High Court · Decided 7 July 2010

Equatorial Marine Fuel Management Services Pte Ltd v The “Bunga Melati 5”

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[2010] SGHC 193Case no. Admiralty in Rem No 21 of 2010

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Grounds of decision

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Teo Guan Siew AR:
Introduction
[1] This application to strike out an admiralty suit raised a number of issues relating to the invocation of the admiralty jurisdiction of the High Court, including the applicable standard of proof under s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) and whether there is a threshold test of merits at the jurisdictional stage. It entailed a consideration of some recent decisions by our courts in this area, in particular the Court of Appeal decision in The “Vasiliy Golovnin” [2008] 4 SLR(R) 994 and the recent High Court case of The Eagle Prestige [2010] SGHC 93. As there were proceedings in the United States between the same parties preceding the present suit, cross-jurisdictional questions also arose, namely how the well-known “one claim, one ship” rule should apply when foreign proceedings are involved, and when a foreign court ruling is to be considered final and conclusive for the purpose of raising an issue estoppel. The way the substantive claim was pleaded by the plaintiff further brought into play issues of agency and the law on unjust enrichment.
[2] I granted the defendant’s application, and struck out the admiralty writ and statement of claim. The plaintiff has since appealed against my decision. The defendant has also filed a cross-appeal against my refusal to declare that the plaintiff is not entitled to invoke the admiralty jurisdiction of the court by reason of the operation of the “one claim, one ship” rule. The reasons for my decision are set out below.
Background
[3] The plaintiff, Equatorial Marine Fuel Management Services Pte Ltd, brought the present action against the defendant, MISC Berhad, to recover payments for bunkers supplied to the defendant’s vessels. The admiralty writ was served on one of the defendant’s ship, the “Bunga Melati 5”, but the vessel was not arrested. The “Bunga Melati 5” was not one of the vessels which received the bunkers in question, and hence this is a “sister ship action” under s 4(4) of the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“the Act”).
[4] In the plaintiff’s statement of claim, it was alleged that the parties had entered into two fixed price contracts whereby the plaintiff agreed to supply bunkers for the months of August and September 2008, at a price of US$744 per metric ton and US$750 per metric ton respectively, to vessels owned or operated by the defendant (“the Fixed Price contracts”). In addition, the plaintiff had allegedly entered into a further contract with the defendant on a “spot” basis for the supply of bunkers to the defendant’s vessel the MT “Navig8 Faith” (“the Navig8 Faith contract”). An entity known as Compass Marine Fuels Ltd (“Compass Marine”) was the broker acting for the plaintiff for the Fixed Price contracts, while another entity OceanConnect UK Ltd (“OceanConnect”) was its broker for the Navig8 Faith contract. According to the plaintiff, a Malaysian company, Market Asia Link Sdn Bhd (“MAL”), had acted as the buying agent or broker of the defendant at all material times, and had procured bunkers on behalf and in the name of the defendant. The contracts for the supply of the bunkers were purportedly evidenced by emails sent by Compass Marine and OceanConnect to MAL, as well as other documents such as bunker confirmations and contract price confirmations which named the defendant as the contractual buyer for the bunkers.
[5] The plaintiff further pleaded that the defendant had represented to the plaintiff and its brokers that MAL was acting on its behalf and had routinely directed third parties to deal with MAL as the defendant’s agent. In the circumstances, the plaintiff contended that the defendant was estopped from denying that MAL was its agent.
[6] In the alternative to its contractual claim, the plaintiff’s case was that if there were no valid and binding contracts for the sale and supply of the bunkers between the parties, the defendant had been unjustly enriched by the plaintiff’s action in supplying bunkers to the defendant’s vessels. The plaintiff further contended that the offer of a corporate guarantee by the defendant, in the context of earlier US court proceedings in respect of the same dispute, amounted to an admission of liability by the defendant.
[7] Prior to the start of this action, the plaintiff had commenced another set of proceedings in the United States District Court for the Central District of California, based on essentially the same claims as in the present proceedings. The plaintiff filed what is known as a “Verified Complaint” to obtain an attachment order under Rule B of the “Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure for the US District Courts”. The Rule B attachment order was executed against one of the defendant’s vessel, the “Bunga Kasturi Lima” in the port of Long Beach, California.
[8] Shortly after the attachment of the vessel in the US, the defendant offered the plaintiff a corporate guarantee that the defendant would pay to the plaintiff the sum of US$22.4 million (which is equivalent to the plaintiff’s claim amount in the US proceedings), on condition that the plaintiff would withdraw all suits against the defendant and not commence any further actions against the defendant’s vessels. The plaintiff refused to accept the offer.
[9] The defendant then filed a motion to vacate the Rule B attachment order, and to dismiss the Verified Complaint for failure to state a claim (which is akin to a striking out application). The California District Court vacated the Rule B order, on the basis that the plaintiff had failed to establish a valid prima facie case against the defendant for breach of contract or unjust enrichment. The plaintiff filed an appeal, which was dismissed by the United States Court of Appeals for the Ninth Circuit. The motion to dismiss the Verified Complaint was however not considered, and was scheduled for further hearing. That did not take place eventually, because the plaintiff sought a voluntary dismissal of its substantive action.
The defendant’s application
[10] The defendant denied that it had contracted with the plaintiff, and averred that at all material times, it had procured the sale and supply of bunkers for its vessels from MAL as its contractual sellers. The defendant had made payment of the invoices issued by MAL, totalling more than US$17 million, for the supplies which form the subject matter of the plaintiff’s claims. The defendant also asserted that it had never received, and had no knowledge at all of any of the emails or other documentation which allegedly evidenced the contracts between the plaintiff and defendant.
[11] In the present application, the defendant prayed for inter alia the following orders:
(c) A declaration that the defendant is not entitled to invoke the admiralty in rem jurisdiction of the court against the defendant’s vessel the “Bunga Melati 5” or any other vessel owned by the defendant in relation to the plaintiff’s alleged claim.
Admiralty jurisdiction of the High Court
[12] Section 4(4) of the Act states:
[13] It is well established, and was not in dispute, that to invoke the High Court’s admiralty jurisdiction against a sister ship, the following requirements must be satisfied:
(i) the claim falls within one of the limbs in s 3(1)(d) to (q) of the Act;
(ii) the claim arises in connection with the offending ship – s 4(4)(a);
(iii) the person who would be liable on the claim in an action in personam (“the relevant person”) was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship – s 4(4)(b); and
(iv) the relevant person is, at the time the action is brought, the beneficial owner as respect all the shares in the sister ship.
It was further common ground between parties that the same principles apply whether the in rem jurisdiction is established by an arrest of a vessel, or by service of the in rem writ on a vessel: The Fierbinti [1994] 3 SLR(R) 574.
[14] To show that the cause of action falls within one of the categories of s 3(1), the Court of Appeal in The “Vasiliy Golovnin” [2008] 4 SLR(R) 994 (“The Vasiliy Golovnin”), adopting its earlier ruling in The Jarguh Sawit [1997] 3 SLR(R) 829, decided that the burden on the plaintiff is one of showing a good arguable case. In particular, the Court of Appeal (at [49]) endorsed the following description of the state of Singapore law by Toh Kian Sing SC in Admiralty Law and Practice (LexisNexis, 2nd ed., 2007) (“Admiralty Law and Practice”) at 46:
