The “CARAKA JAYA NIAGA III-11” [2021] SGHC 43

Introduction

When two vessels are involved in a collision and both vessels are to blame for the collision occurring, the loss and damage suffered by the owners (which reference includes demise charterers) of the respective vessels will ordinarily give rise to claims and cross-claims by one owner against the other. Under Singapore law, liability for the collision is apportioned in accordance with s 1 of the Maritime Conventions Act 1911 (Cap IA3, 2004 Rev Ed) (“MCA 1911”). The general rule is that liability is apportioned according to the degree to which each vessel was at fault.

Depending on the apportionment of liability and the recoverable quantum of each shipowner’s loss and damage based on that liability apportionment, one shipowner may be either the net payor (ie, net paying party) or the net payee (ie, net receiving party). This is because in practice, the quantum of the smaller recoverable claim is deducted from the quantum of the larger recoverable claim, leaving only one net balance to be paid by the net payor to the net payee. This outcome is the result of applying what is known as the “single liability principle”.

The application of the single liability principle as summarised above is a straightforward one in cases where the claims of both shipowners against each other are not time-barred. However, what happens in a case where the claim of one of the shipowners against the other is time-barred? Can that shipowner, as the net payor, still avail itself of the single liability principle in order to reduce its liability to the net payee? These questions lie at the centre of the application before me. I am given to understand by counsel that this is the first case in which these questions have squarely arisen for determination in Singapore whereas they have been considered once in the English High Court (see [18] below).

Background

In HC/SUM 2585/2020 (“SUM 2585”), the defendant sought an order for the court to determine a preliminary question of law or issue pursuant to O 33 r 2 of the Rules of Court (Cap 332, R5, 2014 Rev Ed) (“ROC”) and/or the inherent powers of the court. At the hearing of SUM 2585 on 21 September 2020, there was initially some disagreement between the parties as to whether the original phrasing of the question by the defendant was appropriate. After hearing the parties and with input from the court, the following question was framed with the consent of the parties (“Question”):

The agreed facts and procedural history

The factual matrix surrounding the Question is not in dispute. The agreed facts are set out in Annex A of my order dated 21 September 2020 (“Order”).

The first plaintiff is the registered owner of the vessel Grand Ace12 and the second plaintiff is its demise charterer. The defendant is the demise charterer of the vessel Caraka Jaya Niaga III-11.

On or about 3 April 2017, a collision occurred between the Grand Ace12 and the Caraka Jaya Niaga III-11. Both the plaintiffs and the defendant claim to have suffered loss and damage as a result of the collision.

Under s 8 MCA 1911, the time-bar to bring proceedings (including by way of a counterclaim) came into effect on or about 3 April 2019.

On 29 March 2019, the plaintiffs issued an in rem writ against the Caraka Jaya Niaga-III 11 in HC/ADM 48/2019 (“ADM 48”).

On 6 May 2019, the writ in ADM 48 was served on the Caraka Jaya Niaga-III 11.

On 13 May 2019, the defendant issued an in rem writ against the Grand Ace12 in HC/ADM 64/2019 (“ADM 64”). The writ in ADM 64 was not served and lapsed on or about 13 May 2020.

In ADM 48, the defendant applied in HC/SUM 2924/2020 filed on 12 June 2019 for an extension of time, pursuant to s 8(3) MCA 1911, to maintain a counterclaim against the plaintiffs notwithstanding that the counterclaim was by then time-barred under s 8(1) MCA 1911.

The application was heard on 19 August 2019 by an assistant registrar (“AR”) and dismissed on 4 October 2019. No appeal was brought by the defendant against the decision of the AR.

Accordingly, the defendant’s claim or counterclaim against the plaintiffs arising out of the collision is time-barred.

On 11 June 2020, the plaintiffs and defendant entered into a Consent Judgment which provided that the plaintiffs shall bear 40% of the blame for the collision and the defendant 60% of the blame. The Consent Judgment was entered into without prejudice to the defendant's reliance on the single liability principle and without prejudice to the plaintiffs' right to challenge the defendant's reliance on the single liability principle when so presented or argued.

