In a recent case, the Admiralty Court considered whether, in an admiralty action, an intervener (ie, a party other than the proper defendant) can apply to set aside a warrant of arrest of a vessel on non-traditional grounds.

Legal background

The traditional grounds for setting aside a warrant of arrest include:

  • in excess or lack of jurisdiction;(1)
  • wrongful arrest and wrongful continuance of the arrest;(2)
  • the plaintiff's failure to make a full and frank disclosure of material facts in the affidavit leading to the arrest;(3)
  • the setting aside of a writ which removes the basis for the arrest;(4)
  • a failure to comply with the mandatory requirement for service of a writ and warrant of arrest;(5) and
  • the action is unsustainable.(6)

Facts

The plaintiff was the operator of the Kuantan Port. The defendant was the owner of the vessel MT HE XIE HAO. The intervener was the owner and person entitled to the immediate possession of the cargo, approximately 1,727,269 metric tonnes of fuel oil laden on board the vessel.

On 17 August 2019 the vessel collided with a navigational beacon owned and maintained by the plaintiff at the Kuantan Port. The plaintiff later obtained the Marine Department's assistance to detain the vessel and prevent it from leaving the port until the plaintiff's claim was resolved.

The intervener loaded the cargo onto the vessel without any notice of the dispute between the plaintiff and defendant.

On 15 October 2019 the vessel was arrested at Kuantan Port pursuant to a warrant of arrest issued by the Admiralty Court at the plaintiff's behest.

On 21 October 2019 the plaintiff applied to the Admiralty Court for an omnibus order pursuant to Order 70, Rule (11) of the Rules of Court 2012.

An 'omnibus order' is an order made by the Admiralty Court during the advance stages of proceedings in relation to the preservation, management or control of a ship, vessel or maritime property that is under arrest.

On 31 December 2019 the Admiralty Court allowed the plaintiff's application for an omnibus order, pursuant to which the plaintiff had to obtain port risk insurance cover for the vessel under the sheriff's name in order to properly maintain and preserve the vessel's interest while it was under arrest. All costs and expenses connected or incidental thereto were to be treated as forming part of the sheriff's costs and expenses under the omnibus order.

In early June 2020 the intervener applied for leave to intervene in the admiralty proceedings. In the same application, the intervener applied to have the cargo on board the arrested vessel discharged to it or its nominee. The court allowed this application.

In mid-June 2020 the intervener wrote to the plaintiff asking if it had secured port risk insurance cover for the arrested vessel. The intervener also alerted the plaintiff that the vessel had neither protection and indemnity insurance cover nor hull and machinery insurance cover. This was confirmed by the defendant's solicitors.

Without any insurance protection for the vessel, the intervener could discharge the vessel's cargo by way of a ship-to-ship transfer of the cargo from the arrested vessel to a receiving vessel. It is a requirement of the Marine Department that vessels involved in a ship-to-ship transfer be insured due to the inherently risks.

In October 2020 the plaintiff still had not obtained port risk insurance cover for the vessel. Thus, the intervener could not discharge its cargo.

The intervener filed an application to set aside the warrant of arrest against the vessel on account of the plaintiff's failure to obtain port risk insurance cover.

Intervener's submission

The requirement to preserve a vessel by way of an omnibus order is set out in:

  • Order 70, Rule (11) of the Rules of Court 2012;
  • Practice Direction 2/2007 – Admiralty Actions; and
  • Practice Direction 1/2012 – Admiralty and Maritime Claims.

The intervener submitted that:

  • the intervener had the necessary standing to make the present application;
  • the intervener was not seeking to lift, discontinue or set aside the warrant of arrest under the traditional grounds for setting aside an arrest; and
  • the application to set aside the warrant of arrest had been filed by the intervener in recognition of the court's inherent power to lift, discontinue or set aside an arrest where the arresting party fails, neglects or refuses to abide by an order of the Admiralty Court.

The intervener further submitted that:

  • the plaintiff had failed to comply with the requirement in the omnibus order to obtain port risk insurance cover for the vessel;
  • the plaintiff had failed to disclose its failure to obtain port risk insurance cover to the Admiralty Court;
  • the vessel had been lying arrested with no insurance cover since the date of the grant of the omnibus order;
  • the vessel, its crew and the cargo were at risk without the insurance cover; and
  • the vessel was a risk to other vessels in the port in the absence of port risk insurance cover.

The intervener relied on the earlier judgment of the Admiralty Court delivered in Majorole Shipping Sdn Bhd v Semua Bahagia v M&G Tankers (L) Pte Ltd (Suit WA-27NCC- 68-11/2016).

Plaintiff's submission

The plaintiff submitted that:

  • the intervener did not have the legal standing to apply to set aside the arrest of the vessel as it was only an intervener with an interest in the cargo on board the arrested vessel. It had no interest in the vessel;
  • the vessel had been arrested as security for the plaintiff's claim and, therefore, the arrest should not be lightly set aside;
  • this was not a situation where any of the traditional grounds for setting aside an arrest applied;
  • the intervener could have acted pursuant to the omnibus order to have its cargo discharged;
  • the intervener had been granted leave to discharge its cargo from the vessel but had not acted thereon;
  • the lack of insurance cover did not prevent the discharge of the cargo;
  • the intervener should be faulted for not introducing an insurer to the plaintiff which could have provided port risk insurance cover;
  • the plaintiff had tried its level best to secure port risk insurance cover. The fact that it could not was not its fault;
  • the plaintiff should not be faulted for failing to obtain port risk insurance cover during the COVID-19 pandemic; and
  • the intervener's application was tainted with delay.

