Admiralty Practice and Malaysian Admiralty Court – A Comparative View

This article gives an overview of the Malaysian Admiralty Court set up in 2010 as well as the law and practice of Ship Arrests in Malaysia. The article also provides some key differences from the Admiralty law of Singapore. Ultimately, by highlighting the Malaysian Admiralty Court and Ship Arrest Practice it helps to answer the key question most Shipping lawyers may ask – that Malaysia is a viable jurisdiction to proceed with the ship arrest.

Ship Arrests

Singapore, a maritime hub at the economic and geographical crossroads of global trade, has a strong presence within the global shipping community. As a vital player in the international maritime industry, it has cultivated a sophisticated legal framework to govern maritime activities, with its admiralty laws playing a significant part. 130,000 vessels pass through Singaporean ports annually and it calls home to 150 of the world’s top international shipping groups.¹Singapore Academy of Law (2021) Singapore: An Overview of Shipping Law, pg. 1.

Similarly, Malaysia occupies the Malay Peninsular with the Straits of Malacca running through its length. International Trade is vibrant in Malaysia and the country consistently ranks as amongst within the top 25 importers and exporters internationally in terms of value.

The ability to proceed In Rem and to arrest ships is unique in the enforcement of maritime claims. This important mode of enforcement in maritime claims is exercised by the Courts through their Admiralty Powers. Each jurisdiction has different procedures for the invocation of this Admiralty powers.²See the author’s article in the Maritime Executive, Navigating Disputes, at https://maritime-executive.com/magazine/navigating-disputes#:~:text=Maritime%20lawyers%20help%20parties%20navigate,to%20help%20their%20parties%20prevail.

This article compares the position in Singapore and Malaysia.

The Malaysian Admiralty Court

The Malaysian Admiralty Court was set up in 2010 as a specialist Court. The Court exercises the same Admiralty Jurisdiction as the same jurisdiction and authority in relation to matters of admiralty as is had by the High Court of Justice in England under the United Kingdom Supreme (now Senior Courts) Court Act 1981.³Section 24 (b) Courts of Judicature Act 1964. Cf Singapore established its own statute i.e. High Court (Admiralty Jurisdiction) Act 1961. Originally the Court exercise the same traditional In Rem remedies as exercised by the United Kingdom Courts,⁴The traditional 18 categories of claims see Practice Direction 1 of 2012 – Admiralty and Maritime Claims. the jurisdiction of the Court was expanded in 2012⁵Ibid, above. to maritime claims which are stated to include marine insurance, marine related claims, shipbuilding amongst others.⁶Ibid, above.

The Admiralty Court was set up with Datuk Nallini Pathmanathan as the first Admiralty Judge and the rationale was that expertise would be concentrated in the Court.⁷The author argued the Inaugural reported decision of the Court in the case of The Istana VI (2011) 7 MLJ 145. The current Admiralty Judge since May is Justice Ong Chee Kwan, a 1988 law graduate from the National University of Singapore who was the former named Partner of the Malaysian law firm of Christopher Lee and Ong.

While the adoption of the same Admiralty Jurisdiction allowed the application of English cases, the cases heard by the Court soon added to and facilitated the establishment of Malaysian jurisprudence in this area of law.

There is no Admiralty Court in Singapore as such. Nonetheless, the Singapore Courts have long decided admiralty and shipping cases and built a copious jurisprudence of in this area. Unlike the Admiralty Jurisdiction exercised in Malaysia which derives from the English statute, Singapore has its own statute, the Singapore High Court (Admiralty Jurisdiction) Act.⁸(Cap 123) (‘HCAJA’).

Dangerous Goods

Two decisions of the Singapore and Malaysian Courts cover the issue of the carriage of dangerous goods. These decisions cover significant aspects of such carriage, one on the International Maritime Dangerous Goods Code (or IMDG Code), the other the duty of care on such carriage as prescribed under the ICS Tanker Safety Guide (Chemicals).

The International Maritime Dangerous Goods Code (or IMDG Code) first published in 1965 is an International Maritime Organisation Code which prescribes guidelines for the safe preparation, storage, and handling of transportation and shipment of dangerous goods or hazardous materials. The IMDG Code divides dangerous goods into nine classes, with different attributes and labelling, and each will have their unique UN Number.

In the Malaysian Admiralty Court in the case of The Ing Hua Fu,⁹(2013) 9 MLJ 825. The Author acted for the Plaintiff shipowner in this case. the forwarder declared the classes and UN numbers of the dangerous chemicals to the load port authorities without any appreciation of their significance. He did not have a copy of the IMDG Code, and he simply forwarded the information given by the shipper. In the booking of the shipment with the shipping agent, the forwarder declared the cargo as innocuous Agrochemicals instead of their true nature.

