Court of Appeal · Decided 19 September 2008

The "Vasiliy Golovnin"

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[2008] SGCA 39Case no. CA 109/2007, 110/2007, Adm in Rem 25/2006, RA 214/2006, 216/2006

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Laws this judgment relies on

International Arbitration Act 1994

Grounds of decision

Official text from eLitigation

V K Rajah JA (delivering the judgment of the court):
Introduction
[1] Admiral Vasiliy Mikhaylovich Golovnin[note: 1] was an 19th century Russian navigator and explorer. In 1819, while attempting to survey one of the Kuril Islands, sandwiched between Russia and Japan, he was apprehended by the Japanese. As the Kuril Islands were then the subject of rival sovereignty claims by both countries, Admiral Golovnin was promptly accused by the Japanese of having strayed too close to the island. He spent the next two years languishing in a Japanese prison as there were then no established international conventions on how to deal with such transgressions.
[2] Almost 200 years later, a vessel named after him, the Vasiliy Golovnin, owned by the respondent, has been caught in the middle of an international legal melee, spanning several jurisdictions. As a result of an alleged contractual default by its sister ship, it was arrested in Singapore. Fortunately, in accordance with established Singapore shipping practice, it was promptly released after security was provided. The issues in these appeals, while having little apparent historical or political significance, are nevertheless of considerable commercial importance to the parties involved. Is the Vasiliy Golovnin an innocent party in the middle caught up in a legal muddle or do its owners have legal responsibility for failing to comply with the instructions of the appellant (qua consignee)? For ease of reference and to facilitate understanding, we now set out the schematic arrangement of this judgment:
Introduction........................................................................................
1
Overview...........................................................................................
3
The appeals........................................................................................
4
Background facts...............................................................................
5
The decision of the Judge....................................................................
12
CA 109/2007.....................................................................................
13
Sustainability of the cause of action............................................
14
The so-called arbitration agreement.................................
16
Requirements for determining whether a claim falls within section 3(1) of the HCAJA...................................
21
Crédit Agricole’s substantive claim..................................
25
Material non-disclosure.............................................................
38
Duty to make full and frank disclosure.............................
40
The content/scope of disclosure.......................................
42
The threshold of disclosure..............................................
46
Non-disclosure of the inter partes hearing in Lomé...........
48
Non-disclosure of the proposed “switch” of the bills of lading.........................................................................
51
Synopsis.........................................................................
53
Issue estoppel...........................................................................
55
CA 110/2007.....................................................................................
55
The test of wrongful arrest........................................................
56
The Evangelismos test....................................................
56
Some perceived problems with the Evangelismos test.......
62
The rationale behind the Evangelismos test........................
66
The proper application of the Evangelismos test................
75
Whether damages for wrongful arrest should be awarded to FESCO..................................................................................
79
Absence of any reasonable basis.......................................
81
Material non-disclosure....................................................
84
Synopsis..........................................................................
85
Conclusion..........................................................................................
88
Overview
[3] Crédit Agricole (Suisse) SA (“Crédit Agricole”), the appellant in Civil Appeal No 109 of 2007 (“CA 109/2007”), and Banque Cantonale de Genève SA (“BCG”) (collectively “the Banks”) arrested a vessel, the Chelyabinsk, in Lomé, the capital of Togo, on 21 February 2006. Acceding to a setting-aside application by Far Eastern Shipping Co Plc (“FESCO”), the Lomé Court of First Instance ordered that the vessel be released on 24 February 2006. Dissatisfied with this outcome, the Banks, not long after, moved to arrest her sister ship, the Vasiliy Golovnin, in Singapore on 18 March 2006, pursuant to the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“HCAJA”), on the same basis as the arrest of the Chelyabinsk.
[4] On 10 July 2006, FESCO, the respondent in CA 109/2007, the owners of the two vessels, persuaded Assistant Registrar Ang Ching Pin (“AR Ang”), to set aside the warrant of arrest of the Vasiliy Golovnin and strike out the Banks’ writ of summons. AR Ang, however, did not award FESCO any damages arising from the wrongful arrest of the Vasiliy Golovnin.
The appeals
[6] CA 109/2007 is an appeal by Crédit Agricole against the High Court’s decision. The appeal concerns the decision to set aside the warrant of arrest and strike out the writ in rem. However, it bears mention that BCG, the other bank responsible for the arrest of the Vasiliy Golovnin, has not pursued the matter any further.
[7] Civil Appeal No 110 of 2007 (“CA 110/2007”) is an appeal by FESCO against the High Court’s decision declining to award it damages arising from the wrongful arrest of the Vasiliy Golovnin. The Banks are the respondents in this appeal.
[8] In this judgment, we shall address CA 109/2007 before dealing with CA 110/2007. We first briefly set out the undisputed facts and then condense the Judge’s grounds of decision (“the Judge’s GD”).
Background facts
[9] The Judge has ably summarised the salient facts and we gratefully adopt substantial portions of the factual matrix set out in the Judge’s GD. The unfortunate saga began somewhat uneventfully around September 2005. On 9 September 2005, FESCO chartered the Chelyabinsk (“the chartered vessel”) on amended New York Produce Exchange (“NYPE”) terms (“the head charterparty”) to Sea Transport Contractors Ltd (“STC”). STC, in turn, sub-chartered the chartered vessel, also on amended NYPE terms, to Rustal SA (“Rustal”). The Banks provided financing to Rustal and received the relevant bills of lading as security.
[10] In accordance with the terms of the head charterparty, STC instructed the chartered vessel to load a cargo of about 5,100mt of Chinese rice at Nanjing for discharge at “any African port”. Three bills of lading were issued. All of these bills referred exclusively to the head charterparty dated 9 September 2005 and stated the port of discharge as “any African port”.[note: 2] Of these three bills of lading, only one of them (“the African port bill of lading”) is in issue in these proceedings. The holder of the other two bills of lading declined to institute proceedings against FESCO in Singapore, despite the fact that the holder was also a party to the proceedings in Lomé, Togo.
[11] Immediately after loading the Chinese rice, the chartered vessel then proceeded to Kakinada, India, where it loaded about 15,000mt of Indian rice. Five new bills of lading (KKD/LT/01, KKD/LT/02, KKD/LT/03, KKD/LT/04, KKD/LT/05) all dated 10 September 2005 were issued in respect of the Indian rice. The port of discharge was stipulated in each and every one of them to be Lomé, Togo. Of these five bills, three bills (KKD/LT/01, KKD/LT/02, KKD/LT/03) are held by Crédit Agricole, the appellant in CA 109/2007. The other two bills (KKD/LT/04, KKD/LT/05) are held by BCG. The cargo covered by bills numbered KKD/LT/03 and KKD/LT/05 was eventually discharged in Abidjan, a port in Côte d’Ivoire, after letters of indemnity were provided. No claims arise in relation to these bills for the purposes of this appeal. Also, as BCG is not a party to this appeal, there is no issue in relation to KKD/LT/04. Only two of the new bills of lading (KKD/LT/01, KKD/LT/02), hereinafter referred to as “the Lomé bills of lading”, and the African port bill of lading (see [10] above) are relevant for the purposes of the present appeal.