Decision

In delivering the Admiralty Court's judgment, Judicial Commissioner Atan Mustaffa Yussof Ahmad opined and ruled as follows:

  • The plaintiff had failed to comply with Paragraph 7 of the omnibus order dated 31 December 2020. The plaintiff was obliged under the order to obtain insurance for the vessel – in particular, port risk insurance cover under the sheriff's name, in order to properly maintain and preserve the vessel's interest while it was under arrest.
  • The plaintiff's non-compliance with the omnibus order had worsened when it had failed to disclose to the Admiralty Court its failure to take out port risk insurance cover for the vessel. This had been uncovered six months after the arrest, only after the intervener had alerted the plaintiff on 17 June 2020 of the lack of port risk and other insurance cover.
  • The intervener had locus standi to apply to set aside the warrant of arrest, although the application was not founded on traditional grounds such as lack jurisdiction or merits of the plaintiff's grounds for arrest. There was precedent for an intervener to set aside a warrant of arrest.(7) As stated by the judge in Semua Bahagia, even if the intervener had no locus standi to raise issues in relation to the omnibus order, this did not stop the court from taking issue with the plaintiff for its non-compliance with the order. Therefore, the court has inherent power to lift, discontinue or set aside the arrest where the arresting party fails, neglects or refuses to abide by an order of the Admiralty Court.
  • The plaintiff's failure to take out port risk insurance cover had put the vessel and its crew and cargo at risk as the vessel had been lying arrested with no insurance cover since 31 December 2019. The vessel and its crew and cargo were left unprotected and without remedy should anything untoward have happened to the vessel or its crew or cargo. In this sense, the vessel under arrest was not properly preserved.
  • Further, in the absence of port risk insurance cover, other vessels were also at risk. In the event of a collision, affected parties would be without redress from the sheriff or Admiralty Court who was responsible for the custody, control and supervision of the vessel.
  • The plaintiff had not made reasonable efforts to take out port risk insurance cover for the vessel. The plaintiff had nothing from the date of the omnibus order (31 December 2019) to the point when the intervener contacted the plaintiff (17 June 2020) regarding insurance cover for the vessel. The plaintiff had offered no explanation for this omission. The plaintiff's enquiry to one broker and one insurer after it had been notified of the absence of port risk insurance cover by the intervener was not an adequate effort by the plaintiff. The plaintiff had also failed to act correctly when it sought hull and machinery insurance cover in addition to port risk insurance cover in its name, when what was required was port risk cover. Paragraph 10 of the omnibus order requires the insurance to be taken out in the name of the sheriff who has a legal interest in the vessel.
  • Although the vessel was arrested pursuant to the plaintiff's right to obtain security, the plaintiff, as the arresting party, had the duty to ensure that the vessel was preserved, which included taking out port risk insurance as stated in Paragraph 10 of the omnibus order. Taking out insurance cover for the preservation of the vessel was averred by the plaintiff's officer in the plaintiff's affidavit in support of Point 10 of the notice of application for an omnibus order. The court has the inherent power to lift, discontinue or set aside the warrant of arrest on account of the plaintiff's failure to comply with the omnibus order dated 31 December 2020, even though the original purpose of the arrest was to obtain security.

The Admiralty Court set aside the warrant of arrest and ordered the vessel's release.

Comment

The main takeaway points from this judgment are that:

  • an intervener can be a party with the necessary locus standi to apply to set aside a warrant of arrest executed against a vessel on non-traditional grounds; and
  • the Admiralty Court has the inherent power to lift, discontinue or set aside a warrant of arrest on account of the arresting party's failure to comply with an order of the court.

Endnotes

(1) See The Fordeco 12 and 17; Owners of and all other persons interested in the ships Fordeco 12 and Fordeco 17 v Shanghai Hai Xing Shipping Co Ltd, the owners of the ship MV Xin Hua 10 [2000] 1 MLJ 449.

(2) See Ocean Gain Shipping Pte Ltd v Owner or charterer of demise of vessel Dong Nai registered at Haiphong Port, Vietnam (The Dong Nai) [1996] 4 MLJ 454.

(3) See Shivnath Rai Harnarain (India) Ltd v Owners of the ship or vessel MV 'Win Moony' (Lr 8204846) of the Valletta Port, Malta [2005] 1 MLJ 141).

(4) See Shanti Kant Jinghan v Owners or other persons interested in the vessel ' Indera Pertama' [1989] 3 MLJ 58.

(5) See Kertih Port Sdn Bhd v Owners of the vessel ' Shema' [2009] 2 MLJ 589; Vitol Asia Pte Ltd v Owners of the ship or vessel 'Malik Al Ashtar' (IMO 9525900) of the Malta Port, ING Bank NV, interveners, [2016] MLJU 692.

(6) See Vitol Asia Pte Ltd v Owners of the ship or vessel 'Malik Al Ashtar' (IMO 9525900) of the Malta Port (ING Bank NV were the interveners) [2016] MLJU 692.

(7) See Majorole Shipping Sdn Bhd v Semua Bahagia v M & G Tankers (L) Pte Ltd (Suit WA-27NCC- 68-11/2016); East Asia Supply Co Pte Ltd v The 'San 003' [1979] 2 MLJ 8.