[15] It should however be pointed out that the footnote to the learned author’s commentary reproduced above goes on to state the qualification that there are certain cases, such as The Alexandrea [2002] 1 SLR(R) 812 and The Andres Bonifacio [1991] 1 SLR(R) 523, which held that the onus on the plaintiff is in fact to establish, on a balance of probabilities, that one of the limbs of s 3(1) apply.
[16] Indeed, there are very recent High Court decisions which would appear to adopt a similar view that the threshold for subject matter jurisdiction under s 3(1) is the more onerous one of a balance of probabilities. In The Eagle Prestige [2010] SGHC 93 (“The Eagle Prestige”), although Belinda Ang J referred to the Court of Appeal’s decision in The Vasiliy Golovnin that the standard of proof in the context of s 3(1) is the good arguable case yardstick, the learned judge however went on to make the observation (at [49]) that “the proper standard of proof on jurisdiction is on a balance of probabilities”.
[17] Ang J also referred to another recent High Court decision by Steven Chong JC (as he then was) in The “Catur Samudra” [2010] SGHC 18 (“The Catur Samudra”), where one of the issues was whether a claim under a guarantee for the liabilities of a related company under a charterparty constituted a claim arising out of an agreement relating to the use or hire of a vessel within the meaning of s 3(1)(h). The learned judicial commissioner appears, and indeed was interpreted by Ang J to have held that the plaintiff there failed to establish on a balance of probabilities that s 3(1)(h) was applicable. In addition, Ang J cited other cases such as The Inai Selasih (ex “Geopotes X”) [2005] 4 SLR(R) 1, but these dealt with the standard of proof for jurisdictional questions not under s 3(1) but rather s 4(4) of the Act, an issue to be considered in more detail later in these grounds of decision.
[18] With regard to the proper threshold that a claimant has to discharge to establish the court’s subject matter jurisdiction under s 3(1), there therefore seems to be some degree of uncertainty. One possible rationalisation lies in the perhaps somewhat subtle distinction between the existence of certain underlying facts or a particular state of affairs which go towards establishing the jurisdictional connection in one of the limbs of s 3(1) on the one hand, and the test of whether the legal precondition under one of the limbs of s 3(1) is satisfied on the other. The former needs to be proved on a balance of probabilities (following cases such as The Catur Samudra and The Eagle Prestige), while the latter must be established to the standard of a good arguable case (following the Court of Appeal decision in The Vasiliy Golovnin).
[19] In considering the applicable standard of proof under s 3(1), it may also be worthwhile to recall the requirements that must be satisfied in order to effect service of an action out of jurisdiction. Although obtaining leave to serve process out of jurisdiction of course involves different considerations from invoking the admiralty jurisdiction of the court, it may be argued that the heads of O 11 r 1 of the Rules of Court serve a fairly similar purpose to the limbs under s 3(1) of the Act. The various heads under O 11 r 1 represent various possible connecting factors to Singapore before our courts are prepared to exercise long-arm jurisdiction outside of Singapore, whereas the limbs of s 3(1) spell out the various types of connection that a claim must have to a ship before the admiralty jurisdiction of the High Court can be exercised. It is uncontroversial that the standard to be discharged in relation to satisfying the heads of O 11 r 1 is that of a good arguable case: Seaconsar Far East v Bank Markazi Jomhouri Islami Iran [1993] 3 WLR 756; Goodwill Enterprise (Malaysia) v CT Nominees (in liquidation) [1996] 1 SLR(R) 330. The rationale clearly is that an O 11 application will be assessed at a very preliminary stage of the proceedings and based only on affidavit evidence, such that it would be premature and too onerous to require the plaintiff to show proof on a balance of probabilities of the application of one of the limbs under O 11 r 1. Similar considerations would probably apply at the stage of determining the applicability of s 3(1). It should also be noted that our courts have taken the view that the limbs of s 3(1) should be given a broad and liberal reading: The “Mara” [2000] 3 SLR(R) 31; The “Trade Fair” [1994] 3 SLR(R) 641.
[20] There was no need, however, to reach a conclusive view as to whether the standard of proof under s 3(1) is that of a good arguable case or a balance of probabilities, for the purpose of determining the present application. This was because the defendant did not challenge the applicability of s 3(1) in the present case. The real crux of the dispute was as regards the application of s 4(4).
Jurisdictional requirements under s (4)(4)
[21] The defendant’s primary basis for contending that the plaintiff had invalidly invoked the admiralty jurisdiction of the High Court was that the plaintiff had failed to discharge its burden of establishing, on a balance of probabilities, that the defendant is the person liable in personam under s 4(4) of the Act. More specifically, the defendant contended that the plaintiff failed to show on a balance of probabilities that the defendant had contracted with the plaintiff, instead of MAL, for the supply of the bunkers in question.
[22] In advancing the proposition that a party invoking the admiralty jurisdiction of the High Court has to establish the in personam liability of the defendant on a balance of probabilities, counsel for the defendant, Mr Gurbani, relied on the following paragraphs from the decision of Steven Chong JC (as he then was) in The Catur Samudra (at [22] and [23]):
[23] To buttress the defendant’s position, Mr Gurbani cited the following passage from Admiralty Law and Practice (at 107):
[24] Further, Mr Gurbani referred to Belinda Ang J’s judgment in The Eagle Prestige at [49]:
[25] With respect, the defendant’s argument was misconceived. The starting point is to appreciate what the learned judges and commentator were referring to which requires proof on a balance of probabilities. As is clear, particularly from the above extract of Ang J’s decision in The Eagle Prestige, what needs to be proved on a balance of probabilities are the particular jurisdictional facts stipulated under s 4(4), such as the ownership of the offending ship and of the sister ship, as well as whether there was “possession or control” of the offending ship at the material time. These factual questions are obviously different from the issue of whether there is in personam liability, an issue pertaining to the merits of the claim. As counsel for the plaintiff, Mr Leong, also pointed out, the existence of such jurisdictional facts are required to be proved on a balance of probabilities because the matter of jurisdiction has to be determined once and for all at the interlocutory stage, but these requirements are clearly distinct from the question of the merits of the case. In The Catur Samudra, the court was concerned with the question of whether the defendant was in possession or in control of the offending vessel at the time when the cause of action arose (as it was clear that the defendant was not the owner of the vessel at that material time). The court further considered whether the corporate veil should be lifted so that the defendant was effectively the charterer. The plaintiff in that case failed on both counts, and it was in that context that Steven Chong JC (as he then was) held that the plaintiff had failed to discharge its burden of establishing the jurisdictional requirements under s 4(4). The learned judicial commissioner did not hold that the plaintiff had to, for the purpose of crossing the jurisdictional hurdle, also prove on a balance of probabilities that the defendant is liable in personam to the plaintiff.
[26] The above view is supported by a study of the legislative purpose behind s 4(4), which is clearly to extend the court’s exercise of in rem jurisdiction to not only the offending ship but sister ships as well, and not to impose a new requirement of showing merits in the claim. Section 4(4) of the Act can be traced back to s 4(4) of the Courts (Admiralty Jurisdiction) Ordinance 1961. The Ordinance adopted the provisions of the UK Administration of Justice Act, which inter alia implemented in the UK the sister ship arrest rule to give effect to the International Convention Relating to the Arrest of Seagoing Ships of 1952. In the second reading of the Courts (Admiralty Jurisdiction) Bill, the Minister for Health and Law Mr K. M. Byrne explained the background, the material parts of which are reproduced below (Singapore Parliamentary Debates, Official Report (16 December 1961) vol 15 at col 2377 to 2383 (Mr K. M. Byrne, Minister for Health and Law)):