[12] After a request by Rustal, STC instructed the chartered vessel to proceed to Abidjan. In Abidjan, part of the Indian rice (under KKD/LT/03 and KKD/LT/05, see [11] above) was discharged in exchange for letters of indemnity issued by STC. Presumably, the letters of indemnity were given because the bills of lading had named Lomé as the port of discharge. In early December 2005, Rustal also requested STC to effect a switch of the Lomé bills of lading in order to, inter alia, reflect a change of the port of discharge from Lomé to Douala in Cameroon. STC initially agreed to this. On receiving a request from STC, FESCO immediately agreed to do so provided that the original bills of lading were simultaneously surrendered in exchange for the new bills of lading. The agreed switch of documents was scheduled to take place on 12 December 2005 at the office of FESCO’s chartering brokers in Surrey, England. However, neither Rustal’s staff nor its agents turned up at the appointed time to effect the switch. While there is some disagreement between the parties as to the reason for the breakdown of this arrangement, nothing really turns on this. What is now significant is that the Lomé bills of lading have never been switched.
[13] Even though STC had initially instructed the chartered vessel to sail to Douala on 13 December 2005, immediately after the breakdown in effecting the switch occurred, it revoked its earlier directions to discharge the cargo at that port. On 14 December 2005, STC informed FESCO in no uncertain terms not to switch the Lomé bills of lading unless further instructions were given. On 15 December 2005, STC reiterated its earlier instructions and reminded FESCO that the chartered vessel should not enter the port of Douala or berth there without STC’s prior instructions. It has now emerged that STC was then embroiled in an intractable dispute with Rustal about unpaid hire for the chartered vessel.
[14] On 19 December 2005, STC sent an e-mail to FESCO instructing the chartered vessel to sail for Lomé and to discharge the cargo in accordance with the express mandate contained in the subject bills of lading. However, soon after this, on 21 December 2005, FESCO received a conflicting request from M/s Waterson Hicks, the solicitors of BCG, insisting that the discharge of the cargo of rice be effected at Douala in exchange for a letter of indemnity covering the proposed change of the port of discharge. FESCO promptly responded, asserting that in the light of STC’s express instructions and the fact that BCG’s cargo (KKD/LT/04) named Lomé as the port of discharge, it could not accede to BCG’s request. Despite FESCO’s refusal to accede to BCG’s request, the latter’s solicitors persisted in seeking confirmation that the cargo would be discharged in Douala in accordance with their clients’ instructions. FESCO then replied to BCG’s solicitors reiterating, first, that while it had carefully considered BCG’s requests, it was unable to discharge the cargo at Douala because it had already received firm instructions from STC to sail to Lomé and, second, it could only change the port of discharge after receipt of STC’s approval. There was also a similar request from Crédit Agricole to discharge its cargo under the Lomé bills of lading and the African port bill of lading (collectively, “the relevant bills of lading in the present appeal”) at Douala instead of Lomé. It should be noted in passing that there is also some disagreement as to when that request was received by FESCO. Crédit Agricole claimed that its request was sent by fax on 16 December 2005, but FESCO maintained that it only received the fax on 29 December 2005, through its English solicitors, who in turn had received it from Crédit Agricole’s English solicitors. Nothing of real moment, however, turns on this. In any event, by 16 December 2005, FESCO had already irrevocably decided not to discharge the cargo in Douala.
[15] The parties had thus reached a stalemate. Who was to cut the Gordian knot and take delivery of the cargo at Lomé? To resolve this stalemate, on 22 December 2005, STC obtained from the Lomé Court of First Instance an order for the detention, after discharge, of 15,541mt of rice on board the chartered vessel (“the STC Court Order”). Pursuant to this order, the cargo was to be detained in Lomé as security for STC’s claim against Rustal for unpaid hire under the sub-charterparty between STC and Rustal. As soon as the chartered vessel arrived at Lomé on 23 December 2005, the STC Court Order was served on her.
[16] This unsurprisingly set in motion a legal chain reaction and resulted in a flurry of further court orders. On 24 December 2005, Rustal obtained an order from the Lomé court (“Ruling No 2081/2005”) preventing the discharge of the cargo. On 27 December 2005, STC responded by obtaining a contrary court order authorising the discharge of the cargo (“the Discharge Order”). Matters did not rest here.
[17] The Banks then decided to enter into the legal fray to protect their security. They applied to have the Discharge Order set aside and for the reinstatement of Ruling No 2081/2005 (“the Banks’ application against STC”). On 16 January 2006, the Lomé court rejected the Banks’ application against STC, set aside Ruling No 2081/2005, and ordered the cargo be discharged in Lomé (“Ruling No 0023/2006”). The court also determined that STC was entitled to retain the cargo as security. The Banks and Rustal then promptly applied for and obtained separate rulings for a temporary stay of execution of this ruling.
[18] On 2 February 2006, the Lomé Court of Appeal directed that the stay of execution made in relation to Ruling No 0023/2006 be lifted. This enabled the cargo to be immediately discharged in Lomé. Soon after this, FESCO commenced discharging operations. The discharge of the cargo was completed in mid-February 2006. This unfortunately did not resolve the problems. Upon the unloading of the cargo pursuant to the discharge order, STC alleged that part of the cargo had been damaged. Security for this particular claim by STC was provided by the chartered vessel’s protection and indemnity (“P&I”) club, the UK P&I Club, by way of a letter of undertaking dated 16 February 2006. Undeterred by what had transpired, soon after the unloading of the cargo on 18 February 2006, the Banks secured a court order in Lomé for the arrest of the chartered vessel on 21 February 2006 in connection with their claims for the damage to the cargo, as well as FESCO’s refusal to effect discharge at Douala. This, however, was only a momentary respite for the Banks.
[19] On 24 February 2006, FESCO decisively countered the arrest and succeeded, on the same day, in obtaining an order setting aside the arrest of the chartered vessel (“the Lomé Release Order”). It bears mention that these proceedings were vigorously contested and heard inter partes. Comprehensive oral and written submissions were made by counsel for the Banks and FESCO. In arriving at its decision to make the Lomé Release Order, the court made the following findings:[note: 3]
(a) The Banks must have known that STC, as charterers, had control over the commercial management of the chartered vessel and that FESCO was bound to follow the instructions of STC.
(b) FESCO was not at fault for routing the chartered vessel to the port of Lomé on the instructions of STC, the charterers.
(c) The Banks’ claim that cargo was destined for Douala was rejected on the basis that the port of Douala was not a port named in the relevant bills of lading in the present appeal.
(d) The cargo was discharged at Lomé in fulfilment of orders issued by the Lomé court.
(e) Sufficient security was already provided for the alleged damage claim.
(f) Accordingly, the Banks had no right to arrest the chartered vessel as security for their alleged claims.
Further, it is also crucial to point out, at this juncture, that the Banks did not appeal against the Lomé Release Order to the Lomé Court of Appeal. The chartered vessel, after this, uneventfully left Lomé on 25 February 2006. The time allowed for an appeal against the Lomé Release Order expired on 17 March 2006. The legal wrangling did not end here. The dispute between the Banks and STC/FESCO then unexpectedly moved to a new forum, Singapore.