The facts as related by the Court are as follows:

“From the evidence of these various witnesses, it transpires if that is not in dispute that pursuant to Bill of Lading No PGM206 (‘B/L’), the shipper shipped the following cargo of agrochemicals on board the vessel at Penang Port for delivery to their buyers in Miri …”

These chemical products bear different characteristics identified by the UN and IMO Class numbers. The B/L described the cargo as “six pallets said to contain 185 packages (30 bags and 155 cartons) Agrochemicals”. The shipment was arranged by the forwarding agent, Heng with the carrier’s Penang ship agents, Syarikat Perkapalan Soo Hup Seng Sdn Bhd (Soo Hup Seng).

Essentially, the chemicals which were stowed on deck caught fire and exploded when the vessel arrived at the subsequent port, sinking the vessel within 20 minutes. The Court held that the forwarders and shipper’s failure to declare the dangerous nature of the cargo was a negligent act which contributed and caused the damage to the vessel.

The Court considered in detail the provisions of the IMDG Code and Material Safety Data Sheet pertaining to the cargoes carried. It also found that the epicentre of the explosion occurred on that part of the main deck where the pallets of agrochemicals were stowed. The fact that the Agrochemicals were directly related to the explosion was borne out by the eye-witness account.

The Court found that there was no information given to the carrier about the nature and characteristics of these chemicals, albeit in the form of the MSDS or otherwise. No indication on the possible hazards of such a composition of chemicals, notwithstanding that the shippers and their agents were the primary persons in possession of such knowledge.

The forwarding agent that arranged the shipment for the shipper dealt with the shipping agent, completed the draft bill of lading that declared the DG chemicals as innocuous Agrochemicals yet at the same time declared the proper IMDG Code and Number to the Penang Port Commission. When cross-examined on the IMDG Code, the forwarding agent admitted that he did not have a copy of the Code. When asked about the particular Codes and Numbers of the chemicals declared, he couldn’t explain. The forwarding agent was held liable for failing to fulfil a duty of care.

In the Singapore Court of Appeal decision of The Sunrise Crane,¹⁰The “Sunrise Crane” (2003) SGHC 291; The “Sunrise Crane” (2004) SGCA 42. the appellant’s vessel, the Sunrise Crane, a chemical carrier transferred approximately 34mt of nitric acid contaminated by hydraulic oil into the No 1 wing cargo tank of the Pristine. A short while later, smoke was seen coming out from the forward vent of the Pristine which also listed a little to port. The crew from the Pristine evacuated and the Pristine eventually capsized. It was subsequently established that the cargo of contaminated nitric acid had bored holes into the hull of the Pristine, causing leaks.

It was common ground that prior to the transfer of the cargo from the Sunrise Crane to the Pristine, no one on board the former informed anyone on board the latter that the substance to be transferred was contaminated nitric acid.

The Singapore Court of Appeal held the owners of the Sunrise Crane liable. In coming to its decision, it endorsed and adopted the decision of the High Court:

“The duty to inform the receiver of the dangerous nature of the goods is not foreign to the chemical tankers in the industry. Such disclosure is very much part of and inherent in the basic safety procedures and work practices of chemical tankers in the industry. The ICS Tanker Safety Guide (Chemicals), (3rd Ed, 2000) which is intended as a guide to complement and not replace a shipowner’s own safety or operational guidelines for chemical tankers sets out the reasonable steps the recipient of chemical cargo [is] to take once the information on the cargo is received.”

Invoking Admiralty Jurisdiction

The most common remedy sought in the Admiralty Court is the In Rem remedy of a ship arrest. The Warrant of Arrest is served together with the Writ In Rem on the Vessel according to the Rules of Court. The claim which found the right of arrest is established in the underlying pleading.¹¹The Jeil Crystal (2022) SGCA 66. It is on this basis that when the arrest is challenged, often the challenge is made by applying to set aside the arrest as well as to strike out the claim.

Unlike some other jurisdictions (for example, China),¹²See the author’s article in the Maritime Executive, Navigating Disputes, supra Note, 1. the arresting party is not required to put up countersecurity.

A relatively unknown fact is the reach of the Admiralty Court; the Warrants of Arrest issued by the Court can be exercised over vessels in Malaysian waters even if located in Sabah or Sarawak. This is often exercised by the Admiralty Sheriff empowering the Bailiffs of the Courts in Sabah and Sarawak to serve both the In Rem Writ and Warrant of Arrest on the vessels in the waters of the local jurisdiction.

The Arrest is proceeded in a two-stage process:

1. The Plaintiff’s lawyer applies to the Admiralty Court for the issuance of the Warrant of Arrest. In this application, he must satisfy the Court that the grounds of invoking the admiralty jurisdiction have been satisfied;
2. Execution of the Warrant. Once the Warrant of Arrest has been issued, the Admiralty Sheriff or Bailiff will serve the Writ In Rem and Warrant of Arrest on board the Vessel. In Singapore, this can be done by the clerk of the law firm whilst in Malaysia this can only be done by the Admiralty Sheriff.