[27] The phrase “the person who would be liable on the claim in an action in personam” under s 4(4) is therefore meant to identify the person whose ships may be arrested. Section 4(4) is primarily a provision about identifying the ships that may be arrested by reference to the person who would be liable in personam on the assumption that the action succeeds. It is not a provision that seeks to impose a more stringent requirement of merits to be satisfied before the admiralty jurisdiction of the court can be invoked, which is the purport of the defendant’s submission that there is in effect a need to establish in personam liability before s 4(4) is satisfied. The flaw in the defendant’s reasoning is also evident from the decision of Belinda Ang J in The Eagle Prestige itself, wherein Ang J endorsed the following principles enunciated by Willmer J in the leading case of The St Elefterio [1957] 1 Lloyd’s Rep 283 (“The St Elefterio”)(at 287-288):
[28] In Admiralty Law and Practice, the learned author expressed a similar view and provided an excellent explanation for it (at 109 to 110):
[29] Indeed, imposing a requirement on the plaintiff in the present case to prove, on a balance of probabilities at this jurisdictional stage, that the defendant is the party liable in personam in respect of the bunkers supplied, would lead to an untenable result. The central dispute between parties was whether the contracts for bunkers were in fact entered into between the plaintiff and the defendant through the agency of MAL, or whether the defendant had contracted independently with MAL which in turn entered into another contract with the plaintiff. There was no question that the bunkers in issue were supplied to the defendant for its use, and that the defendant had not made any payment to the plaintiff. That being so, if the plaintiff manages to establish on a balance of probabilities that the contract was between the plaintiff and defendant and hence correspondingly that the defendant is the person liable in personam, the plaintiff would in fact be entitled to judgment. Effectively, the plaintiff would be required to show that he can obtain summary judgment under O 14 of the Rules of Court before he is entitled to invoke this court’s admiralty jurisdiction. That would certainly be a surprising conclusion.
[30] Both parties referred to the oft-cited distinction laid down in the High Court decision of The “Opal 3” ex “Kuchino” [1992] 2 SLR(R) 231 between the in rem test and the in personam test under s 4(4). However, it is important to bear in mind that when reference is made to the in personam test, this does not mean a test on the merits of the in personam claim. G P Selvam JC (as he then was) stated (at [10]):
[31] It is clear that when the learned judicial commissioner referred to the in personam test, he was concerned with the identification of the in personam defendant as the owner, or person in possession or control of the vessel, at the time the claim arose. The test is no different in nature from the in rem test, the latter of which deals with the identification of the beneficial owner of the ship at the time the action was started. Both tests therefore deal with the existence of jurisdictional facts, and not the question of merits. As such, the decision is consistent with the other cases analysed earlier (save that the standard of proof for the jurisdictional facts was stated by Selvam JC to be that of only an arguable case, as opposed to the more stringent standard of a balance of probabilities laid down in the more recent cases like The Eagle Prestige and The Catur Samudra).
[32] Belinda Ang J in The Eagle Prestige explained the way that the issue of merits of the case may become relevant in the context of the jurisdictional inquiry, as follows:
Unmeritorious substantive claim
[54] I now come to the other part of The Vasiliy Golovnin (CA) relating to the question of whether the banks’ claims were unmeritorious or clearly unsustainable…On the facts of that case, a good starting point is the test of jurisdiction under s 4(4)(b) (ie, the in personam test). It is important to bear in mind the in personam test in two contexts. The first concerns what has been described as “the low threshold of the merits enquiry” (“Situation 1”), and the second is where the proceedings are frivolous or vexatious or otherwise an abuse of process so as to warrant halting such proceedings in limine by striking out the action under O 18 r 19 of ROC [Rules of Court] or under the court’s inherent jurisdiction (“Situation 2”). Under Situation 2, the merits of the claim are examined as a summary disposal of the action is being sought…
…
[57] In short, it is open to a defendant to apply at an early stage of the proceedings for the writ in rem and action to be struck off on the ground that the action has no chance of success and is, therefore, vexatious. It is at this stage of striking out application that the court is asked to assess the sustainability of the action. It is at this stage of the striking out application that the validity or strength of the claim will be relevant, and the burden on the issue of non-liability lies on the defendant to show that the case is wholly and clearly unarguable. If there is any arguable basis put up by the plaintiff that the action could succeed then the court should not order the striking out of the action…
[60] The assumption under s 4(4)(b) of the HCAJA- that a party would be liable on the claim in an action in personam on the assumption that the action succeeded – is the default position so long as there is no suggestion that the claim is frivolous or vexatious or otherwise an abuse of process (ie, Situation 1 as in [54] above). This default position is reflected in O70 r 4(7)(a) of the ROC [Rules of Court] which requires the affidavit leading the warrant of arrest to state the name of the person who would be liable on the claim in an action in personam. Willmer J in The St Elefterio left open the possibility of striking out the action if the action on the evidence is frivolous or vexatious or otherwise an abuse of process (ie, Situation 2 as in [54] above)…
[emphasis added]
[33] At first blush, it may appear that Ang J took a different approach from what has been advocated in the preceding paragraphs of these grounds of decision, since the learned judge dealt with the question of merits of the case in the context of s 4(4) of the Act, and appears to have treated what is known as the “in personam test” as a test on the merits. On closer examination though, it can be seen that the difference is more apparent than real. In what Ang J described as “Situation 1”, it seems clear that any consideration of merits generally entails merely procedural compliance, specifically with the requirement under O70 r 4(7)(a) that the affidavit leading the warrant of arrest states the name of the person who would be liable on the claim in an action in personam. At the risk of repetition, there is an assumption that that person identified is the person who would be liable in personam if the claim succeeds. It is only in “Situation 2” that there is a real inquiry into the substantive merits of the case, for the purpose of determining whether the action should be struck out for being frivolous or vexatious or otherwise an abuse of process. “Situation 2” is therefore no different from any other non-admiralty action where an application is taken out under O 18 r 19 or under the inherent jurisdiction of the court to strike out an action or claim. In that sense, the approach taken by Ang J is hence in line with the view advocated here, namely that s 4(4) imposes no separate or additional requirement of showing merits in the case so as to establish the admiralty jurisdiction of the court.
[34] However, it is necessary to consider a narrower argument raised by Mr Gurbani, which pertain to the specific situation where there is a dispute as to who the proper defendant is, such as when a defendant denies he is the contracting party. As the jurisdictional requirement under s 4(4) looks to the party who would be liable in personam, the argument was that the substantive merits of the underlying claim in such cases are so enmeshed or intertwined with the basis of jurisdiction that an examination of the merits becomes inevitable even in the context of a jurisdictional challenge. In this connection, Mr Gurbani relied principally on Belinda Ang J’s decision in The Eagle Prestige, particularly the following passage (at [64]):