[20] On 18 March 2006, the very next day after the expiry of the appeal period, the Banks successfully applied ex parte to the duty registrar, Assistant Registrar David Lee (“AR Lee”) to arrest a sister vessel on the basis of the very same claims earlier made unsuccessfully to the court in Lomé. The Vasiliy Golovnin, a sister vessel of the chartered vessel, was then arrested in Singapore.
[21] Meanwhile, the Banks were also busy concurrently pressing ahead with their claim against STC in relation to the discharge of the cargo directly to them. It bears mention that, on 28 March 2006, the Lomé Court of Appeal reversed Ruling No 0023/2006 and allowed the Banks’ appeal against the original order (ie, the Discharge Order) that the cargo be discharged in Lomé. This, however, has no direct nexus with the Lomé Release Order. When the cargo was discharged in Lomé, FESCO was then legally obliged to do so. As stated earlier, on 10 July 2006, following an application by FESCO, AR Ang set aside the ex parte order for the arrest of the Vasiliy Golovnin and simultaneously struck out the Banks’ writ against FESCO. She determined that:
(a) it was an abuse of process for the Banks to arrest one of FESCO’s vessels again, as an issue estoppel had arisen by reason of the earlier decision of the Togolese court (AR Ang’s GD at [20]);
(b) the Banks’ claims were unmeritorious as the Banks had no arguable claim for breach of contract against FESCO apropos the relevant bills of lading in the present appeal (AR Ang’s GD at [32]); and
(c) the Banks had failed to disclose material facts to AR Lee (AR Ang’s GD at [38]).
Nevertheless, she did not award FESCO damages for the wrongful arrest of the Vasiliy Golovnin (see [4] above), as she felt that the Banks had honestly believed they had valid claims against FESCO (at [45] and [46] of AR Ang’s GD).
The decision of the Judge
[22] The Judge noted at the outset that a warrant of arrest of a vessel was a drastic remedy entailing full and frank disclosure of all material facts. Since the Banks had clearly failed to disclose three material facts at the ex parte hearing, the warrant of arrest ought to be set aside (at [22] and [35] of the Judge’s GD).
[23] The Judge also observed that, merely because a vessel had been previously released from arrest in a different jurisdiction, a fresh arrest did not constitute an abuse of process unless the vessel was arrested on grounds covered by an issue estoppel. For issue estoppel to arise: (a) the jurisdiction of that other court had to be competent, its judgment final and conclusive and on the merits of the case; (b) the parties to that action had to be the same as those in the present action; and (c) the issue before the present court had to be identical to the issue considered in that other court. As all three requirements for issue estoppel had been satisfied in the prevailing circumstances, the Banks had no right to arrest the Vasiliy Golovnin (at [36]–[38] and [51] of the Judge’s GD).
[24] A court, the Judge added, would not exercise its discretion to strike out a writ or pleading under O 18 r 19 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) or under its inherent jurisdiction unless the case was plainly unarguable. All of the Banks’ claims, other than that relating to damage to the cargo, ought to be struck out as they failed to satisfy the threshold of being “arguable”. As FESCO had performed the terms of the contract of carriage as evidenced by the relevant bills of lading in the present appeal, it “cannot be faulted for carrying the cargo to Lome” (at [59] of the Judge’s GD). The claim for damage to the cargo, while arguably sustainable, was not, however, in itself a ground for arresting the ship, as sufficient security had earlier been provided for that claim by the letter of undertaking provided by the UK P&I Club (at [50], [70] and [72] of the Judge’s GD).
[25] Nevertheless, as it appeared that the Banks had honestly believed that they had valid claims against FESCO, they should not be required to pay damages for wrongful arrest (at [73], [75] and [76] of the Judge’s GD).
CA 109/2007
[26] In CA 109/2007, there are three main issues for our consideration:
(a) first, the sustainability of the cause of action: whether Crédit Agricole has an arguable case or whether its claims are wholly unmeritorious and/or clearly unsustainable;
(b) second, material non-disclosure: whether Crédit Agricole discharged its obligation to make full and frank disclosure of material facts in its ex parte application for a warrant of arrest; and
(c) third, issue estoppel: whether Crédit Agricole is estopped from arresting another of FESCO’s vessels in respect of the same claims raised and determined in the prior proceedings that took place in Lomé.
[27] The first and third issues are crucial in the determination of whether the writ in rem ought to be struck out, whilst all three issues are relevant in the assessment of whether the warrant of arrest alone should be set aside.
Sustainability of the cause of action
[28] During the hearing of CA 109/2007, we queried counsel for Crédit Agricole, Ms Vivian Ang (“Ms Ang”), about Crédit Agricole’s objective in pursuing the appeal, given that the ship had already been released, and security had already been provided through the UK P&I Club’s letter of undertaking. In response, Ms Ang informed us that the appeal continued to be relevant as the parties had initiated arbitration proceedings to resolve the claim in London in accordance with an arbitration clause contained in one of the charterparties. She contended that the High Court’s decision affirming the striking out of the claim might preclude further claims by Crédit Agricole in the arbitration proceedings. This contention does not pass muster upon closer scrutiny, particularly because BCG has apparently not taken the same view since it has not joined Crédit Agricole in this appeal. BCG’s reasons for not appealing are unclear. However, this much can be quite readily inferred, BCG’s failure to appeal certainly does not lend any support to Crédit Agricole’s present stance because BCG is apparently also a party to the arbitration.
[29] In its written submissions on the sustainability of the cause of action, Crédit Agricole contended that the High Court, in striking out the claim in limine, had seriously erred by considering the strengths and weaknesses of the conflicting claims when the parties had already agreed that the underlying disputes between the parties be referred to a three-man arbitration tribunal. Crédit Agricole further submitted that, pursuant to s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”), which it argued would apply to this case, the action in Singapore was subject to a mandatory stay and court proceedings in support of arbitration should not attempt to determine the merits of the matter. Crédit Agricole added, for good measure, that the court should strictly limit itself to deciding whether the plaintiff “could arrest or not arrest” and abstain from determining the merits, as such a determination could preclude the Banks from pursuing their claims in the arbitration proceedings either on the basis of issue estoppel or res judicata.[note: 4]
[30] We note, however, that nowhere in the indorsement of the claim, and in its written submissions before AR Lee, did Crédit Agricole even hint that these proceedings were initiated to support the arbitral process or that the arrest was actually being made pursuant to s 7 of the IAA, which permits the court to order the provision or retention of security to satisfy an arbitration award as a condition to the stay of an action in rem. In fact, nowhere in Crédit Agricole’s written submissions to us is there any reference whatsoever to s 7 of the IAA. There was, however, some indication that arbitration might be pursued. Nevertheless, when the Banks took out the arrest application, it was not clearly stated that the arrest was being taken out in support of intended arbitration proceedings. Mr Kenny Yap, who appeared before AR Lee in the arrest proceedings, rather cryptically indicated to AR Lee that the Banks were “reserving their rights” under the IAA.[note: 5] Ironically, in the affidavit supporting the arrest application, the Banks acknowledged that while they might have a right to arbitration under the various charterparties, they did not know which charterparty conferred them this right. As we will see later, the Banks, even now, remain far from clear about which charterparty confers the right to arbitration. It must be said, however, that this omission to state categorically that the arrest was initiated in support of arbitration proceedings does create real doubt about the cogency of the stance adopted by Crédit Agricole in this appeal. It appears to us that this particular contention is very much an afterthought, not having been actively pursued either before AR Ang or the Judge. For completeness, nevertheless, we now examine the genesis of the alleged arbitration agreement since it appears to be one of Crédit Agricole’s principal planks in this appeal.
