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RECENT DEVELOPMENTS IN SINGAPORE MARITIME LAW

Toh Kian Sing Partner, Admiralty & Shipping25 May [email protected]

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Recent Developments in Singapore Maritime Law

Specifically, I shall deal with the recent developments in the following areas:-

(A) Bills of Lading

(B) Charterparties

(C) Limitation of Liability

(D) Maritime Arbitration

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A. BILLS OF LADING

I. THE RAFAELA S [2005] All ER (D) 236

II. UCO BANK V GOLDEN SHORE TRANSPORTATION PTE LTD [2005] SGCA 42

III. THE JORDAN II [2004] UKHL 49

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A. BILLS OF LADING

I. THE RAFAELA S [2005] All ER (D) 236

- Facts : The case concerned printing machinery which were damaged in the course of their carriage from Felixstowe to Boston. The bill of lading issued in this case was straight bill of lading

- Issue: Whether the contract for the carriage was covered by “a bill of lading or any similar document of title” within the meaning of section 1(4) of the English Carriage of Goods by Sea Act 1971and Art 1(b) of the Hague Visby Rules

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- The House of Lords held that a straight bill of lading was a “bill of lading or any similar document of title” within the meaning of the Hague Visby Rules.

Rationale:

(i) The document described itself as a bill of lading;

(ii) Although it was not a bill transferable by endorsement, it was issued in more than one original and transferable to a named consignee;

(iii) Presentation was necessary to obtain delivery of the goods and that this was a fundamental characteristic of all bills of lading; and

(iv) There was no policy reason as to why a named consignee who receives an order bill and a named consignee who receives a straight bill of lading should have different protection as the Hague and Hague Visby Rules are aimed at protecting the rights of such third parties

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II. UCO BANK V GOLDEN SHORE TRANSPORTATION PTE LTD [2005] SGCA 42

- Facts: Owners of vessel issued four bills oflading to cover shipments of logs from East Malaysia to Kandla. All four B/Ls were made to the “order of UCO Bank”, who had issued L/Cs for the shipments

- Unknown to the Bank, Owners also issued switched b/ls at the request of the shippers.

- The 4 original B/Ls were presented to HSBC, the negotiating bank, by the shippers for negotiation. The B/Ls were not indorsed to HSBC when they negotiated the documents, and HSBC in turn did not negotiate them to UCO Bank.

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- Thus, B/Ls were received by UCO Bank without any indorsement. UCO Bank paid under the L/Cs but did not receive reimbursement and UCO Bank then sued the owners for failing to deliver the cargo under the B/Ls.

- The Owners argued that as the shippers did not endorse the original B/Ls to HSBC when they negotiated the documents, and HSBC in turn did not indorse them to UCO Bank, UCO Bank did not become a lawful holder of the B/Ls.

- However, the Court of Appeal held that UCO Bank was a holder of the original B/Ls under the Bills of Lading Act 1994 and had title to sue.

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- The original B/Ls were “to order” bills which were transferable and were therefore governed by the Act. The nature of a B/L is determined as at the date of issue and does not change by subsequent events.

- The transfer of the B/Ls to HSBC without any indorsement did not change the B/Ls into non-transferable B/Ls. Once the named consignee comes into possession of the B/L, the consignee will, pursuant to s5(2)(a) of the Act, become the lawful holder of theB/Ls even without any indorsement by the shipper. This is not limited to a direct transfer by the shipper to the consignee.

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III. THE JORDAN II [2004] UKHL 49

- Facts: The charterparty provided that loading, stowing, lashing, securing, dunnaging and discharging operations were to be carried out by charterers/shippers/receivers.

- The bills of lading issued in respect of the cargo incorporated the terms of the terms of the charterparty and also incorporated the standard clause paramount.

- The initial claim arose as a result of damage to the cargo and it was agreed that the damage had occurred at some point during the loading, stowing, and securing operation or during discharge.

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- The cargo interests’ main argument was that the FIOS terms as incorporated in the bills of lading fell foul of Articles III (2) and (8) of the Hague Visby Rules.

- The cargo interests’ argument was that Article III (2) laid down certain non-delegable duties that the carrier must undertake and any attempt to transfer responsibility for these operations to another party (i.e. the shippers/ receivers) should fall foul ofArticle III (8) and be rendered of no effect.

- The House of Lords held that a carrier can contract out of responsibility for loading, stowing, dunnaging, securing and discharging the cargo. There can be no doubt that FIOS clauses, provided they are suitably worded, are valid and have full effect.