[35] On behalf of the defendant, Mr Gurbani contended that the facts of the present case precisely involved such a situation where the basis for invoking the court’s jurisdiction was factually inseparable from the substance of the underlying claim. As his argument went, the central substantive dispute on the merits was whether the plaintiff did in fact contract with the defendant through the agency of MAL, and this went equally towards the jurisdictional question of whether the defendant was properly the party who would be liable in personam under s 4(4). That being the case, following The Eagle Prestige, the plaintiff in this case would presumably have to discharge a higher burden in order to stave off a jurisdictional challenge, as compared to a claimant in a situation where there is no dispute that the defendant is the proper party to be sued and the only dispute relates to whether the defendant is in fact liable. Mr Gurbani’s argument went so far as to say that the plaintiff in the present case therefore needs to prove the in personam liability on a balance of probabilities, a contention which for reasons already given earlier (principally at [29]), I did not accept. It should be noted that in The Eagle Prestige decision, Ang J said that the jurisdictional facts in dispute in such cases can be summarily disposed of, but did not expressly make clear what the standard of proof on the plaintiff is in a case where the defendant denies it is the proper party to be sued.
[36] It is also not clear from the cases which Ang J referred to what the standard of proof on the claimant should be where there is a challenge as to the proper party to be sued. There is no clear indication that the standard in such a scenario is necessarily higher. In The Thorlina [1985-1986] SLR(R) 258, the court found that the defendant was not a party to the contract for the repair of the vessel in question and hence would not be liable in personam, but did not elaborate or make clear on what standard of proof that finding was made. As for The AA V [1999] 3 SLR(R) 664, that was a case where the evidence was so clear that the defendants were not a party to the contracts, such that Prakash J thought that it was unnecessary to determine what the proper threshold test under s 4(4) should be. Finally, in The Rainbow Spring [2003] 2 SLR(R) 117, Belinda Ang JC (as she then was) held, referring to The St Elefterio and The Wigwam [1981-1982] SLR(R) 689, that what a plaintiff needs to show is an arguable case that the defendant is the person likely to be liable in personam. It was held that “[i]f the plaintiff's case on jurisdiction is plainly unarguable in that it is bound to fail, the in rem writ would be set aside [emphasis added]”. The test as enunciated resembles closely the usual principles of striking out under O 18 r 19 or pursuant to the inherent jurisdiction of the court. This, together with the reference to the decision in The St Elefterio, suggest that Ang JC in The Rainbow Spring was essentially considering the merits of the case in the same way as how a court would consider the merits in dealing with a striking out application under what the learned judge subsequently termed as “Situation 2” in The Eagle Prestige.
[37] In my view, the cases do not support the narrower proposition advanced by Mr Gurbani. Indeed, one may query whether there ought to be a higher standard imposed on the plaintiff to discharge its jurisdictional burden simply because there is a dispute as to the identity of the proper party to be sued. When a defendant denies that it was the party who contracted with the plaintiff, it is possible to view the argument as just another defence to a contractual claim. It may be contended that there is no reason in principle why a plaintiff ought to be subject to a higher jurisdictional burden merely because the defendant is alleging that the plaintiff has sued the wrong party, as opposed to a case where the defendant accepts that it is the contracting party but contends it is not liable for other reasons.
[38] For the foregoing reasons, my interpretation of s 4(4), both from a consideration of its legislative purpose as well as the associated case law and academic commentary, is that the provision is not about imposing a threshold test of merits which a plaintiff has to discharge before it is able to invoke the admiralty jurisdiction of the High Court. Section 4(4) is merely a provision concerned with the identification of the defendant as the owner, or person in possession or control of the vessel, at the time the claim arose, on the assumption that he would be liable. This is so even in the case where there is a dispute as to whether the defendant is the proper party to sue. Any imposition of a burden on the plaintiff to show merits cannot be justified based on s 4(4).
Requirement to show merits
[39] However quite apart from s 4(4), the question still arises as to whether the law should require some merits to be shown by a claimant before the court’s admiralty jurisdiction can be invoked, and if so, to what extent.
[40] In The Vasiliy Golovnin, V K Rajah JA on behalf of the Court of Appeal stated the following (at [50]):
[41] The above pronouncement by the Court of Appeal clearly indicates that there is a separate requirement of merits that a claimant in an admiralty action has to satisfy in addition to the requirements under ss 3(1) and 4(4) of the Act. A broadly similar argument was made by counsel in the case of The Eagle Prestige, but was rejected by Belinda Ang J. It is crucial to appreciate the way the defendant’s counsel in The Eagle Prestige had framed the argument, which Ang J recounted in her grounds of decision as follows:
[42] It was therefore in the context of s 4(4) that Belinda Ang J rejected the contention by the defendant’s counsel in The Eagle Prestige. The learned judge was especially influenced by her view that the Court of Appeal in The Vasiliy Golovnin could not have intended to depart from the leading decision of The St Eleftterio (in relation to the interpretation of the equivalent provision to s 4(4) of the Act) without expressly saying so. Ang J said at [58]:
[43] To the extent that Belinda Ang J in The Eagle Prestige rejected the counsel’s submission in that case on the basis that there is no requirement to show a good arguable case on the merits under s 4(4), that is consistent with my interpretation that s 4(4) itself does not impose any threshold condition of establishing the merits of the case but is merely about identification of the defendant who would be liable in personam as the owner, or as the person in control or possession of the vessel, at the material time.
[44] On the broader question of whether there is a need to show merits per se however, the Court of Appeal’s decision in The Vasiliy Golovnin, and particularly the paragraph reproduced above at [40], would suggest an affirmative answer. This view is further supported by Rajah JA’s comment which immediately follows that paragraph, on specifically an arrest of a vessel (at [51]):
[45] It therefore appears clear from the Court of Appeal’s pronouncements that some preliminary assessment of the merits of the case is required even at the jurisdictional stage, and that the standard to which such merits are to be established is that of a good arguable case. Rajah JA’s reference to Mareva injunctions and Anton Piller orders is instructive. For both types of orders, an applicant is required to establish a certain degree of merits to his case before he can obtain the relief, even though the proceedings are only at an interlocutory stage. A good arguable case on the merits must be shown in order to obtain a Mareva injunction (see Amixco Asia Pte Ltd v Bank Negara Indonesia 1946 [1991] 2 SLR(R) 713), whereas an Anton Piller order will only be granted if the applicant satisfies the court of an extremely strong prima facie case on the merits (see Asian Corporate Services (SEA) Pte Ltd v Eastwest Management Ltd (Singapore Branch) [2006] 1 SLR(R) 901). The imposition of such stringent conditions to show merits in the claim, at a usually early stage of the proceedings, is justified based on the draconian nature of the remedy. Since the arrest of a vessel is, as the Court of Appeal pointed out in The Vasiliy Golovnin, also a very powerful and invasive remedy, it can be said that there ought likewise to be some test of merits which must be satisfied. In this regard, a parallel can also be drawn where the court is asked to exercise its “long-arm” jurisdiction by permitting service of its process overseas. It is well established that a claimant who wishes to effect service out of jurisdiction requires leave of court under O 11, which would only be granted if the claimant can satisfy the court, on the merits, that there is a serious issue to be tried: Seaconsar Far East Ltd. V Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438; Goodwill Enterprise (Malaysia) v CT Nominees (in liquidation) [1996] 2 SLR 404. In principle, there is much to be said for the view that if a claimant in an admiralty action faces a challenge at the jurisdictional stage, he should have a more onerous burden to discharge than a claimant in an ordinary non-admiralty suit facing an application to strike out the action based on O 18 r 19 or the inherent jurisdiction of the court.