The so-called arbitration agreement
[31] In a letter from M/s Allen & Gledhill (Crédit Agricole’s solicitors in Singapore) to M/s Rajah & Tann (FESCO’s solicitors in Singapore) dated 13 April 2006, Allen & Gledhill wrote:[note: 6]
[32] On 24 April 2006, Rajah & Tann wrote to Allen & Gledhill seeking clarification on Crédit Agricole’s position on the reference to arbitration in London. They also sought particulars of the arbitration clause being relied on. On 4 May 2006, Allen & Gledhill replied, stating that the head charterparty, which all the bills of lading referred to, contained an arbitration clause “which provides for London arbitration”. In that letter, they also said that FESCO had earlier furnished, in respect of the Singapore arrest, security by way of a UK P&I Club letter of undertaking payable against an award of a London arbitration tribunal. The letter of undertaking from the UK P&I Club stated:[note: 7]
[33] On 24 May 2006, Rajah & Tann responded to Allen & Gledhill emphasising:[note: 8]
[34] This letter was the last reference to arbitration we can find in the documents placed before us. The dates of the correspondence confirm that this exchange took place only after FESCO applied to set aside the warrant of arrest. These letters also plainly evidence that the “agreed” arbitration proceedings had a rather limited scope. In our opinion, the UK P&I letter’s reference to “such sums as may be adjudged, awarded and/or declared by a London Arbitration Tribunal”[note: 9] [emphasis added] cannot in itself be seen to signify FESCO’s consent to arbitration in London. The UK P&I Club and FESCO are both different entities. In any event, the letter from Rajah & Tann stated explicitly that FESCO would not agree to arbitration until its application to set aside the ex parte arrest was “fully and finally determined”[note: 10] against their clients.
[35] At the hearing, counsel for both sides, in response to further queries from the court, clarified that the arbitration proceedings were only at a preliminary stage, and their clients were still in the process of attempting to settle the appointment of arbitrators. This is pertinent.
[36] In our estimation, Ms Ang’s contention that any decision in Singapore would prevent or circumscribe the arbitration proceedings is plainly unmeritorious. First of all, the purported arbitration agreement was relatively nascent and contingent in nature and, in any event, narrowly limited in its intended scope. These particular arbitration proceedings could not have been even contemplated when the application for the warrant of arrest in Singapore was initiated. It also follows inexorably that the arbitration proceedings were not even contemplated when the Lomé court proceedings were initiated by the Banks. Certainly, we cannot find any reference, in the documents made available to us, to an intended arbitration in those proceedings save for a reference in the “Request for Arrest of Ship” to the Lomé court dated 21 February 2006 affirming that the arrest of the ship was intended to secure a claim “in anticipation of the judicial or arbitration consequences of the Banks’ claims against FESCO with the competent English courts”[note: 11] [emphasis added]. This certainly does not evince any commitment to proceed to arbitration in England or anywhere else. From the parties’ correspondence, it is also plain to us that the arbitration was not clearly on the horizon even when FESCO made the application to set aside the warrant of arrest.
[37] Second, even if Crédit Agricole knew of and intended to rely on the arbitration clause contained in one of the charterparties, it failed to adequately disclose this fact to AR Lee when it made the application to arrest the ship. Mr Kenny Yap, who appeared on behalf of the Banks before AR Lee, failed to notify AR Lee (and subsequently AR Ang) that the arrest was being made in support of arbitration proceedings. It seems to us whether or not the application was being made to support prospective arbitration would have been an important factor that AR Lee would certainly have considered and required further clarification of. He would certainly have needed further information in deciding whether to issue the warrant of arrest unconditionally or issue it in conjunction with a stay under s 6 of the IAA.
[38] We acknowledge that in admiralty disputes, an arbitration tribunal does not have in rem jurisdiction to arrest a vessel. A vessel can only be arrested pursuant to an application in the High Court. The retention of security or provision of alternative security to satisfy an arbitration award is expressly provided for in s 7(1) of the IAA. Pursuant to this provision, where a court stays admiralty proceedings under s 6 of the IAA, it “may, if in those proceedings property has been arrested or bail or other security has been given to prevent or obtain release from arrest, order — (a) that the property arrested be retained as security for the satisfaction of any award made on the arbitration; or (b) that the stay be conditional on the provision of equivalent security for the satisfaction of any such award”.
[39] Toh Kian Sing SC, Admiralty Law and Practice (LexisNexis, 2nd Ed, 2007), incisively observes at pp 559–560:
He further goes on to emphasise (at fn 37 at p 560):
[40] We agree. Indeed, we would go further. It is necessary for a party who intends to rely on an arbitration agreement to disclose this to the court in an ex parte application (on the issue of full and frank disclosure, see [79]–[110] below). If the arbitration is consensual, the court hearing the application for warrant of arrest must be alerted to the fact that the proceedings are being brought only to assist the arbitration proceedings. This fact must be disclosed so that if the court grants the arrest, it can also consider whether to stay the arrest or make other appropriate directions pending the award by the arbitral tribunal pursuant to s 7 of the IAA. Care has to be also taken by the court not to directly or even indirectly pronounce on the merits of the matter or trespass onto the jurisdiction of the arbitral tribunal in any other way. If the validity of the arbitration agreement is or will likely be disputed, the court’s attention must also be drawn to this fact. The court’s determination of the application can then be appropriately calibrated to take these potential developments into consideration.
[41] Can parties consent to arbitration after the application to arrest the vessel has been taken out? There is no reason why they should not be able to do so. However, once the decision to commence arbitration has been agreed upon, the parties ought to apply to the court to stay the subject proceedings without delay. Following this, the parties’ agreement should reflect the consensus reached so that the authority of the arbitration tribunal to deal with the claim is not fettered by decisions made in the in rem proceedings.
[42] Ms Ang’s contention on the effect that the High Court’s decision would have on the arbitration proceedings can be best described as an imaginative argument of convenience. It was not properly developed in her written submissions and was only fleshed out in response to our queries.
[43] We summarise. There was plainly no obvious reliance on the existence of the arbitration agreement (assuming it then existed) when the arrest order was made. Neither has any application for a stay pursuant to s 6 of the IAA been made. We are therefore minded to treat the subject ex parte application as being no different from any other typical arrest warrant application.
[44] We now turn to consider Ms Ang’s contentions on FESCO’s striking out application – whether Crédit Agricole met the threshold of an “arguable case” for the purposes of the HCAJA and/or whether its claims were not unmeritorious nor clearly unsustainable.