These are the agreed facts which form the factual substratum on which the Question is to be determined. After making the Order, I also heard the parties’ substantive arguments on the Question on 21 September 2020 and reserved judgment thereafter.

The parties’ arguments

The defendant argues that the fact that its counterclaim is time-barred is “irrelevant” because it is merely seeking to defend itself against the plaintiff’s claim by relying on the “single liability principle” as applied in The Khedive [1882] 7 App Cas 795 (“The Khedive”). It is not seeking to bring any proceedings against the plaintiffs. Based on the apportionment of liability agreed in the Consent Judgment (see [15] above), the plaintiffs would expect to recover 60% of their recoverable loss and damage and the defendant 40% of its recoverable loss and damage. The defendant argues that it should be entitled to set-off 40% of its loss and damage against 60% of the plaintiffs’ recoverable loss and damage in reliance on the single liability principle, thereby reducing its liability to the plaintiff to the net sum due.

In support of its case, the defendant relies primarily on the English High Court’s decision in MIOM 1 Ltd v Sea Echo ENE (No 2) [2012] 1 Lloyd’s Law Reports 140 (“Sea Echo”). Mr R Govin, counsel for the defendant, contends that Sea Echo should be followed and applied in Singapore. In particular, Mr Govin draws my attention to the following paragraphs of Justice Nigel Teare’s judgment (at [76], [78] – [79]):

On the other hand, counsel for the plaintiffs, Ms Vivian Ang, submits that the defendant is not entitled to rely upon the single liability principle to diminish or reduce the plaintiffs’ claim. She submits that such a backdoor route to circumventing the time bar cannot be countenanced, and that the single liability principle does not apply where the counterclaim is time-barred. The plaintiffs also contend, among others, that the decision in Sea Echo should not apply to the present case as it can be distinguished on the facts and is, in any event, unsound and should not be followed.

Two preliminary points

Before dealing with the application and the Question proper, I make two preliminary points.

Second, it is also important to understand the nature and effect of the time bar under s 8 MCA 1911.

Section 8 MCA 1911 prescribes a two-year time bar in respect of, among others, collision claims and states as follows:

Time bars may take effect by either: (a) barring the remedy sought by the party whose claim is not brought in time; or (b) extinguishing altogether the substantive rights underlying one’s claim (Toh Kian Sing, Admiralty Law and Practice (3rd Ed, 2017) (“Toh Kian Sing”) at p 428).

It is well established that the time bar under s 8 MCA 1911 is procedural in nature and falls into the former category. Thus, a plaintiff’s failure to bring its claim within the time-limit prescribed by s 8 MCA 1911 merely bars the remedy sought by the plaintiff (The Aries Tanker Corporation v Total Transport Limited [1977] 1 Lloyd’s Rep 334 at 402c). In other words, s 8 MCA 1911 bars the “maintainability” of proceedings by a plaintiff (Sea Echo at [36] and [78]).

It is also accepted that s 8 MCA 1911 applies equally to counterclaims (The El Arish [1994] 1 SLR(R) 141 in the context of s 8 MCA 1911 and The Pearl of Jebel Ali [2009] 2 Lloyd’s Rep 484 at [32] and [34] in relation to s 190 of the UK Merchant Shipping Act 1995).

Thus, the fact that the defendant’s counterclaim is time-barred prevents the defendant from seeking any remedy for its counterclaim but does not extinguish the underlying rights which gave rise to the counterclaim.

Reverting to the case at hand, the issue before me pivots on whether the single liability principle is applicable even when the defendant’s counterclaim is time-barred, and whether the counterclaim may be raised, not as a remedy in the sense of a cause of action seeking substantive relief (since the remedy is time-barred), but simply as a way to reduce the defendant’s liability to the plaintiffs.

The single liability principle

In my judgment, the resolution of the Question very much turns on the true nature and operation of the single liability principle. Annex B of the Order states that:

Thus, it is critical to first understand what principle was decided and applied in The Khedive, and the reasons and context underpinning the decision.

At its core, the single liability principle may be summarised as follows. Where two vessels are involved in a collision for which both vessels are to blame, there does not exist two cross-liabilities in damages (ie, a separate liability on the part of one vessel to the owner of the other vessel for the proportion of his loss and vice versa). Instead, there is only a single liability for the difference between the moiety (ie, a portion) of the larger claim and a moiety of the smaller claim (see The Khedive at 801 – 807, especially at 801 where the central issue in The Khedive is framed). That difference is then payable by the net payor to the net payee.