[46] It must however be acknowledged that the above construction of the Court of Appeal’s decision in The Vasiliy Golovnin, may not sit well with Belinda Ang J’s ruling in The Eagle Prestige with regard to the non-disclosure of material facts in the arrest process. In Ang J’s view, for a plaintiff to discharge its obligation to make full and frank disclosure, there is no need for the plaintiff to disclose substantive defences that the defendant could raise at the trial, unless the matters underlying the defences will show that the claim is obviously unsustainable such that the omission to mention them effectively amounts to misleading the court. Ang J explained (at [75]):
[47] Ang J’s reason for holding the above view is that at the jurisdictional stage, there is no onus on the in rem plaintiff to show that the claim is likely to succeed. It would suffice that the claim is not an abuse of process or so obviously frivolous and vexatious as to be open to summary dismissal. In her view, the plaintiff is generally not required to go into the merits of the claim in “Situation 1” cases (or at any rate only to a very minimal degree), and it is only where there is an application to strike out the action under O 18 r 19 or pursuant to the inherent jurisdiction of the court (ie “Situation 2”) that the merits of the case become relevant (see [74] of the learned judge’s grounds of decision).
[48] My decision in the present case is therefore justified on two separate bases. The defendant had applied for the following orders in the alternative, namely (a) that the admiralty writ be struck out and/or set aside on the basis that the admiralty jurisdiction of the court under the Act was improperly and/or invalidly invoked by the plaintiff against the vessel “Bunga Melati 5”; or (b) that the writ be struck out and/or set aside pursuant to O 18 r 19 and/or the inherent jurisdiction of the court. As will be elaborated below, the primary basis for my decision to strike out the admiralty writ is that the plaintiff failed to establish its case on the merits to the standard of a good arguable case. In particular, it failed to show a good arguable case that it had contracted with the defendant for the supply of the bunkers in question. Accordingly, the admiralty jurisdiction of the court was not properly invoked and the writ should therefore be struck out. In the alternative, if the true position is that there is no independent requirement on the plaintiff to show merits to its claim in order to invoke the court’s admiralty jurisdiction, the result will still be the same, because my view based on the state of the evidence presented is that the defendant has successfully shown that the plaintiff’s claim is plainly unsustainable and frivolous, and ought therefore to be struck out pursuant to O 18 r 19 or the inherent jurisdiction of the court.
Application to the Present Case
[49] As already mentioned, the issue of whether the plaintiff’s claim fell within s 3(1) of the Act did not arise. In relation to s 4(4), it was not disputed that the defendant, the person who would be liable in personam if the action succeeds, was the owner of the offending ships at the time the cause of action arose. It was also common ground that the defendant was the beneficial owner of the sister ship, The Bunga Melati 5, at the time this action was brought. To reiterate, the view taken here is that s 4(4) does not impose a threshold condition of merits. It however remains necessary to go further to examine the merits of the plaintiff’s claim, as following The Vasiliy Golovnin, the plaintiff must establish its claim on the merits to the standard of a good arguable case. Even if that is not the proper interpretation of the Court of Appeal’s decision, and that there is no additional requirement to show merits in the claim in order to establish jurisdiction, the defendant’s alternative prayer to strike out the writ and action under the usual principles of O 18 r 19, or the inherent jurisdiction of the court, still necessitates an examination into the merits of the case.
The claim in contract
[50] The plaintiff’s claim was for payment of certain bunkers supplied under the alleged Fixed Price contracts and the Navig8 Faith contract. According to the plaintiff, the alleged Fixed Price contracts were evidenced by emails between MAL and the plaintiff’s broker Compass Marine, while the Navig8 Faith contract was evidenced by emails between MAL and the plaintiff’s other broker OceanConnect. In both instances, the submission made was that MAL was acting as the agent of the defendant. Mr Leong on behalf of the plaintiff also placed reliance on documents such as bunker confirmations, some of which named the defendant as “Buyers” and the plaintiff as “Sellers”. What is critical to note is that none of these emails or documents originated from the defendant, and nor is there any indication that these emails and documents were sent to the defendant. The defendant denied any knowledge of these documents, until they surfaced in the court proceedings. As Mr Gurbani pointed out, it is difficult to see how such documents – which were essentially correspondences between MAL and Compass Marine or OceanConnect, and between the plaintiff and Compass Marine or OceanConnect – can be said to bind the defendant to a contract with the plaintiff.
[51] In contrast to the paucity of documentary support for the supply contracts as alleged by the plaintiff, the defendant adduced concrete evidence showing that the defendant had in fact procured the sale and supply of bunkers for its vessels from MAL directly as the contractual seller. There were contractual documents evidencing an open tender process which took place before the defendant awarded the fixed term 6-month contract to MAL. It was further not in dispute that, in accordance with the contracts which the defendant had with MAL, the defendant had paid a substantial sum of in excess of US$17 million to MAL for the bunkers sold and supplied by MAL to the defendant’s vessels, which form the subject matter of the plaintiff’s claim. Mr Gurbani made the very forceful point that it makes no logical sense for the defendant to first enter into a contract with MAL (in March 2008) where the price of the bunkers was fixed at US$475 per metric ton, and then to subsequently authorise MAL (in July 2008) to contract with the plaintiff or its brokers on the defendant’s behalf for the same bunkers at a price in excess of US$740 per metric ton. The same argument applies in relation to the market price contracts concluded between the defendant and MAL, for which the agreed prices ranged from US$525 to US$649.
[52] The plaintiff sought to cast doubts on whether the defendant had in fact dealt with MAL as an independent seller for the bunkers, and suggested that the alleged contracts between them may be in fact be shams, or at the very least the surrounding circumstances justify further investigation and examination through the trial process. The argument was mounted on several fronts. Mr Leong contended that it was unlikely for a substantial shipowner like the defendant to entrust almost all of its bunker requirements worldwide to a company like MAL, which was a relatively small set-up with no reputation in the bunker industry. In relation specifically to the tender contract, Mr Leong highlighted that MAL was the only party in the tendering process to accept the tender conditions without reservations and to offer a substantially lower price than the other bidders, suggesting that the contract was therefore not an arms-length transaction. In addition, Mr Leong alluded to the fact that MAL was never involved in the physical execution of the bunkering operations of the defendant’s vessels. Instead, the plaintiff liaised directly with the defendant’s local agents in Singapore to coordinate the bunkering operations. This, according to Mr Leong, suggested that MAL was clearly not the actual seller of the bunkers but merely a broker.