Requirements for determining whether a claim falls within section 3(1) of the HCAJA
[45] The Banks’ arrest of the Vasiliy Golovnin was chiefly predicated on ss 3(1)(g) and 3(1)(h) of the HCAJA which provide as follows:
[46] Crédit Agricole pointed out that, unlike actions in personam, where the court’s jurisdiction was founded on the presence of the defendant within the jurisdiction, admiralty jurisdiction in rem was made out whenever one of the requirements of s 3(1) of the HCAJA was satisfied. The only requirement under the HCAJA, it said, was to assess whether the subject matter of the claim was of the type stipulated for under s 3(1). Crédit Agricole further contended that since the applications to set aside the arrest and to strike out the writ and the action were all premised on the ground that there had been a failure to comply with s 3(1) of the HCAJA, a fundamental jurisdictional requirement, this was the sole threshold issue that the Judge should have considered and made a definitive finding on. Instead, it argued, the Judge appeared to have omitted this step and proceeded to address the court’s ability to strike out a claim under O 18 r 19 of the Rules of Court or under the inherent jurisdiction of the court. Ms Ang vigorously submitted that the Judge seriously erred in this respect and should have first paused to address the issue of whether the jurisdictional requirements were met, by deciding whether the claim fell within one of the provisions of s 3(1) of HCAJA.
[47] It is trite that the issue of whether or not the jurisdictional requirements of s 3(1) of the HCAJA are satisfied is a procedural rather than a substantive one dealing with the merits of the claim. In The Jarguh Sawit [1995] 3 SLR 840, MPH Rubin J noted at 852, [33]:
On appeal, M Karthigesu J aptly observed in The Jarguh Sawit [1998] 1 SLR 648 (“The Jarguh Sawit (CA)”) at [43]:
[48] Pursuant to O 70 r 2(1) of the Rules of Court, admiralty proceedings in Singapore ought to be commenced by writ in the prescribed form. While O 70 prescribes certain special procedures for admiralty proceedings, it is now incontrovertible that the usual procedural remedies for the summary resolution of such matters continue to be available.
[49] Toh Kian Sing SC in Admiralty Law and Practice ([39] supra) succinctly summarises the present position as follows (at pp 45–46):
[50] Satisfying the requirements of s 3(1) of the HCAJA cannot be said to be the end all and be all when assessing the sustainability of an admiralty action. Invoking the admiralty jurisdiction may be in one sense a procedural step but it also plainly attracts substantive considerations. There are two requirements that claimants in every admiralty action must satisfy: first, the in rem jurisdiction must be established, through, inter alia, ss 3 and 4 of the HCAJA. Second, the claim must, if challenged, also meet the requirement of being a good arguable case on the merits.
[51] The arrest of a vessel is never a trifling matter. Arrest is a very powerful invasive remedy. An arrest of a ship can lead to tremendous inconvenience, financial distress and severe commercial embarrassment (see also [120] below). Even the briefest of delays can sometimes cause significant losses. It can also in certain instances prejudice the livelihood of the ship’s crew and the commercial fortunes of the shipowner. Maritime arrests can, when improperly executed, sometimes be as destructive as Anton Piller orders and even as potentially ruinous as Mareva injunctions, the two nuclear weapons of civil litigation. As such, a plaintiff must always remain cautious and rigorously ascertain the material facts before applying for a warrant of arrest. While there is no need to establish a conclusive case at the outset, there is certainly a need to establish a good arguable case, before an arrest warrant can be issued. This determination plainly requires a preliminary assessment of the merits of the claim.
[52] The standard to be applied in Singapore at this early stage of the matter, if there is a challenge on the merits, is indeed the “good arguable case” yardstick (see also Karthigesu J’s observations in The Jarguh Sawit (CA), at [47] above). The plaintiff does not have to establish at this stage that he has a cause of action that might probably prevail in the final analysis. Karthigesu J had rightly pointed out in The Jarguh Sawit (CA) that the plaintiff need only show that he has a “good arguable case” that his cause of action falls within one of the categories provided for in s 3(1) of the HCAJA. The party invoking the arrest procedure must be prepared, when challenged, to justify that it was entitled right from the outset to invoke this remedy.
Crédit Agricole’s substantive claim
[53] We now examine the substantive claims against FESCO. Crédit Agricole’s substantive claim is premised on two quite different planks:
(a) the non-delivery of the cargo that was carried on board the chartered vessel to it, qua lawful holder of the relevant bills of lading in the present appeal, and as the named consignee; and
(b) the damage suffered by the cargo whilst it was in the care and custody of FESCO.
As different considerations apply to the two different types of bills of lading (see [10]–[11] above) we will identify these as well, when necessary.
[54] At this juncture, it will be useful to set out the Banks’ indorsement of claim (set out at [55] of the Judge’s GD):
[55] This is a fairly turgid indorsement, but one thing is clear. It is common ground that Crédit Agricole was named as the consignee of the relevant bills of lading in the present appeal and the bills were duly indorsed to it (see AR Ang’s GD at [28] and [30]–[32]; and the Judge’s GD at [59]). It is hornbook law that the terms of a bill of lading are the only terms that govern contract of carriage between the carrier and the indorsee. This is true whether the claimant is both the consignee and indorsee or a subsequent indorsee. This legal position is also why any private antecedent arrangements between the shipper and the carrier cannot be relied on against a consignee or a subsequent indorsee of a bill of lading without the consent of all the relevant parties (see Leduc & Co v Ward (1888) 20 QBD 475 (“Leduc v Ward”), and also [64]–[66] below). Under the terms of the relevant bills of lading in the present appeal, FESCO’s only delivery obligation was to deliver goods at the port of discharge that had been stipulated in these bills of lading. As the bills of lading in question had not, as had been originally proposed, been switched, the fact remains that two of the three relevant bills of lading in the present appeal named Lomé as the port of discharge while the remaining bill of lading provided for the discharge of the cargo at “any African port”. In so far as the Lomé bills of lading are concerned, it was FESCO’s contention that it could not be faulted for delivering the cargo at Lomé as it was strictly performing its obligations.
[56] Crédit Agricole, however, maintained that the de facto port of discharge on a bill of lading would ultimately have to depend on the circumstances of each case. This, it contended, necessitated an individualised interpretation of the terms of the bill of lading and the contract of carriage as a whole. In support of this rather remarkable proposition, Crédit Agricole relied on Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 where Lord Hoffmann had generally observed at [76]:
[57] Primarily on the basis of this rather broad dictum, Crédit Agricole quixotically argued that the court should bear in mind “circumstances reasonably available to be known by a merchant or a bank” when interpreting a bill of lading.[note: 12] While we have no quarrel with this general statement of principle, it bears mention that it is no more than a general restatement that a contract should be interpreted objectively (see Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029 where this court restated the principles applicable in Singapore for interpreting contracts). In seeking to create an overlay of the circumstances reasonably available to just the bank rather than to all the relevant parties, Crédit Agricole is in fact seeking to import a subjective test unilaterally. This is, of course, impermissible.