The Singapore Court of Appeal¹³In Bunga Melati 5 (2012) SGCA 46, similar requirement applies in Malaysia under Sections 20 and 21 of the United Kingdom Supreme (now Senior Courts) Act 1981. held that before a Warrant of Arrest can be issued, the Plaintiff had to establish the following:

1. The claim probably exists and is in the nature of a maritime claim that falls within sections 3(1)(d) to (q) of the HCAJA;
2. Show that the underlying claim arises in connection with the offending ship;
3. Identify who is the person who would be liable on the claim In Personam (the Relevant Person);
4. Show that the Relevant Person was the owner, charterer, or in possession or control, of the offending ship when the cause of action arose; and
5. Show that at the time when the action is brought, the Relevant Person is,
   1. the beneficial owner or bareboat/demise charterer of the offending ship, or
   2. the beneficial owner of the sister ship.

Competing Approaches

At the first stage for the application for a Warrant of Arrest, a critical issue that arises is what needs to be disclosed and whether in hearing the application, the Judge’s decision is discretionary. This is where the Singapore and Malaysian position differs.

Unlike the English position where the entitlement to a warrant of arrest is as of right, the Singapore court has the discretion whether or not to grant a warrant of arrest. To enable the Singapore court to exercise its discretion, full and frank disclosure of all material facts must therefore be made on any application for a warrant of arrest. The facts to be disclosed are not limited to the circumstances leading to the arrest but also to any plausible defences that the defendant would have in seeking to set aside the arrest.¹⁴The Vasiliy Golovnin (2008) 4 SLR (R) 995, The Rainbow Spring (2003) 3 SLR(R) 362, The Big Fish (2021) SGHCR 7.

In the case of The Ever Concord,¹⁵(2021) 9 MLJ 936 The same proposition had been established earlier by the Court of Appeal in Civil Appeal No. W-02(IM)(ADM)-1327-07/2017 overruling the High Court decision of Thaumas Marine Ltd v Owners thel ‘JHW Sapphire’ (2017) MLJU 2102, which case was argued by the Author. Unfortunately, there was no written grounds by the Court of Appeal. the Malaysian Admiralty Court ruled that, unlike the Singapore position, a ship arrest under Malaysian law was not a discretionary remedy once the Plaintiff satisfied the criteria for invoking Admiralty Jurisdiction:¹⁶Following the English position see the English Court of Appeal case of The Varna (1993) 2 Lloyd’s Rep 253.

“The plaintiff had satisfied the court that the requirements under O 70 r 4(6) and (7) of the ROC were complied with, without any further requirement of full and frank disclosure in its request for the issuance of the warrant of arrest. The issue of a warrant of arrest was not a discretionary remedy, but a right for the plaintiff. There was no requirement of full and frank disclosure and the arresting party only had to demonstrate that he had complied with O 70 r 4 of the ROC.”

Nature of In Rem Claim

The Malaysian Court of Appeal in Majorole Shipping Sdn Bhd v M & G Tankers (L) Pte Ltd¹⁷Civil Appeal No W-02(IM)(ADM)-1179-06/2019. The author acted for the Appellant in this case. considered whether an In Rem claim survived the setting aside of an arrest of the vessel.¹⁸In August 2021, the Federal Court considered the leave application for Appeal from the Court of Appeal. Federal Court Leave Application No: 08(i)-88-03/2020(W), appeal against Court of Appeal decision W-02(IM)-1179-06/2019 dated 23 February 2021. Leave was refused. Leave will only be granted by the Federal Court on meeting the criteria under the Courts of Judicature Act s96(a).

In August 2021, the Malaysian Apex Federal Court considered an appeal from the Court of Appeal, in a case which concerned the competing rights of a purchaser of an arrested vessel vis-à-vis the claim of a shipping agent which arrested the vessel and obtained an In Rem judgment in default. After obtaining the judgment, the shipping agent did not proceed with the sale pendente lite. The vessel was under mortgage and if the sale had taken place the rights of the shipping agent would have fallen behind that of the mortgagee in priority.

The arrest was not withdrawn. Some 18 months later, the subsequent buyer found that it could not sail the vessel outside of the port area due to the arrest which was still in place. The buyer could only sail the vessel after it had provided security of the shipping agent’s claim. The buyer filed proceedings alleging that the continued arrest was an abuse of the Court process and also applied to set aside the arrest on the ground that the affidavit of service did not reveal the warrant was properly served on board. However, the buyer failed to conduct a search at the Admiralty Registry but still claimed that it was a bona fide purchaser without notice on the ground that the announced website was not set up and when it went on board there was no writ or warrant pasted on board. The shipping agent filed parallel proceedings contending that it had obtained an In Rem judgement which attached to the vessel and the purchaser took subject to the crystallised In Rem rights.