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B. CHARTERPARTIES

I. THE GOLDEN VICTORY [2005] EWHC Civ 1190

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I. THE GOLDEN VICTORY [2005] EWHC Civ 1190

- Facts: A charterparty was 1998 and included a provision whereby if there was an outbreak of war between any two or more of a list of countries including the USA, UK and Iraq, the Charterers would have the option of cancelling the charter. The earliest contractual date for redelivery of the vessel was 6 December 2005.

- However, on 14 December 2001, the Charterers repudiated by redelivering early.

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- Issue arose as to the level of damages available to owners, i.e.either damages assessed up until the point when the charter would otherwise have ended, namely, 6 December 2005 (“Owners’ contention”); or damages are to be assessed up until the point in time when the charter would have come to an end in any event, i.e. 20 March 2003 when war broke out between, inter alia, the USA, UK and Iraq.

- The Court of Appeal held that the Charterers’ exposure to pay damages to the Owners was limited to the date of the outbreak of the second Gulf War on 20 March 2003.

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- After all, the aim of damages for breach of contract was to compensate the innocent party.

- Owners were not entitled by reason of the breach to earn damages beyond the amount to which they would have been entitled had there been due performance by the Charterers.

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Recent Developments in Singapore Maritime LawSIGNIFICANCE OF THE COURT OF APPEAL DECISION:

- The decision was inevitable as otherwise, a finding in Owners’favour would have effectively allowed a punitive element to enter into the assessment of damages.

- On the other hand, the result of the decision may arguably encourage a charterer to delay making any claim in the hope that they may be able to take the benefit of a future event thatwould allow them to terminate the charter at an earlier date.

- The Court however appeared not to have been concerned by this outcome holding that issues of certainty, finality and easeof settlement must yield to the greater importance of achieving an assessment of damages and compensation which best reflects the actual loss which an owner can, at whatever is the date of the assessment, be seen to have suffered as a result of the repudiation.

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C. LIMITATION OF LIABILITY

I. Present Legislative Framework in Singapore

II. THE DARFUR [2004] EWHC 1506

III. WESTERN REGENT [2005] 2 LLR 359

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Recent Developments in Singapore Maritime LawI. Present Legislative Framework in Singapore

- Limitation of Liability for shipowners for maritime claims is dealt with statutorily under Part VIII of the Merchant Shipping Act (Cap. 179).

- Such claims include those for death, injury, loss or damage to goods occurring on board or in connection with the operation of a vessel.

- Prior to the Merchant Shipping (Amendment) Act 2004, the regime for limitation of liability was based on the 1957 Convention. With the amendment, Singapore gave effect to the 1976 Convention.

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- However, the amendment only affect liability arising out of an occurrence which took place after 1 May 2005.

- Limits of liability is prescribed by Article 6 - derived by multiplying the vessel’s tonnage (i.e. gross tonnage, determined in accordance with the International Convention on Tonnage Measurement of Ships, 1969) by the prescribed number of units of account as laid down under Article 6(1).

- Unit is the Special Drawing Right (SDR).

- Exchange rate for the Singapore dollar as of today is 1 SDR = SGD 0.423945.

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- A catalyst for the adoption of the 1976 Convention was the decision of the Court of Appeal in The Sunrise Crane [2004] 4 SLR 715, which involves a claim for damage caused to the ‘PRISTINE’ by the defendants’ failure to give full details of the dangerous nature of a cargo of contaminated nitric acid which the ‘PRISTINE’ had undertaken to receive for disposal.

- Defendant shipowners had appointed competent masters and officers to serve on the ‘SUNRISE CRANE’ who were specifically trained to handle dangerous cargo such as nitric acid.

- Still, this did not absolve the defendant from its duty to ensure that there was a proper system on board the vessel for dealing with the cargo.

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- Hence the requirement under the 1957 Convention of absence of fault and privity was not satisfied.

- It was observed by the Court of Appeal that the protection accorded to shipowners under the 1957 Convention has at times become illusory.

- Another case which illustrates the illusory protection of the 1957 Convention is the recent decision of Antara Koh Pte Ltd v Eng Tou Offshore Pte Ltd [2005] 4 SLR 523

- Facts: The tug, which was towing the crane barge, Antara Koh88, sank, with the loss of seven lives, when the crane mounted on Antara Koh 88 toppled over.

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- Cause of the casualty - failure of the crane’s boom due to the inadequate welding of the boom connectors, i.e. negligent act ofthe plaintiffs

- Court found that there was no proper system for the maintenance of the crane

- Such omission led to the failure to detect the defect in the boom, which led to the casualty; appointment of competent personnel to operate the crane alone was insufficient to prove the absenceof fault or privity.