[53] In considering the plaintiff’s arguments above, one must bear in mind the clear evidence presented before the court of a transparent and rigorous tendering process conducted by the defendant. The process attracted bids from a number of established bunker traders and suppliers such as Petronas Dagangan Berhad, BP Singapore Pte Ltd, and Shell Malaysia Trading Sdn Bhd, all of whom were registered bidders for the defendant’s bunker supply contracts. The terms and conditions of the fixed price contract with MAL were contained in a set of documents known as the “Bid Documents”, which were circulated to the various registered bunker suppliers that were invited to participate in the tender exercise. A total of six bids were received, indicating that apart from MAL, there were other established suppliers wiling to agree to a fixed price contract at that time over the period in question. Against this backdrop, Mr Leong’s suggestion that there may be something suspicious about the tender process was unpersuasive. Leaving aside whether MAL was indeed a small-time player in the industry (an issue which the defendant’s counsel argued not unconvincingly to the contrary), the mere fact that MAL was able to offer more favourable terms to the defendant than the other bidders should not, without more, raise eyebrows. After all, that must be precisely the reason why the tender was awarded to MAL eventually. While the price of US$475 per metric ton offered by MAL was indeed lower than the other bidders, the defendant pointed out that MAL itself managed to enter into a six month contract with another party OW Bunkers at an even lower price of US$467 per metric ton. This indicates that MAL knew how to hedge its position. In fact, MAL had been contracting with the defendant for a number of years prior to 2008, and had no difficulty fulfilling its contractual obligations until the present transactions which are before the court.
[54] To prove that there has been a sham transaction, it is trite law that the parties must be shown to have entered into the contract with the common intention “to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create”: Snook v London and West Riding Investments Ltd [1967] 2 QB 786, accepted locally in Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd [2008] 1 SLR(R) 375 and The Inai Selasih (ex Geopotes X) [2006] 2 SLR(R) 181. In the present case, after the supply contracts were entered into between the defendant and MAL, it was undisputed that MAL supplied bunkers to the defendant’s vessels pursuant to the terms of those contracts, with invoices being rendered by MAL to the defendant following each supply. As already mentioned, it was also common ground that the defendant then made payment for the bunkers supplied in accordance with the supply contracts. In the circumstances, my view is that any argument that the supply contracts between the defendant and MAL were sham transactions is bound to fail. Evidence that the tender process was other than bona fide were sorely lacking.
[55] It is moreover pertinent to note that the documents, which were sent by MAL to the defendant in respect of the various bunker supplies, typically state as follows:
MAL was clearly referred to as a bunker trader, and not a broker or agent. Parties were in agreement that the term “bunker traders” typically refers to parties who do not physically supply the bunkers, but procure the bunkers from other suppliers. This would explain why the party which the defendant liaised with in relation to the physical operations of the bunker supply was the plaintiff and not MAL, since the latter did not have physical possession of the bunkers. This is in no way inconsistent with the defendant’s case that MAL was the actual contracting party with the defendant and not a mere agent. Perhaps most detrimental to the plaintiff’s case was its failure to explain why the defendant would make payment for the bunkers to MAL if the latter was merely a broker. There was no evidence of any brokerage commission being paid to MAL as remuneration, or any indication of the existence of a brokerage agreement at all. This was despite the fact that the managing director of MAL, Mr Yahya Bin Mohd Khalid (“Mr Khalid”), gave evidence on behalf of the plaintiff. If an agency relationship indeed existed, one would have expected Mr Khalid to refer to some brokerage agreement and provide details of its terms. Noticeably absent as well was any explanation by Mr Khalid for the payment of over US$17 million from the defendant to MAL.
Agency by estoppel
[56] Faced with a lack of documentary evidence showing that MAL was appointed by the defendant as the agent to broker the bunker transactions, the plaintiff sought to rely on the affidavit evidence of various third parties to build up an argument based on agency by estoppel. The plaintiff asserted that the defendant had held MAL out as its agent. Alternatively, the defendant knew or ought to have known that MAL was holding itself out as the defendant’s agent and that bunker suppliers like the plaintiff would have supplied the bunkers only if they thought that the defendant was the principal and MAL its agent. It was argued that notwithstanding the above, the defendant did not take any steps to correct the plaintiff’s erroneous belief, and the plaintiff had acted in reliance of such express or implied representation of MAL’s authority to its detriment by supplying the bunkers to the defendant’s vessels without obtaining payment. In these circumstances, the plaintiff submitted that the defendant was estopped from denying MAL’s authority to enter into the bunker transactions on its behalf.
[57] The plaintiff primarily relied on the affidavit of Mr Khalid, who deposed to the fact that the defendant knew that MAL was purchasing bunkers on behalf of the defendant. The plaintiff also procured an affidavit from the managing director of Compass Marine, Mr Darren Middleton. Mr Middleton gave evidence about how a representative from the defendant’s bunker unit had informed him that MAL was the defendant’s bunker broker, and provided him with MAL’s contact details so that Compass Marine could liaise with MAL for the supply of bunkers to the defendant. Finally, Mr Lars Nielsen, the managing director from another firm in the bunker trade, Brilliant Maritime Services (“BMS”), swore an affidavit stating that one of the employees at the defendant’s bunker unit, by the name of Khairul, had directed his staff in a phone conversation to contact MAL to discuss the defendant’s bunker requirements. Mr Nielsen’ evidence was that he understood this to mean that the defendant had appointed MAL as its broker to fix bunker contracts.
[58] The concept of agency by estoppel was explained by the English court in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (“Freeman & Lockyer”) in the following terms (at 503-504):
[59] In the recent decision of Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2009] 4 SLR(R) 788, the High Court accepted (at [80]) the applicable principles laid down in Freeman & Lockyer. In particular, the following three conditions must be satisfied before an agency by estoppel can arise:
(a) there must be a representation that the agent has authority to enter on behalf of the principal into a contract of the kind sought to be enforced;
(b) such representation must be made by a person or persons who had “actual” authority to manage the business of the principal either generally or in respect of those matters to which the contract relates; and
(c) the contracting party must have been induced by such representation to enter into the contract, that is, that he in fact relied upon it.
The High Court (at [80]) specifically referred to the following passage by Diplock LJ in Freeman & Lockyer (at 505):
[60] Bearing in mind the above legal requirements for establishing an agency by estoppel, the evidence produced by the plaintiff fell far short. In relation to Mr Middleton’s evidence, the first point to note is that the alleged representation made by the defendant’s employee did not even relate to the transactions in question. The supposed telephone conversation took place in May 2006, but the Fixed Price contracts were concluded only more than two years later in July 2008. Second, the law is clear that to form an estoppel, the representation must emanate from a person with actual authority to manage the business of the principal. There was no indication whatsoever that the alleged employee in the bunker unit was such a person. Third, it was Mr Middleton’s employee, and not Mr Middleton himself, who allegedly spoke to that employee of the defendant. Fourth, and this is important, any alleged representation was made to Compass Marine (of which Mr Middleton is the managing director), and not to the plaintiff itself. The plaintiff has adduced no evidence to show that it was induced by and had acted in reliance of that representation to its detriment. Mr Gurbani also highlighted that Compass Marine could have a vested interest in the outcome of these proceedings, even though it is not directly involved. This is because if this court were to hold that there was no contract between the defendant and the plaintiff, Compass Marine would potentially be liable to the plaintiff for breach of warranty of authority in misrepresenting that the plaintiff’s contractual buyer was the defendant when it was in fact MAL.