The Khedive was a case involving a collision between two vessels, the Voorwaarts and the Khedive. The actual circumstances leading up to the collision are not relevant for the present purposes. It suffices to say that the collision caused damage to both vessels and to the cargo onboard. The damage to the Voorwaarts was more extensive than the damage to the Khedive. The owners of the Voorwaarts brought an action against the owners of the Khedive and the owners of the Khedive counterclaimed in respect of their own loss and damage. Both vessels were subsequently held equally to blame for the collision. The owners of the Khedive then commenced a limitation action and set up a limitation fund. The fund in court was insufficient to satisfy all the claims for which the owners of the Khedive were answerable in damages.

The owners of the Khedive submitted that the limitation fund ought to be apportioned rateably between the owners of the Voorwaarts and the other claimants. The owners of the Khedive also contended that the in rem action brought by the owners of the Voorwaarts should be stayed except as regards to the counterclaim of the Khedive’s owners which they sought to continue. On the other hand, the owners of the Voorwaarts argued that their claim against the limitation fund was for a moiety of the damage that the Voorwaarts had suffered less a moiety of the damage sustained by the owners of the Khedive, thereby wiping out the smaller claim of the owners of the Khedive. The owners of the Voorwaarts contended that once the respective damages had been ascertained and the net balance in favour of Voorwaarts established, both the claim and counterclaim should be stayed, leaving the owners of Voorwaarts to prove their rateable claim against the limitation fund of the Khedive. In short, the issue before the House of Lords in The Khedive was whether the tonnage limit of liability of the Khedive applied only after each shipowner’s proportionate claim had been taken into account and a single liability had been determined.

The House of Lords reversed the English Court of Appeal’s decision and answered the question in the affirmative in favour of the owners of the Voorwaarts. It held that the owners of the Voorwaarts were entitled to prove against the limitation fund of the Khedive for a moiety of their damage, less a moiety of the damage suffered by the owners of the Khedive, and to be paid, in respect of the net balance due to them, pari passu with the other claimants out of the limitation fund of the Khedive.

It is not easy to discern the true ratio decidendi in The Khedive which requires a close reading of the leading opinion of the House of Lords delivered by Lord Selborne L.C. The core inquiry was framed as follows (at 801):

Crucially, Lord Selborne L.C. thought that the “solution of this question”, depended “upon the true effect of the procedure, and the forms of decrees, of the Admiralty Court, in this class of cases” [emphasis added] involving both-to-blame collisions (The Khedive at 801).

Lord Selborne L.C. then embarked upon an examination of the historical procedure of the English Court of Admiralty in collision actions, and stated that when a suit was brought following a collision, it was always by one party, alleging the other party to be at fault. There would also generally be a cross-suit by the other party, with a like allegation of fault against his opponent in cases where both parties were ultimately found to be at fault and both vessels had sustained damage (The Khedive at 802). Thereafter Lord Selborne L.C. summarised the genesis and workings of the single liability principle as follows (at 802 - 803):

[emphasis added in bold, added emphasis in bold underline]

Based on Lord Selborne L.C.’s summary above of the history behind the single liability principle and how it operated, the critical points to note are that the single liability principle was, first, borne out of the procedure applied in the English Court of Admiralty dating back to at least the 1800s. Second and more importantly, the application of the single liability principle clearly presupposed that both ships were at fault, both ships suffered damage and both shipowners advanced claims and counterclaims or cross-claims against each other that were valid (ie, that were not time-barred), be it in one suit or separate but conjoined suits. It was in this context that separate decrees on liability were issued in favour of each shipowner and, if a “monition” was issued by the Admiralty Registrar, it would be issued in favour of one party only “for the balance representing one moiety of the excess of the aggregate beyond equality.”

