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Singapore – First Five-Member Court Of Appeal Decision On Admiralty.

12 March, 2015

 

Legal News & Analysis – Asia Pacific – Singapore – Shipping Maritime & Aviation

 

Introduction


Rajah & Tann Singapore LLP acted as counsel for Transocean Oil Pte. Ltd. (“Transocean”) before a 5-member Court of Appeal against the decision of the High Court striking out its claim for unpaid bunkers and setting aside the warrant of arrest against the STX MUMBAI (the “Vessel”) in STX MUMBAI [2014] SGHC 122. This is the first time in Singapore’s history that the Court of Appeal comprising five members has been constituted to hear an admiralty case.

 

Brief Facts


Briefly, Transocean had supplied bunkers to the Vessel in 2013. Before the expiry of the 30-day credit period (16 June 2013, which was a Sunday) to pay for the bunkers, Transocean issued a writ in rem and arrested the Vessel in the afternoon of 14 June 2013 (a Friday) on the basis that the owners were in anticipatory breach of the bunker supply contract.


Transocean argued that by the time the writ was issued and the Vessel was arrested, it was clear that the owners of the Vessel could not pay the price of the bunkers within the credit period because the STX group was insolvent, as the parent, STX Pan Ocean Co. Ltd., had put itself under bankruptcy protection in South Korea.


Holding Of The High Court


In the setting aside and striking out application made by the owners, the High Court ruled that Transocean’s action was pre-mature and legally unsustainable as it had issued the writ and arrested the Vessel before the expiry of the 30-day credit period. The High Court also held that insolvency per se did not amount to a repudiation of the contract as a matter of law.


The High Court further observed that the doctrine of anticipatory breach may be unavailable under Singapore law in executed contracts – i.e. where the only outstanding obligation left in the contract was to pay the price. Having decided that there was no valid cause of action when the Vessel was arrested, the Court further ruled that Transocean had acted with bad faith in obtaining a warrant of arrest and continuing the arrest. An inquiry as to the damages for wrongful arrest was therefore ordered.


Holding Of The Court Of Appeal


The team from Rajah & Tann Singapore LLP was instructed as counsel and was successful in persuading the Court of Appeal to depart from precedents in various jurisdictions namely, certain states in the USA, Australia and Canada, ruling that the doctrine of anticipatory breach was unavailable to executed contracts. They argued that a single test of anticipatory breach should apply in both executed and executory contracts, that is, the Court should simply look at the facts and determine whether it was impossible to or if there was an intention not to perform the contract by the counterparty.


On the facts, it was arguable that Transocean waited until after they were reasonably satisfied that payment could not be made before the arrest was executed. They also persuaded the Court of Appeal that it was arguable that the insolvency of STX Pan Ocean Co. Ltd. precluded the price from being paid, there being no incentive for the liquidator to admit the debt for payment. It was therefore pre-mature for the High Court to set aside the arrest and strike out the case on the basis that insolvency did not amount to a repudiation of the contract.


The Court of Appeal allowed Transocean’s appeal immediately after hearing oral arguments but indicated that it would issue grounds of decision at a later date. The grounds of decision is much awaited by admiralty and commercial lawyers as it will clarify various principles of law which has hitherto not been squarely tested in the Singapore courts. The impact of this decision on the shipping industry was immediate, as both Platts and Tradewinds featured this case in their publications.


Rajah & Tann

 

For further information, please contact:

 

Kah Wah Leong, Partner, Rajah & Tann

kah.wah.leong@rajahtann.com


V Bala, Partner, Rajah & Tann
bala@rajahtann.com


See Bin Koh, Partner, Rajah & Tann

see.bin.koh@rajahtann.com

 

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