[58] In the final analysis, the real issue before this court is whether the bill of lading, without more, is binding and conclusive as to its terms (FESCO’s position) or whether it is invariably flexible and open to interpretation based on surrounding circumstances and business practices (Crédit Agricole’s position). Crédit Agricole boldly submitted that this was a novel point and the leading text books had only considered the delivery obligation at the contractual port of discharge without properly addressing the issue as to whether delivery can be refused by the shipowners when demanded by cargo owners at an intermediate port. This issue, Crédit Agricole added, had, however, been considered in a series of railway cases concerning the carriage of cargo by rail. It relied on a line of 19th century cases, namely, Scothorn v The South Staffordshire Railway Company (1853) 8 Exch 341; 155 ER 1378 (“Scothorn”) and The London and North Western Railway Company v Bartlett (1861) 7 H & N 400; 158 ER 529 (“London & NW Railway”) for the proposition that the holder of a bill of lading is entitled qua bailor to possession of the cargo in transit. We now turn to examine these decisions.
[59] In Scothorn, the plaintiff agreed with the defendant for the goods to be taken from Staffordshire and delivered “to the East India Docks” in London (from where they were to be transported to Australia). The goods were packed and labelled “Scothorn & Co, to the East India Docks, passenger-ship ‘Melbourne,’ Australia”. Payment was made for the carriage of the goods to the East India Docks. The goods were duly despatched from the Great Bridge Station of the defendant carrier. Before the goods reached the East India Docks, the plaintiff, who was the consignor, directed the defendant carrier to deliver the goods to a different place in London – the Bell Wharf, Ratcliffe. This was not done. Instead, the defendant carrier placed, as originally agreed, the goods on board the vessel Melbourne. The goods were then transported to Australia and eventually lost in transit. The plaintiff sued for the loss of the goods and succeeded before the Court of Exchequer.
[60] Alderson B held that the issue of what the contract of carriage amounted to was “no more than a question of fact” (at 344; 1379). In this case, the contract was “to procure [the defendant’s] agent to deliver according to the [plaintiff’s] directions”; that since the defendant had not done so and occasioned a loss to the plaintiff, it was bound to make good that loss (at 345; 1380). Martin B observed (at 346; 1380):
[61] In London & NW Railway, the contract of carriage between Mr Bartlett, the plaintiff, and the defendant railway company was for the delivery of wheat to the mill of a Mr Badger in Birmingham. Mr Badger instructed the defendant to retain the wheat in Birmingham Railway Station until he gave written orders for the wheat to be sent to his mill. Acting on these instructions, the defendant held on to the wheat for over three months. In the meantime, the wheat deteriorated and was eventually returned to Mr Bartlett, who then claimed damages against the defendant for the losses thereby incurred. On appeal to the Court of Exchequer, the question was whether the consignee (Mr Badger) was entitled to give the instructions he did. The court held that, under the contract of carriage, the consignee had the power to order delivery to him at any place en route to the final destination. Bramwell B wryly noted at 408; 532:
As such, the plaintiff had no case against the defendant as the delivery of the wheat to Birmingham Railway Station instead of to the mill was on the consignee’s instructions.
[62] Relying on these authorities, Crédit Agricole contended that the consignee was legally entitled to demand delivery while the goods were in transit at a place en route to the final destination. It added that it was settled law that courts would normally recognise the property rights of a consignee so long as they did not conflict with the carrier’s rights.
[63] We are of the view that Crédit Agricole’s reliance on these authorities is entirely misplaced. It appears to us that the legal attributes of bills of lading have historically evolved very differently, and for good reason, we may add. The essential characteristics of a carriage of goods by sea and by rail are quite different.
[64] It is settled law that as between the carrier and indorsee of a bill of lading, the terms of the bill of lading are conclusive evidence of the contract of carriage; in fact the bill is the contract of carriage, as Lord Esher MR held in Leduc v Ward ([55] supra) at 480–481:
(See also generally Stephen Girvin, Carriage of Goods by Sea (Oxford University Press, 2007) at paras 7.11–7.12; and Sir Guenter Treitel QC & FMB Reynolds QC, Carver on Bills of Lading (Sweet & Maxwell, 2nd Ed, 2005) at paras 3-007–3-008).
[65] Leduc v Ward concerned a voyage from Fiume to Dunkirk. The ship deviated to Glasgow and sank with her cargo. The carrier attempted to rely on an excepted perils clause which exempted him from liability for perils of the sea. However, he was not able to rely on this clause if the ship deviated from the route, as defined by the carriage contract. The carrier claimed that the shipper knew, before the carriage contract was concluded, that the ship was intended to sail to Glasgow and, in effect, the deviation was permitted by the contract. The court held that the pre-contract agreement could not bind the indorsee, who took on the terms of the bill of lading. These terms did not permit deviation and, by deviating, the carrier lost the benefit of the excepted perils clause. Lord Esher MR said (at 480):
[66] Leduc v Ward remains good authority today. The bill of lading is conclusive as to its terms between the carrier and indorsee, and general principles of contract ought to apply in interpreting it. Antecedent agreements and other surrounding circumstances will not suffice to vary the terms of a bill of lading, in particular, the port of discharge, unless known and agreed to by all affected parties.
[67] In the present case, FESCO never ruled out the possibility of varying the contract of carriage. Indeed, FESCO was willing to alter the port of discharge provided the bills of lading were consensually switched. The switch, however, was never effected. As a result, the bills of lading were never altered to effect a change in the port of discharge, ie, the contract was never varied.
[68] It does not appear to us that Scothorn ([58] supra) has set out any general principle of law. Scothorn was a case decided on its peculiar evidence. That particular contract was for delivery according to the specific instructions received from the plaintiff. The court also found that the defendant in Scothorn had in fact agreed to a variation of the contract by varying the destination of carriage. Crédit Agricole’s reliance on Scothorn and London & NW Railway ([58] supra) confuses two related though distinct processes involved in the carriage of goods: discharge and delivery. Discharge is the physical operation for the unloading of cargo. The discharge takes place at the port of discharge, as stated in the bill of lading. FESCO contends, again rightly, that a bill of lading typically stipulates the port of discharge, and not the act or point of delivery. The holder of a bill of lading presents the bill of lading at the warehouse or terminal at the port of discharge to take delivery of the cargo. While the discharge location is explicitly mentioned in a bill of lading, railway consignment notes and transport documents for the transport of cargo by land refer to delivery locations. We also note with keen interest that Scothorn is generally regarded as an authority of limited application, having particular relevance mainly to contracts of carriage by land. N E Palmer, Bailment (The Law Book Company Limited, 2nd Ed, 1991) at p 1011 observes:
[69] Notes of consignment for carriage by rail have a vastly different character from bills of lading. For example, the Convention Internationale concernant le Transport des Marchandises par Chemin de Fer (“CIM”) sets conditions for the international transportation of goods by rail. CIM notes are documents which confirm that the rail carrier has received the goods and that a contract of carriage exists between trader and carrier. Unlike a bill of lading, a CIM note is not a document of title. It does not give its holder rights of ownership or possession of the goods. One of the key characteristics of a bill of lading is that it operates as a document of title apart from evidencing a contract of carriage and confirming that the carrier has received the goods. The bill of lading is a badge of constructive ownership. Such constructive ownership can be transferred by endorsement and delivery. It is sometimes described as a “key” to ownership. The effective transfer of the key will also transfer property. As the bill of lading serves as a document of title, it requires certainty, and cannot be freely interpreted on an ad hoc basis according to the circumstances as Crédit Agricole suggests.