In my judgment, this is the true essence of the single liability principle. It is in reality, a rule of procedure that has its origins in the “ancient rule of the Admiralty” (per Lord Selborne L.C. at 804). The key point is that the single liability principle as decided and applied in The Khedive presupposes the existence of valid or maintainable claims and cross-claims or counterclaims. This is so that the court could then, following the procedure in the Court of Admiralty, pronounce a single judgment (or “monition”) in favour of the net receiving party for a moiety of its damage beyond the point of equality. It should be noted that on the facts of The Khedive, neither the claim of the Voorwaarts nor the counterclaim of the Khedive was time-barred.

My conclusion above is further supported by Lord Selborne L.C.’s speech at 806 – 807:

In my view, the logical corollary of the passage quoted above is that the single liability principle as applied in The Khedive requires that both the claim and the cross-claim (or counterclaim) are maintainable and not time-barred. This being the case, with respect, I do not think that a shipowner who expects to be the net payor can instead of issuing proceedings in time, sit back, do nothing and rely on the single liability principle to defend himself simply because “[h]e is not bringing proceedings” (Sea Echo at [78] – [79] as reproduced above at [18]). The single liability principle, as a procedural rule, does not, in my view, apply or operate in a case where s 8 MCA 1911 is applicable to prevent the defendant from bringing or maintaining proceedings (including a counterclaim) in the first place.

I note that in arriving at his view (see [18] above), Teare J derived support from the decision of Dr Lushington in The Seringapatam (1848) 3 Wm Rob 38 (“The Seringapatam”), a decision which was also cited by Lord Selborne L.C. and Lord Blackburn in The Khedive at 806 and 821 respectively. Mr Govin also relied on The Seringapatam to support his argument that the application of the single liability principle did not require a valid or subsisting counterclaim.

With respect, I do not think The Seringapatam furthers the analysis. It is also a case that is distinguishable on its facts. The decision itself appears to have involved a scenario where there were, in fact, valid and maintainable claims and cross-claims although the latter was subsequently discontinued.

The Seringapatam involved somewhat peculiar circumstances. A collision occurred in England between a foreign owned vessel, the Harriet and a British ship, the Seringapatam. The owners of the Harriet brought an action for damage in the English Admiralty Court and the owners of the Seringapatam brought a cross-action against them. As the Harriet had sunk following the collision and its owners were foreigners, the owners of the Seringapatam could not serve the writ in their cross-action. The owners of the Seringapatam thus applied to stay the action brought by the owners of the Harriet until the latter furnished bail in the cross-action brought by the Seringapatam against the Harriet (an application not dissimilar to that permitted under O 70 r 27 of the ROC). The application to stay the Harriet’s action was dismissed by Dr Lushington. Subsequently, the owners of the Seringapatam discontinued their cross-action against the owners of the Harriet because the former were unable to compel the latter to enter an appearance in the cross-action and had no security for their claim.

It was in those unusual circumstances that the court was faced with a motion by the owners of the Seringapatam for an order that the court, in assessing the amount of damage due to the owners of the Harriet, deduct a moiety of the damage sustained by the Seringapatam. Dr Lushington dismissed the motion holding that, the cross-action having been discontinued, the owner of the Seringapatam could not have the benefit of a decree which, in point of fact, had never been pronounced in their favour. However, to prevent injustice, the court did not permit the owners of the Harriet to recover its damages unless they submitted to the deduction of a moiety of the damage sustained by the owners of the Seringapatam.

It is clear from the facts summarised above that the court’s sympathy was with the owners of the Seringapatam (even though the application by its owners was disallowed). It remained true that the owners of the Seringapatam had been compelled to abandon their cross-action. However, leaving that aside, it is material to note from the case report that the owners of the Seringapatam had commenced their cross-action before any time-bar had set in. There is also no suggestion in the case report that the cross-claim of the Seringapatam was time-barred, even at the time of Dr Lushington’s decision on their application. The Seringapatam is thus not an authority that supports the defendant’s argument that the single liability principle would apply even when the claim, cross-claim and/or counterclaim of one of the shipowners is barred by the limitation of time.

As I have explained above at [21], Sea Echo was also not, strictly speaking, a case that involved a time-barred counterclaim.

Mr Govin also contended that the essence of the single liability principle is based on equity and fairness in that one party should not be made to pay more than it should when the other party was also partly to blame for the collision.

