.00.

On 18 October 2002, more than two years after the loss of the cargo, Cendrawasih claimed that they were the wrong party to be sued as the vessels were demise chartered at the material time to PT Armada Arung Samudra ("PT Armada") under a charter dated 19 July 2000. Pan United challenged the authenticity and/or existence of the alleged demise charter. Pan United submitted in the alternative that it would be unconscionable for Cendrawasih to rely on the demise charter to avoid liability as Cendrawasih had misled Pan United by granting time extensions for the claim, and Cendrawasih had never informed Pan United that the vessels were under demise charter to PT Armada, until after the claim against PT Armada, as the demise charterers, had become time-barred.

The following preliminary issues were tried before the Court:
a) Whether the tug "Samudra Perkasa II" and the barge "ASP-1" were demise chartered by the Defendants to PT Armada at the material time;
b) If so, whether the Cendrawasih were estopped from denying that they were parties to the bill of lading or from relying on the demise charter to deny liability to the Plaintiffs. 

Judgment
1. Whether or not a ship has been demised depends on whether or not the shipowner has parted with the whole possession and control of the ship, and whether the demise charterer has been given the power and right, independent of the shipowner and without reference to the shipowner, to do what he pleases with regard to the captain, the crew and the management and employment of the ship.

2. The Judge held that Cendrawasih had failed to establish that the vessels were demise chartered to PT Armada, on the following grounds:

a) Cendrawasih and PT Armada had signed more than one copy of the demise charter for the vessels, leading Pan United’s Counsel to suggest that documents were signed by them as and when requested by their solicitors for the purposes of the trial and that the demise charter dated 19 July 2000 was just another document generated for that purpose;
b)there was no evidence of payment made by PT Armada for the alleged demise charter; 
c)there was no evidence that the terms of the alleged demise charter were complied with; for example, there was no on-hire survey conducted, no letter of guarantee was furnished by PT Armada, and PT Armada did not insure the vessels as required under the terms of the charter;
d) Cendrawasih made no claim against PT Armada for loss of the barge or damage to the tug; and 
e) Cendrawasih and not PT Armada had made a general average claim for the casualty.

3. Further, in an attempt to support their case that there was a course of dealings between themselves and PT Armada, Cendrawasih produced copies of two other demise charterparties. The Judge found that the documents were flawed in many respects and questioned the credibility of the evidence.

4. The Judge considered it noteworthy that Cendrawasih had only raised the demise charter defence in October 2002, more than two years after the casualty in July 2000 and after the claim against the demise charterer had become time-barred and had only allowed inspection of the document on 2 December 2002.

5. As the Judge found in Pan United's favour on the first issue, there was no need to consider the second issue of estoppel.

Comments
Shipowners alleging that their ship had been on demise charter cannot simply produce a document entitled "demise" or "bareboat" charter. Apart from verifying its authenticity, the Court will examine whether there has actually been a parting with the whole possession or control of the ship. Mere words of letting and hiring will not of themselves invest a party with the possession of the ship. Payment of charter hire, insurance by the demise charterers, hire surveys, evidence of operation of the ship and employment of the master and crew by the demise charterers are important ingredients in determining whether the ship was on demise charter.

Singapore law has been amended with effect 1 April 2004 to allow the arrest of a demise chartered ship. In a hypothetical situation where a shipowner, such as Cendrawasih, argues that the vessel was demise chartered to another company, the cargo claimant can still arrest the vessel even if it is the demise charterer, and not the shipowner, who is personally liable on the claim.

      

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