[70] We are not persuaded that the approach taken in these railway cases can be crystallised into a broader principle in relation to bills of lading that sanctions an ad hoc approach to reinterpret the bills of lading to dovetail with any change of circumstances. It is instructive that a leading textbook on carriage by sea, viz, Raoul Colinvaux, Carver’s Carriage by Sea (Stevens & Sons, 13th Ed, 1982), in footnoting both of these railway cases, has this to say at vol 2, para 1594:
It is axiomatic that Crédit Agricole was itself aware of the need to expressly provide for alterations in the port of discharge, and that is why it sought to switch the bills of lading. Crédit Agricole’s submission, that the port of discharge on a bill of lading should be considered and interpreted according to circumstances such as the type of trade, the usual practices of the trade and the carriage agreements for other cargo, is nothing short of a recipe for uncertainty, shorn of both logic and principle. If we were to accept Crédit Agricole’s bold, and one might add bald, argument, bills of lading could well be reduced to the status of mere ambulatory consignment notes. This, to us, is a wholly unacceptable proposition.
[71] FESCO complied with its duty to deliver goods at the port of discharge which was named in a bill of lading. In so far as the Lomé bills of lading which named Lomé as the port of discharge are concerned, FESCO cannot be faulted for carrying the cargo to Lomé as it was discharging its obligations in accordance with the terms of the said bills of lading. In the event that the consignee/indorsee instructs the carrier to vary the port of discharge, general principles of contract will apply, viz, the terms of the bills of lading must be consensually varied to effect the change in the port of discharge. We also agree with the observations of Colman J expressed in relation to the fundamental obligations between the parties to a time charter, whether on NYPE terms or most other forms, as stated in The Goodpal [2000] 1 Lloyd’s Rep 638 at 643:
[72] In relation to the African port bill of lading, Crédit Agricole additionally argued that FESCO was in breach of its instructions to discharge at “any African port” cargo at Douala when it was berthed there from 17 to 21 December 2005. Instead, the chartered vessel returned to Lomé where FESCO knew or ought to have known that the cargo would be seized by STC. FESCO responded, arguing that it did not receive Crédit Agricole’s fax with those instructions on 16 December 2005 (see [14] above). Second, FESCO maintained that it was under no obligation to obey instructions from Crédit Agricole in any event. FESCO concluded this argument by emphasising that its obligations were to perform the terms of the contract of carriage as evidenced by the relevant bills of lading in the present appeal and to obey the lawful instructions of STC in so far as they were not inconsistent with the said bills of lading.
[73] Crédit Agricole’s argument, that it was the context that was all important, ought to be assessed in its proper perspective. FESCO declined to discharge the cargo at Douala in the light of Crédit Agricole’s failure to switch the bills of lading because of the specific instructions it had received from STC. If FESCO maintained that it would not discharge the cargo at any other port than the port of discharge contained in the bills of lading, why then did it discharge some of the cargo at Abidjan? FESCO pointed out, however, that the cargo was discharged on the basis of letters of indemnity provided against the breach of the express terms of those bills of lading (see [11] and [12] above). No such letters of indemnity were offered by the Banks for the discharge of the cargo in Douala.
[74] Crucially, we also note that it was not disputed that the cargo of the African port bill of lading cargo was actually stowed below the cargo to be discharged at Lomé. As such, it would be logical that the cargo due for Lomé be discharged first. It was, additionally, not disputed that when the chartered vessel reached Lomé, she was required to discharge all her cargo at that port by virtue of Ruling No 0023/2006, which was an order of court (see [17] above). In view of this, the reality is that FESCO had no option but to discharge all her cargo at Lomé, including the cargo shipped under the African port bill of lading. For this reason, we are of the view that the discharge of the cargo covered by the African port bill of lading in Lomé did not result in any breach of contract. Further, in discharging the African port bill of lading cargo in Lomé, FESCO was in fact complying with a valid court order to discharge all its cargo.
[75] AR Ang and the Judge noted that the Banks did not (and could not) contend that FESCO could have legitimately refused to comply with Ruling No 0023/2006 requiring it to discharge all the cargo at Lomé. We accept that a refusal by FESCO to unload all the said cargo at Lomé would have, additionally, amounted to a contempt of court and Crédit Agricole’s suggestion that FESCO should not comply because of existing contractual obligations was plainly absurd. All the interested parties, including the Banks, have consistently accepted that the Lomé court had the requisite jurisdiction to make Ruling No 0023/2006.
[76] In response, Crédit Agricole attempted to assert that FESCO would not have had to comply with this Lomé order of court if the chartered vessel had avoided Lomé altogether. It claimed that FESCO well knew that if the chartered vessel entered Lomé, as it had been expressly warned by the Banks’ solicitors, the cargo would be seized by STC. Crédit Agricole further submitted that FESCO knew or must have known that, under the terms of the “freight pre-paid” bills of lading between FESCO and the Banks, STC had no right whatsoever to arrest or exercise a lien over the cargo at Lomé and that exercise of such a lien would be clearly wrongful. Ms Ang vigorously concluded this particular contention by emphasising that FESCO had, in all the circumstances, a duty to deviate from Lomé and proceed to another port to discharge the cargo.
[77] We are not at all impressed by this argument. There was no duty on FESCO’s part to deviate from Lomé. To deviate from Lomé would render FESCO liable for breach of the head charterparty and breach of the contracts of carriage evidenced by the bills of lading. It could also have compromised the existing insurance arrangements. It also cannot be controverted that a time charterer is entitled to give employment instructions to the shipowners. Such instructions can usually encompass directions as to how the voyage is to be performed by the vessel. Unless the charterparty provides otherwise, the master is obliged to obey such instructions subject only to considerations of seamanship and safety (see Michael Wilford, Terence Coghlin & John D Kimball, Time Charters (LLP, 5th Ed, 2003) at para 19.25 and Whistler International Ltd v Kawasaki Kisen Kaisha Ltd [2001] 1 AC 638 at 647). In our view, FESCO cannot be faulted at all for complying with its contractual obligations.
Material non-disclosure
[79] When the application to set aside the arrest was heard, FESCO contended that five material facts had not been disclosed by the Banks to AR Lee, who heard the ex parte application for the arrest of the Vasiliy Golovnin. They are as follows (see the Judge’s GD at [24]):
(a) the chartered vessel had been released from arrest by the Lomé court following an inter partes hearing (the Lomé Release Order);
(b) Lomé was the contractual port of discharge under three of the four bills of lading;
(c) the primary purpose of switching the bills of lading in question was to alter the port of discharge from Lomé to Douala;
(d) BCG had offered a letter of indemnity to FESCO on 21 December 2005 in consideration of the cargo being discharged at Douala instead of Lomé; and
(e) after failing to persuade FESCO to discharge the cargo at Douala, BCG had sought FESCO’s confirmation that the cargo would be discharged in Douala in accordance with BCG’s instructions.
