DMC Rating Category: Developed

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

The plaintiff company entered into a joint venture with the defendant, evidenced by a Memorandum of Understanding ("MOU"). Under the MOU, the defendant was to secure contracts for dredging and land reclamation works in Malaysia. The plaintiff was to provide the dredgers, equipment and technical assistance. Under the MOU, the plaintiff company supplied the "Inai Seroja", which it chartered on demise to the defendant.

The plaintiff subsequently had various claims against the defendant under the MOU. The plaintiff arrested the "Inai Selasih", a ship owned by the defendant.

The defendant unsuccessfully applied to the Registrar to set aside the Writ of Summons and Warrant of Arrest. The defendant appealed. The grounds of the defendant’s appeal were that

(a) The MOU did not fall within the scope of section 3(1)(h) of the High Court (Admiralty Jurisdiction) Act (the "Act") as it did not relate to the use or hire of the "Inai Seroja"; and

(b) The defendant was not the charterer of, or in control or in possession of, the "Inai Seroja" because the charterparty relied on by the plaintiff was a sham. Therefore, the requirements of section 4(4) of the Act, which provides that the party liable in personam must fit that description at the time the cause of action arose, were not satisfied.

As to (a), Section 3(1)(h) of the Act provides that the High Court has admiralty jurisdiction to hear "any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship". The defendant argued that the plaintiff’s claim in this instance did not fall within the meaning of section 3(1)(h) on the grounds that the MOU was not an agreement for the hire or use of the "Inai Seroja", but one that related to dredging and land reclamation works in Malaysia. The defendant further argued that the deployment of two dredgers by the plaintiff was incidental to its participation in the MOU. The MOU was not confined to the hire or use of these dredgers.

Judgment
(1) The judge held that the defendant’s arguments on section 3(1)(h) failed. A joint venture involving the use of an identifiable ship was, in a proper case, capable of falling within the scope of section 3(1)(h) of the Act. However, not any involvement would suffice. There must be some reasonably direct connection with the use of the vessel and the joint venture. The plaintiff was able to prove this connection in the instant case. The MOU itself provided that the primary object of the MOU should be the deployment of the dredgers.

(2) The plaintiff’s claim failed, however, as it did not satisfy the requirements under section 4(4) of the Act. The plaintiff was unable to prove on the balance of probabilities that the defendant was the charterer of the "Inai Seroja" at the time the cause of action arose. The evidence showed that the charterparty was created merely for appearance’s sake and was really a sham giving rise to no legal rights and obligations.

(3) The Judge also found that the arrest was wrongful. The plaintiff had acted mala fides (in bad faith) in arresting the "Inai Selasih" on the basis of a bareboat charter which it knew was a sham. The court had been misled by the plaintiff’s non-disclosure of material facts into issuing a Warrant of Arrest. The plaintiff was ordered to pay damages for wrongful arrest. Both the Writ of Summons and Warrant of Arrest were set aside.