For the foregoing reasons, I disagree that the essence of the principle is based on considerations of equity and fairness or that such considerations can override others. As explained above at [39], the single liability principle was borne out of a procedure that was applied in the English Court of Admiralty, which procedure in turn operates on the premise that both shipowners’ claims and counterclaims or cross-claims are not time-barred. If the defendant’s argument on fairness and equity was correct, it would, as Ms Ang submitted, effectively render s 8 MCA 1911 otiose or nugatory in a great many cases where a net paying defendant fails to mount its counterclaim in time.

The single liability principle as a form of set-off

I now deal briefly with the defendant’s submission that it is merely seeking to rely on the single liability principle as a form set-off to reduce the amount that it is liable to pay the plaintiff.

I disagree with the defendant’s submission that the single liability principle represents a form of set-off.

Various passages in The Khedive and subsequent cases make clear that the single liability principle does not pertain to set-off or constitute a form of set-off. In The Khedive, Lord Selborne L.C. made this explicit when he stated as follows (at 806 – 807):

The Tojo Maru [1970] P. 21, a case decided almost a century later, involved a claim in the context of a salvage operation carried out negligently. In gist, salvors, in the course of their attempts to salvage the Tojo Maru, negligently caused a fire and explosion onboard the Tojo Maru which resulted in considerable damage to the ship. The salvors commenced arbitration proceedings against the owners for their claim for salvage remuneration. The owners of the Tojo Maru sought to (a) counterclaim against the salvors for causing damage to their ship, and (b) deny the salvors their salvage remuneration by setting it off against the damage suffered by the ship. Amongst others, the owners stated that if the salvors were liable in damages on the owners’ counterclaim, there should be a set-off in respect of the owners’ damages and the salvage reward prior to the salvors limiting their liability. The owners cited the single liability principle in The Khedive in support of their contention.

At first instance, Wilmer LJ (at 48C – 48D) concluded that if a “cross-claim for damages is statute barred under the Limitation Acts, there would be nothing to set-off” and later (at 49A) “[i]t will be seen, therefore, that The Khedive … was not a case of true set-off at all, as was made abundantly clear in the speech of Lord Selborne L.C.” [emphasis added].

While the English Court of Appeal subsequently reversed Wilmer LJ’s decision and remitted the case back to the arbitrator, this was on unrelated grounds. On the question of whether the single liability principle applied in respect of a claim for salvage remuneration and a claim for damage to a ship, the court agreed, obiter, with Wilmer LJ. Salmon LJ echoed Wilmer LJ’s comments and noted that The Khedive “had nothing to do with true set-off but depended upon the old practice in the Admiralty Division relating only to collision cases” (at 75H).

Second, while the application of the single liability principle might in most cases have the same practical effect as applying set-off, the principle in its true unadorned form is, as explained at [39], a procedural mechanism based on a rule of some antiquity originating in the English Court of Admiralty. It thus has nothing to do with set-off.

In light of the foregoing, I disagree with Teare J’s view that “the principle in The Khedive is a form of set-off long recognised in Admiralty law” (Sea Echo at [81]).

Conclusion

In the final analysis, I respectfully disagree with the reasoning in Sea Echo (at [78]). Nonetheless, I find myself, somewhat curiously, in agreement with Teare J’s ultimate conclusion (at [79]) that the application of the single liability principle is not affected by the operation of s 190 of the UK Merchant Shipping Act 1995 (or in the case of Singapore, s 8 MCA 1911). However, I arrive at this conclusion for quite different reasons. In my judgment, the single liability principle as laid down in The Khedive already presupposes that both the claim and cross-claim or counterclaim are not time-barred. Thus, a defendant shipowner who is a net payor would only be able to rely on the single liability principle to reduce its liability if its counterclaim is not otherwise time-barred (ie, the counterclaim is “maintainable” under s 8 MCA 1911).

To that extent and in that context, s 8 MCA 1911 does not add anything to the single liability principle or modify it in any way. If the defendant’s counterclaim is time-barred under s 8 MCA 1911, the single liability principle, quite simply, does not apply.

SUM 2585 requires me to determine the Question (see [4] above). For the foregoing reasons, I determine the Question by answering it in the negative.