[80] AR Ang upheld FESCO’s contentions in relation to the first and fourth facts, ie, facts (a) and (d). She ruled that there was sufficient disclosure in relation to the remaining three facts. The Judge found that, in addition to the first and fourth facts, the Banks had failed to disclose another material fact, namely that the main purpose of switching the bills of lading was to change the port of discharge from Lomé to Douala. This relates to fact (c).
[81] As Crédit Agricole is the only appellant in this appeal, it is only appealing against the first and third material facts; BCG is not appealing against any of these findings of material non-disclosure and, as such, a discussion on material fact (d) is not necessary as it relates primarily to BCG’s non-disclosure. At the hearing, Crédit Agricole made no submissions on fact (d). This issue is worthy of mention at this juncture because FESCO submitted that BCG’s decision not to appeal should be taken to mean that it has accepted the Judge’s holding on material non-disclosure. It suggested that this now amounted to an admission of non-disclosure on BCG’s part. Therefore, FESCO argued that, even taking Crédit Agricole’s case at its highest, the arrest ought to be set aside because of BCG’s non-disclosure at the ex parte hearing. While there is some force in this point of view, we also think it would only be right to examine the other grounds raised. This will also be relevant in our ultimate assessment of FESCO’s claim for damages for wrongful arrest against the Banks.
[82] We will examine the issue of material non-disclosure from two aspects: first, what ought to have been disclosed (ie, content and scope) and second, whether such facts have been sufficiently disclosed (ie, threshold). Before delving into these two aspects of disclosure, it would be apposite for us, first, to comment briefly on the duty to make full and frank disclosure in ex parte applications, in general, and for the arrest of ships in particular.
Duty to make full and frank disclosure
[83] It is settled law that on an ex parte application, the applicant must disclose to the court all matters within his knowledge which might be material even if they are prejudicial to the applicant’s claim (The King v The General Commissioners for the Purposes of the Income Tax Acts for the District of Kensington [1917] 1 KB 486 at 504, endorsed by this court in Tay Long Kee Impex Pte Ltd v Tan Beng Huwah [2000] 2 SLR 750 (“Tay Long Kee Impex”) at [21]; see also Steven Gee QC, Commercial Injunctions (Sweet & Maxwell, 5th Ed, 2004) at para 9.001). This applies to the arrest of ships in Singapore as well, though the position is presently quite different in England. It has been held by the English Court of Appeal that the effect of the 1986 amendments to the Rules of the Supreme Court (SI 1965 No 1776) (UK) which, inter alia, amended O 75 r 5 governing the issuance of warrants of arrest, was that the affidavit in support of the warrant of arrest need only comply with the requirements of the English rules (the relevant requirements are presently found in PD61 to the Civil Procedure Rules 1998 (SI 1998 No 3132) (UK)) and need not make full and frank disclosure of all material facts (which was the position in England prior to the amendments (see The Andria now renamed Vasso [1984] QB 477 at 491–492)), given that a plaintiff is entitled as of right to issue a warrant of arrest if the requirements are complied with (see The Varna [1993] 2 Lloyd’s Rep 253 at 257–258; and Nigel Meeson, Admiralty Jurisdiction and Practice (LLP, 3rd Ed, 2003) at para 4.42). In other words, a warrant of arrest has ceased to be a discretionary remedy in England after the 1986 amendments, and has become a remedy that is available as of right to a plaintiff in the circumstances prescribed by the English rules (The Varna at 257; see also the case note by M S Dockray, “Disclosure and Arrest of Ships” (1994) 110 LQR 382 at 384).
[84] In The Rainbow Spring [2003] 3 SLR 362, Judith Prakash J, delivering the judgment of this court, stressed that the position in Singapore differed from that of England. This is because, apart from the differences between the English Rules and our Rules of Court, the warrant of arrest here is issued by the court at its discretion (at [32]). She further pointed out that as the arrest of a vessel was a drastic remedy given on an ex parte basis, the duty to make full and frank disclosure to the court was an important bulwark against the abuse of the arrest process (at [37]):
Indeed, so important is this duty that the failure to make full and frank disclosure can be an independent ground for setting aside an arrest (id at [35]; The AA V [2001] 1 SLR 207 at [47]; The Evmar [1989] SLR 474 at 479, [11]). However, while material non-disclosure is a legitimate ground for setting aside a warrant of arrest, the courts always retain an overriding discretion whether or not to do so. In The Fierbinti [1994] 3 SLR 864, L P Thean JA noted at 879–880, [42]:
The courts will often apply the principle of proportionality in assessing the sin of omission against the impact of such default. This invariably requires a measured assessment of the material facts as well as the circumstances in which the application has been made.
The content/scope of disclosure
[85] The duty to make full and frank disclosure is to disclose all material facts (The Rainbow Spring at [33]). The test of materiality for an arrest application is also the same as that required in other ex parte civil remedies (ibid). The underlying rationale is that these are all remedies that may potentially cause enormous and sometimes irreparable damage to a defendant or other connected parties. Further, the judge hearing the matter, not having the benefit of countervailing arguments, may not be appropriately sensitised to the real merits of the application and the potentially hazardous ramifications of the remedy, particularly (as is usually the case) if the relief is sought on an urgent basis. Fairly and logically, the onus of ensuring that the judge is given a balanced view of the matter rests squarely and uncompromisingly on every applicant in an ex parte application. A decade earlier, in The Damavand [1993] 2 SLR 717 at 731, [30], this court summarised the test of materiality for non-disclosure as follows:
[86] In Tay Long Kee Impex ([83] supra), this court further attempted to clarify the elements of “materiality” at [21]:
What is clear from the above two cases is that material facts are not strictly limited to facts which will have a determinative impact on the court’s decision. So long as the facts are matters that the court should take into consideration in making its decision, they are material.
[87] The test for materiality is always an objective one. In the words of Prakash J in The Rainbow Spring, the test is to simply ask “how relevant the fact is” [emphasis added] (at [33]). However, the duty imposed on the applicant requires him to ask what might be relevant to the court in its assessment of whether or not the remedy should be granted, and not what the applicant alone might think is relevant. This inevitably embraces matters, both factual and legal, which may be prejudicial or disadvantageous to the successful outcome of the applicant’s application. It extends to all material facts that could be reasonably ascertained and defences that might be reasonably raised by the defendant. It is important to stress, however, that the duty extends only to plausible, and not all conceivable or theoretical, defences. For example, if there have been unsuccessful prior proceedings, the context as well as the reasons for the dismissal must be adequately disclosed. In short, the material facts are those which are material to enable the judge to make an informed decision (see Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 per Ralph Gibson LJ at 1356).

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The "Vasiliy Golovnin"

Laws this judgment relies on

Grounds of decision

Introduction

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Overview

The appeals

Background facts

The decision of the Judge

CA 109/2007

Sustainability of the cause of action

The so-called arbitration agreement

Requirements for determining whether a claim falls within section 3(1) of the HCAJA

Crédit Agricole’s substantive claim

Material non-disclosure

Duty to make full and frank disclosure

The content/scope of disclosure