[61] As for Mr Nielsen, it must be noted that BMS was not even the broker of the plaintiff in respect of the material transactions. His evidence was therefore even more remote and of peripheral relevance. In any event, his evidence suffered from similar deficiencies as Mr Middleton’s, in that there was no evidence at all that Khairul was an employee with actual authority, and there was nothing to indicate that the alleged representation was in fact conveyed to the plaintiff and relied upon. With regard to the Navig8 Faith contract, no representative from the plaintiff’s broker OceanConnect gave evidence. There was no evidence whatsoever of any representation being made to either OceanConnect or to the plaintiff directly of MAL’s authority to broker that particular deal.
[62] Insofar as the plaintiff’s case on agency by estoppel is based on express representations made by the defendant as to MAL’s authority, my view based on the state of the evidence before me is that it is bound to fail. It remains to address the plaintiff’s alternative case based on implied representation, the contention being that the defendant knew or ought to have known that MAL had been representing itself to the bunker industry that it was the defendant’s agent, but took no steps to correct that mistaken view. It should be clarified at the outset that any representations that might have been made by MAL as to its own authority to transact on behalf of the defendant, without more, would not suffice, as the law is clear that the contracting party cannot rely on the agent's own representation as to its actual authority (see above at [59]). The key is therefore the defendant’s knowledge that MAL was making such representations.
[63] The plaintiff’s contention was that the defendant had acquiesced in MAL’s conduct of holding itself out as the defendant’s agent. In this connection, the plaintiff relied substantially on the evidence of Mr Khalid, the managing director of MAL. Mr Khalid said in his affidavit that the defendant was aware that MAL had sourced for and purchased bunkers in the defendant’s name, and that the defendant had authorised him to do so. He also said that “everyone in the bunker industry knew that MAL was acting on behalf of MISC [the defendant]”. However, there were serious doubts as to the credibility of Mr Khalid’s affidavit evidence, not least because his contentions were wholly inconsistent with a previous sworn Declaration which he had signed on 5 December 2008 in support of the defendant’s motion to vacate the Rule B order in the US proceedings. In the Declaration, Mr Khalid clearly described the relationship between the defendant and MAL as that of contractual buyer and seller. This inconsistency was conceded by counsel for the plaintiff, Mr Leong (although he sought to persuade the court that Mr Khalid ought to be given a chance to explain at trial). Furthermore, the assertions in Mr Khalid’s affidavit completely contradicted the position taken by MAL in legal proceedings which MAL had instituted against a Malaysian bank Affin Bank Berhad in the High Court of Selangor. MAL stated in its statement of claim in those proceedings in no uncertain terms that it “would enter into a short term periodic contract for the sale of Bunkers to MISC at a certain and fixed price, before sourcing and securing the required quantity of Bunkers at a lower price from the open market in order to profit from the sale”. Clearly, the position taken there was that MAL was purchasing bunkers in its own name in order to fulfil its contractual obligations as seller to the defendant.
[64] In addition, Mr Khalid’s evidence in the affidavit was at odds with the contemporaneous documentary evidence. A letter dated 18 November 2008 from MAL to the defendant appealing for future business deserves reproduction below:
1.1 As you are well aware pursuant to your Letter of Award dated 14th March 2008 and the Agreement for Supply of Bunkers dated 24th March 2008, we have secured a six (6) months supply of 138,000 MT (MFO380CST) contract to you at a fixed price of USD475.00/MT at a total award price of USD65,550,000.00 (“the Contract”).
1.2 The price was based at USD475.00/MT which was representative of the then global bunker market price.
1.3 Pursuant to this, we have secured the supply from OW Bunker at USD467.00/MT for a period of six (6) months starting April 2008. Unfortunately, at the end of June 2008, OW Bunker has to abort the contract due to shortage of their own bunker fuel.
1.4 Compass Marine, our London analyst advised and sourced out bunker fuel from another physical supplier i.e. Equatorial Marine Fuel for the remaining three (3) months starting July 2008.
1.5 As you are well aware of, there was a drastic upward movement of worldwide bunker price since the months of July, August and September 2008 where the price ranges from USD600.00/MT for the month of July 2008 to USD750.00/MT for the months of August and September 2008.
1.6 It was impossible to lock the bunker price as there was no supplier willing to do so. This matter is beyond our control.
1.7 We nonetheless continued to honour the Contract. As a result, the Company currently suffers approximately USD15 million losses as a result of compliance to the fixed price mechanism under the Contract.
[emphasis added]
This was clearly not a letter that would have been written by a party who took the view that it was only acting as an agent and purchasing bunkers on behalf of its principal. If MAL were indeed under the impression that it was merely the defendant’s broker, it would not have said that it was suffering from losses of “approximately US$15 million as a result of compliance to the fixed price mechanism under the Contract”. MAL as a broker would be expected to only be entitled to remuneration in the form of a brokerage commission or agency fees. The letter clearly contradicted Mr Khalid’s evidence and indicated quite unequivocally that this was a case where MAL was being paid the bunker purchase price by the defendant. Further, there was correspondence between the defendant and MAL in which MAL apologised for the “hassle caused pertaining to the outstanding payment notice from Equatorial Marine Fuel” and further assured the defendant that it would “take full responsibility to settle all outstanding payments to Equatorial”.
[65] The court is not required to treat every affidavit filed as true and at face value. The court may in appropriate circumstances reject the evidence contained therein, even in the context of an interlocutory application. In Paclantic v Moscow Narodny Bank [1983] 1 WLR 1063, the court considered when it would be appropriate to reject affidavit evidence (at 1067):
[66] Indeed, our court has accepted that just because an allegation is contained in a sworn affidavit, that does not mean that it should be accepted as true at the interlocutory stage. In the context of considering an application for summary judgment, the High Court in Lee Kuan Yew v Chee Soon Juan [2003] 3 SLR(R) 8 endorsed (at [24]) the following principle from Microsoft Corporation v Electro-Wide Limited [1997] FSR 580 (at 594):
[67] In the present case, in light of the obvious inconsistencies with contemporaneous evidence as well as his own sworn Declaration, Mr Khalid’s affidavit evidence should be rejected, or at least be given very little weight as being highly unreliable.
[68] Other than Mr Khalid’s assertion that the defendant was aware that MAL was using the defendant’s name to purchase bunkers on its behalf, all the plaintiff could rely on were the general allegations made by Mr Middleton, Mr Nielsen, as well as by its own director Mrs Chong, that MAL was a small setup with no reputation in the bunker industry except that it was known to be the defendant’s bunker broker. Again, the defendant refuted this and adduced contrary evidence of MAL’s financial viability prior to its present troubles. More importantly however, these assertions relied upon by the plaintiff, even if true, did not address directly the issue of whether the defendant in fact knew about such a perception among the industry players. It must be remembered that the defendant provided documentary evidence of its practice of procuring bunkers directly through fixed price contracts and inviting tenders from its registered bunker suppliers, rather than arranging for such supplies through brokers. All the invoices which the defendant received for the transactions in question were MAL’s invoices, issued on MAL’s letterhead and based on the contract prices between the defendant and MAL. There was no evidence of MAL presenting to the defendant at any time any of the physical suppliers’ invoices or other documentation which might have suggested that the contract for supply was in fact not with MAL.