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II. THE DARFUR [2004] EWHC 1506

- Facts: A collision took place between DARFUR and HAPPY FELLOW in 1995 which gave rise to proceedings in Le Havre.

- Time charterers of the DARFUR commenced proceedings in the English Courts against the owners of the DARFUR claiming damages for breach of the charterparty and an indemnity in respect of various claims that the time charterershad incurred or would incur as a result of the collision.

- The owners of DARFUR commenced a limitation action in England.

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- Issue dealt with was whether the following claims are limitable under Articles 2(i)(a) and 2(i)(f) of the 1976 Convention:-

i. stevedoring expenses advanced by the charterers following the vessel’s arrival at Le Havre shortly after the collision;

ii. third party liability insurance costs incurred by charterersfollowing deviation of the vessel to Le Havre;

iii. cargo transhipment costs;

iv. the cost of chartering in a substitute vessel whilst the DARFUR was out of service;

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v. charterers’ loss of profits; and

vi. wasted management time.

- The Court found that since the items were consequential loss flowing from damage to the shipowners’ own vessel, they were not limitable, following the decision of the Court of Appeal decision in CMA DJAKARTA [2004] 1 Lloyd’s Rep 460, that consequential loss was not limitable.

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III. THE WESTERN REGENT [2005] 2 LLR 359

- Facts: The WESTERN REGENT was in the process of towing 6 seismic streamers when two of these streamers made contact with the ELLEN GRANT marker buoy which was positioned at a well head in the Total Dunbar oil field.

- As a result, the marker buoy was alleged to have been dragged from its position damaging the well head installation in the process. Total E&P UK Plc operated the Dunbar field and was the owner of the well head installation said to have been damaged.

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Recent Developments in Singapore Maritime Law- The Owners and the Charterers issued proceedings in London

claiming a declaration of entitlement to limit their liability for the incident under the 1976 Convention. They also made a payment into Court of an amount equivalent to the Limitation Fund under the 1976 Convention, which was GBP 2.8m.

- Total then commenced proceedings in Texas, claiming damages in respect of damage to property, loss of production and business interruption of about US$9.9m in total.

- In Texas, limitation was based on the value of the vessel post-incident and not on 1976 Convention limits. That value was likely to be in excess of Total’s entire claim.

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- Total challenged the jurisdiction of the English Court to hear the limitation claim on the grounds that under the 1976 Convention, there had to be pre-existing claims before an owner could issue limitation proceedings.

- The Court of Appeal held that there was nothing in the 1976 Convention which required a person wishing to limit his liability to wait until a claimant had started proceedings in England before invoking his right to limit.

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SIGNIFICANCE OF THE COURT OF APPEAL DECISION:

- Permission to appeal to the House of Lords has been granted and it remains to be seem whether their Lordships will follow the Courts below.

- However, pending the appeal, the position under English law and most likely, Singapore law, is that a potential defendant is entitled to take pre-emptive action to obtain a limitation decree and does not have to wait for a claim to be brought against it first.

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D. MARTIME ARBITRATION

I. THE CAPAZ DUCKLING [2006] SGHC 36

II. Establishment of the Singapore Chamber of Maritime Arbitration (SCMA)

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I. THE CAPAZ DUCKLING [2006] SGHC 36

- Facts: A Memorandum of Agreement (MOA) was entered into for the sale of a vessel.

- The completion was to take place in Singapore and funds were to be transferred to the seller’s account in Singapore.

- However, the seller was in a bad financial condition and the buyers applied for a mareva injunction in aid of a foreign arbitration proceedings.

- The Court held that the Singapore court do not have the power under section 12(7) of the IAA to issue a MarevaInjunction over the Singapore assets of a foreigner in support of a foreign arbitration.

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II. Establishment of the SCMA

- The SCMA was established in 2004 and provides the international maritime community with an independent and reliable dispute resolution institution in Asia.

- Presently, more than 40% of the world’s shipping tonnage is owned or controlled by Asian interests.

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Attractiveness of using Singapore as an arbitration forum:-

- UNCITRAL Model Law - Party to the New York Convention- Strong tradition of the rule of law- Maximum judicial support of arbitration, minimum intervention- Freedom of choice of counsel in arbitration proceedings- Competent arbitration professionals - Lower cost than in almost any other major centre - Confidentiality of arbitration proceedings is fully protected

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