Admiralty & Transport Bulletin

THE “CATUR SAMUDRA” [2010] SGHC 18 February 20, 2010

THE “CATUR SAMUDRA” [2010] SGHC 18

Singapore High Court

Steven Chong JC

15 January 2010

Admiralty jurisdiction – Whether claim under guarantee is a claim “arising out of an agreement relating to the use or hire” of a vessel – Section 3(1)(h) High Court (Admiralty Jurisdiction) Act

Summary:

The Singapore High Court held that a claim under a guarantee provided in respect of the charterer’s liability as a condition precedent to a bareboat charterparty was not a claim “arising out of an agreement relating to the use or hire” of a vessel. The claim therefore fell outside of Section 3(1) (h) of the High Court (Admiralty Jurisdiction) Act and did not give rise to a right of arrest.

The Court further held that, on the facts, the Defendant guarantor who was also the parent company of the bareboat charterer was not the person in possession or control of the vessel.

Facts:

The Plaintiff was the registered owner of the vessel Mahakam and the Defendant was PT Humpuss Intermoda Transportasi Tbk.

The Plaintiff had entered into a sale and lease back agreement with Heritage Maritime Ltd, SA (“Heritage”) whereby the Plaintiff purchased the Mahakam from Heritage and leased it back to them under a bareboat charterparty (“the Bareboat C/P”). Heritage was a wholly-owned subsidiary of Humpuss Sea Transport Pte Ltd, who in turn was a wholly-owned subsidiary of the Defendant.

It was a condition precedent under the Bareboat C/P for the Defendant to execute a guarantee in favour of the Plaintiff to secure the due performance and payment of Heritage’s obligations under the Bareboat C/P.

Heritage defaulted on the payment of the charterhire. The Plaintiff terminated the Bareboat C/P and the Mahakam was redelivered to the Plaintiff on 23 June 2009. The dispute between the Plaintiff and Heritage under the Bareboat C/P was referred to arbitration in London, pursuant to the terms of the Bareboat C/P.

The Plaintiff arrested the Defendant’s vessel Catur Samudra and brought an action under the guarantee for payment of outstanding charterhire due and owing by Heritage and for damages for breaches of the Bareboat C/P.

Issue:

The issue before the court was whether a ship owned by a guarantor could constitute a “sister ship” for the purpose of the High Court (Admiralty Jurisdiction) Act (“HCAJA”), and therefore whether the admiralty jurisdiction of the High Court had been correctly invoked against the Catur Samudra.

In deciding this issue, the Court examined:-

(a)       Whether the Plaintiff’s claim under the guarantee  was a claim ‘arising out of an agreement relating to the use or hire’ of a vessel, and thereby fell within Section 3(1)(h) of the HCAJA; and

(b)       Whether the Defendant, being the party who would be liable in personam under the guarantee, was in possession or in control of the vessel at the time the cause of action arose (as required by Section 4(b) of the HCAJA).

Held:

(a)       Whether the Plaintiff’s claim under the guarantee was a claim ‘arising out of an agreement relating to the use or hire’ of a vessel.

The Court held that while courts have tended to interpret the expression “arising out of” broadly and enlarged the types of claims falling within Section 3(1) (h) of the HCAJA, they have nevertheless restricted the claims falling within Section 3(1) (h) to agreements which are in themselves related to the use or hire of a vessel.

The Court further held that the expression “in relation to” did not encompass claims made under agreements which by themselves were not agreements relating to the use or hire of a vessel, but were based on separate agreements which were a step removed from and only indirectly related to the agreement for the use or hire of a vessel.

The Plaintiff’s submission that the guarantee was an agreement relating to the Bareboat C/P, as it was a condition precedent under the Bareboat C/P for the Defendant to execute the guarantee was rejected. The Court held that an agreement which in itself was not an agreement intrinsically related to the use or hire of a vessel could not be transformed into such an agreement by characterizing it as a term or condition precedent of the charterparty.

The fact that the Mahakam was specifically referred to in the recital to the guarantee was not decisive, as there had been cases where agreements which did not refer to the vessel had been held to be within provisions equivalent to Section 3(1) (h), and yet other cases where agreements which did refer to the vessel had been held to fall outside the section. The touchstone was still whether the agreement under which the claim was brought had the requisite “direct connection” with an agreement relating to the use or hire of the vessel.

(b)       Whether the Defendant being the party who would be liable in personam under the guarantee, was in possession or in control of the vessel at the time the cause of action arose.

The court found that the Defendant was not in possession or control of the Mahakam at the time when the cause of action under the guarantee arose.

The Plaintiff submitted that the Defendant was in possession or control of the Mahakam at the time the cause of action arose because Heritage and the Defendant were effectively “a single economic unit with no corporate distinction between them, this rendering each liable for the debts of the other.”

The Court observed that the material used by the Plaintiff in support of its’ submission appeared to be an invitation to the Court to lift the corporate veil in order to show that the Defendant was in reality the charterer of the Mahakam, However, it was clear from the indorsement in the writ of summons that the Plaintiff’s claim against the Defendant was based solely on a guarantee and not under the Bareboat C/P. It was also acknowledged that there was no basis to lift the corporate veil and the Plaintiff was not seeking to do so. In the circumstances, the Court held that the Plaintiff could not rely on the same material to show that the Defendant was in possession or in control of the Mahakam.

The Court further held that the neither the Defendant’s appointment as ship managers of the Mahakam, nor the Defendant’s supply of crew to the vessel established the Defendant’s possession or control of the vessel. A ship manager’s responsibilities over the vessel arise out of their appointment by their principal, and the supply of crew was made at Heritage’s request.