[69] Mr Gurbani submitted that silence is generally insufficient to constitute the kind of representation that is required for a plea of estoppel to succeed. He referred to Prakash J’s decision in Everbright Commercial Enterprises Pte Ltd and another v AXA Insurance Singapore Pte Ltd [2000] 2 SLR(R) 287, in particular the following (at [66]):
[70] There is a similar observation made by the learned authors in The Law Relating to Estoppel by Representation (London: LexisNexis, 4th ed., 2004) at 55:
[71] In my view, plaintiff did not show any credible evidence that the defendant knew or ought to have known that MAL was representing to the bunker industry that it was acting as the agent of the defendant. There was no evidence whatsoever in the various affidavits filed on the plaintiff’s behalf of any attempts by the plaintiff or its brokers to contact the defendant to verify the truth of any representations by MAL as to its own authority. The plaintiff was clearly content to commit itself to the transactions worth more than US$52 million without making any inquiries from a sufficiently senior member of the defendant with actual authority to manage the defendant’s bunker business. I agree with Mr Gurbani’s submission that the defendant could not, in the circumstances, come under any duty to correct any mistaken belief the bunker traders and suppliers (including the plaintiff) might have had that MAL was authorised to act as the defendant’s broker. As such, the plaintiff’s bid to establish an agency by estoppel through implied representation is similarly unsustainable.
Admission of liability
[72] I shall now deal with the plaintiff’s submission that the defendant has admitted its contractual liability to the plaintiff by virtue of the corporate guarantee. The difficulty with such an argument is that the very notion of a guarantee, as Mr Gurbani pointed out, is that it is to guarantee another party’s liability. Indeed, the corporate guarantee in question made it clear expressly that it was to guarantee that the defendant would make full payment of the outstanding sum due and owing to the plaintiff from MAL:
[73] In fact, the wording of the guarantee supported the defendant’s case that there were two separate contracts, one between the defendant and MAL and another between MAL and the plaintiff. Mr Gurbani also highlighted the context in which the corporate guarantee was offered. The defendant’s vessel the “Bunga Kasturi Lima”, worth far more than the $22 million claim by the plaintiff and which was on charter and laden with cargo, had been attached by the plaintiff in California. The defendant was facing tremendous commercial pressure not only from the plaintiff but also other bunker suppliers, and its main objective was to quickly secure the release of the vessel. In the circumstances, the corporate guarantee could not constitute an admission of the defendant’s liability to the plaintiff.
[74] Counsel for the plaintiff Mr Leong also referred to the payments that the defendant made to other suppliers, whose bunkers had been supplied to the defendant’s vessels. Presumably, this constituted an acceptance by the defendant of its liability under similar contracts for the sale of bunkers which it had directly entered into with these suppliers, through the agency of MAL. However, the defendant has explained the reasons behind such payments. The defendant paid not because it accepted that these suppliers were the contractual sellers. Rather, the payments were made because of the commercial pressure, and were necessary to avert arrests of the defendant’s vessels and disruption to its business operations. This was supported by evidence that the defendant had first obtained MAL’s consent before making such payments. MAL in particular had agreed that in respect of the supplies for which the defendant had already paid MAL, MAL would reimburse the defendant for the sums which the defendant had to pay to the bunker suppliers. In addition, the defendant produced letters sent to the suppliers wherein it was made clear that the payments were made under protest and purely to avoid the arrest of the defendant’s vessels. It is also pertinent that the defendant has since commenced legal proceedings in Malaysia against MAL to recover the sums which the defendant had paid to the bunker suppliers on behalf of MAL. More fundamentally, the fact that the defendant made payment to other suppliers in respect of other transactions was not directly relevant to the present dispute.
[75] Mr Leong also placed some emphasis on the fact that the defendant did not expressly deny liability when the plaintiff had sent demands for payment. He submitted that there was silence in the face of the plaintiff’s demands, as apparently all that the defendant did was to forward the plaintiff’s email (which demanded payment) to MAL, with a one-liner “Plse check whether this is yr supplier??”. But one is hard pressed to see how this could be interpreted as some sort of indication that the defendant accepted its liability to the plaintiff. Albeit a one-liner, what the defendant said was perfectly consistent with its present position that the plaintiff was MAL’s contractual supplier, not the defendant’s. If anything, the brevity of the defendant’s response was indicative of its view that it clearly had nothing to do with the actual procurement of the bunker supplies, a matter solely between MAL and its contractual suppliers. Mr Leong further alluded to the defendant continuing to purchase bunkers from MAL despite the demands for payment from the various bunker suppliers. But there was again a perfectly sensible explanation. It obviously made commercial sense for the defendant to continue to buy bunkers from MAL simply because the US$475 million per metric ton price under the Fixed Term contract was far lower than the market price at the material time. There was no reason for the defendant to stop such purchases just because MAL appeared to have some difficulties paying off its suppliers. This was especially so since, as already mentioned above (at [64]), MAL had apologised and assured the defendant that it would take on the responsibility of settling all the outstanding claims with the plaintiff.
Conclusion on contractual claim
[76] The state of the evidence points clearly to the conclusion that MAL had, as the bunker trader, entered into a contract to sell bunkers directly to the defendant. My view is that the plaintiff failed to establish a good arguable case that there was a contractual relationship between the plaintiff and the defendant (established through the agency of MAL) for the sale of bunkers. For this reason, based on my interpretation of the Court of Appeal decision in The Vasiliy Golovnin which requires a claimant to satisfy the court that it has a good arguable case on the merits, the plaintiff is not entitled to invoke the admiralty jurisdiction of the court and accordingly, the admiralty writ should therefore be struck out. Alternatively, if the correct view is that there is no such requirement of a good arguable case on the merits (as the decision in The Eagle Prestige would seem to suggest), the plaintiff’s claim should also be struck out pursuant to O 18 r 19 or the inherent jurisdiction of the court. This is because the claim for payment of bunkers under the alleged contracts between the plaintiff and the defendant is obviously unsustainable and bound to fail: The Osprey [1999] 3 SLR(R) 1099.
The claim in unjust enrichment
[77] In relation to the plaintiff’s alternative claim in unjust enrichment, it was common ground that the elements necessary to establish such a cause of action are the following (see Goff & Jones, The Law of Restitution (London: Sweet & Maxwell, 7th ed., 2007) (“Goff & Jones”) at para 1-016; Chitty on Contracts (London: Sweet & Maxwell, 30 ed., 2009) at 1845):
(a) The defendant must have been enriched by the receipt of a benefit;
(b) The benefit must have been gained at the expense of the plaintiff; and
(c) The benefit was gained in circumstances where it would be unjust for the defendant to retain it.

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Equatorial Marine Fuel Management Services Pte Ltd v The “Bunga Melati 5”

Grounds of decision

Introduction

Background

The defendant’s application

Admiralty jurisdiction of the High Court

Jurisdictional requirements under s (4)(4)

Unmeritorious substantive claim

Requirement to show merits

Application to the Present Case

The claim in contract

Agency by estoppel

Admission of liability

Conclusion on contractual claim

The claim in unjust enrichment