The shipping agent also contended that the High Court Judge was functus officio and could not disturb the judgment or fail to give effect to those In Rem rights. The High Court Judge gave judgment in favour of the purchaser and ordered the cancellation of the security.

The shipping agent appealed to the Court of Appeal and the Appeal was heard by a Panel of three Court of Appeal Judges over two sessions in November 2020 and February 2021.¹⁹The appeal was heard over the online platform ‘Zoom’ and the hearing took a total of 6 hours. The Court of Appeal overturned the decision of the High Court restoring the shipping agent’s claim. In essence the Court of Appeal held that:

“[t]he shipping agent’s claim against the vessel has crystallised as a judgment In Rem after the judgment in default of appearance had been granted and is an In Rem claim which is protected and prioritized”.

The Court of Appeal also found on the facts that there was no abuse of process by the shipping agent in not proceeding with the sale application.²⁰The brief grounds were pronounced orally at the 2nd hearing session in February. The practice in appeals in Malaysia is that detailed grounds will only be written after leave is obtained from the Federal Court for the appeal to the Federal Court.

Not satisfied with the Court of Appeal decision, the purchaser proceeded with a further appeal by applying for leave to appeal to the Federal Court. The purchaser failed to obtained leave and the Federal Court noted that the questions of law posed revolved around issues of fact and the questions would not resolve or have the effect of overturning the Court of Appeal decision.²¹Supra.

This case realigns Malaysian law with English Admiralty law to the effect that that In Rem rights and judgements will bind the whole world.²²The authorities accepted by the Malaysian Court of Appeal included the statement by the House of Lords in The Cristina (1938) AC 485 the House of Lords that ‘A judgment in rem is a judgment against all the world’ and in The Ship ‘Federal Huron’ v OK Tedi Mining Ltd (1987) LRC (Comm) 254 that ‘Rights in rem arising out of a maritime lien travel with the vessel irrespective of ownership and come into existence automatically on the occurrence of the incident giving rise to the lien (per Scott, L.J., in The Tolten (1946) 2 All ER 379)’. The buyer who recklessly fails to conduct due diligence on the encumbrances of the vessel cannot claim to be a bona fide purchaser of the vessel without notice and takes the vessel subject to the crystallised In Rem rights of the shipping agent.

Arbitration

Parties are able to arrest a vessel to obtain security for the later enforcement of the arbitral award, wherever the vessel may be found.²³The enforceability of Arbitration Awards under the New York Convention is easily one of the clearest benefits of arbitration over litigation, this benefit is further enhanced by the ancillary powers of the Malaysian Admiralty Court to lend its powers of in rem enforcement. Under the Arbitration Act, the Malaysian Admiralty Court is empowered to issue Warrants of Arrest in aid of ongoing or intended arbitration.²⁴Section 10(2A) of Arbitration Act 2005. This statutory power is much wider than the previous common law criteria as set by The Rena K (1979) 1 AER 397

By way of contrast, decisions and judgements of local courts have limited enforceability outside the jurisdiction of that court as mutual recognition and enforcement of judgments relies on statutes providing for reciprocal recognition and enforcement of judgments which are limited in scope.²⁵Eg the Malaysian Reciprocal Enforcement of Judgments Act 1958 shows that Malaysia only recognises very few judgements of countries on a reciprocal basis eg UK, Singapore, Hong Kong and certain states of India.

In Innotec Asia Pacific Sdn Bhd v Innotec GmbH,²⁶(2007) 3 AMR 67. the Malaysian High Court recognised the necessity to grant a stay of Malaysian Court proceedings in favour of arbitration in Germany, to honour Malaysia’s treaty obligations under the New York Convention.²⁷Ibid

“… Being the court of the country it is the duty of this court to interpret our laws so as to comply with such Convention where Malaysia is a party, unless expressly prohibited by law. Be it under s 10 of the Arbitration Act 2005 or under the New York Convention 1958, a stay of proceedings is mandatory in order to refer the parties or the dispute to arbitration. This is also in line with the judiciary’s efforts to refer disputes to arbitration or other mediation process before the matter is dealt with by the court.”

Conclusion

The exercise of the Admiralty Jurisdiction of both the Singapore and Malaysian Courts operate for the most part in similar manner. The establishment of the Malaysian Admiralty Court has promoted greater certainty and concentrated expertise in this area of law. The Malaysian Courts have for many years applied a prescribed time frame of completing a trial within nine months of filing of the suit, which is record compared to even some arbitrations.

Over the years there has also emerged a credible Malaysian Shipping Bar which ensures that the expertise in this area is certainly not lacking. Thus, in most cases, the question of which jurisdiction to arrest vessels boils down to where the vessel is sailing to.

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