In the case of Unicious Energy Pte Ltd v The Owners and/or Demise Charterers of The Ship or Vessel ‘Alpine Mathilde’ [2023] MLJU 2819 (“The Alpine Mathilde”) the High Court found that there was a distinction between the arrest of a vessel as security for arbitration and the arrest of a vessel as security for litigation in Malaysia as follows:
- The arrest of a vessel as security for arbitration proceedings is not as of right and is subject to the discretion of the Court. Therefore, a plaintiff seeking the issuance of a Warrant of Arrest for the aforesaid purpose is subject to the duty of full and frank disclosure of all material facts and the Court will also consider the bona fide conduct of the plaintiff in exercising its discretion judicially.
- On the other hand, the arrest of a vessel as security for litigation is as of right and a duty of full and frank disclosure will not be imposed on a plaintiff.
The Alpine Mathilde is the first case in Malaysia to decide the existence of this distinction in an in rem action.
Brief Facts
The Plaintiff filed a Writ in Rem, invoking the admiralty jurisdiction of the Court pursuant to section 24(b) of the Courts of Judicature Act 1964 (“CJA 1964”) read together with sections 20 and 21 of the United Kingdom Senior Courts Act 1981 (“SCA 1981”) and proceeded to arrest the Defendant’s vessel, i.e. the Alphine Mathilde (“Vessel”), as security for arbitration in London which was initiated immediately prior to the filing of the Writ in Rem. The Plaintiff claimed that it entered into a voyage charterparty with the Defendant which the Defendant breached by refusing to deliver the cargo on board the Vessel, comprising about 33,000 +/- 10% MTs of Naphtha, as per the Plaintiff’s instructions.
Subsequently, the Defendant applied to set aside the Writ in Rem and Warrant of Arrest and sought damages from the Plaintiff on the basis that it had wrongfully arrested the Vessel. The Defendant also sought a declaration that the Plaintiff had wrongly commenced and invoked the admiralty jurisdiction and/or that the Court had no in rem jurisdiction over the Defendant in respect of the subject matter of the said suit.
In determining the Defendant’s application, the learned Judge, Ong Chee Kwan J, considered among others, the following legal issues:
- whether the Plaintiff had wrongly invoked the admiralty jurisdiction of the Court;
- whether the arrest was an application for interim measure under section 11(1)(c) of the Arbitration Act (“AA 2005”); and
- if the Warrant of Arrest was treated as an arrest under section 11(1)(c) of the AA 2005, whether the arrest was subject to the Court’s discretion and not a matter of right.
The High Court’s Decision
At the outset,
section 24(b) of the CJA 1964 vests the Malaysian High Court with the same jurisdiction and authority in relation to matters of admiralty
as the English High Court of Justice had in 1981 (but not beyond that) under the UK SCA 1981
1.
It is trite that the purpose of arresting a vessel in an action
in rem is to obtain security for the satisfaction of any judgment which may be obtainable
in such an action, or of any sum which may become payable under an agreement where the action is settled.
Ong Chee Kwan J held that in order to invoke the admiralty jurisdiction of the Court to arrest a vessel, a plaintiff must satisfy test propounded in
The “Bunga Melati 5”2, namely:
- show that he has a claim under Section 20(2) of the UK SCA 1981;
- show that the claim arises in connection with a ship;
- identify the person who would be liable on the claim in an action in personam (i.e. the in personam liability requirement);
- show that the relevant person was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship; and
- show that the relevant person was, at the time when the action was brought: (i) the beneficial owner of the subject vessel in respect of all the shares in it or the charterer of that ship under a demise charter; or (ii) the beneficial owner of a sister ship in respect of all the shares in it.
Once that test was satisfied, a plaintiff is entitled
as a matter of right to arrest a vessel as security for the plaintiff’s claim in an action
in rem3.
However, His Lordship found that the admiralty jurisdiction of the High Court could not be invoked as of right to arrest a vessel as security for a prospective arbitral award under
section 24(b) of the CJA 1964 as
sections 20 to 24 of the UK SCA 1981 does not cloak the High Court with powers to arrest a vessel in an action
in rem solely as security for a prospective arbitral award. Instead, the power of the High Court to arrest a vessel solely as security for arbitration emanates from the
AA 2005, specifically
section 11(1)(c) or
section 10 in the case of a stay application.
His Lordship held that neither
sections 10 nor
11 of the AA 2005 widened the admiralty jurisdiction of the Malaysian High Courts to add a new category of “maritime claim” under
sections 20 to 24 of the UK SCA 1981, to provide for a right to arrest vessels as security for arbitration claims.
His Lordship found that
Section 10 of the AA 2005 merely
confers a discretion on the Malaysian High Courts when granting a stay to retain a vessel under arrest as security for the purposes of satisfying an award that may be made in the arbitration proceedings. On the other hand,
section 11(1)(c) of the AA 2005 confers a discretion on the Malaysian High Courts to order the arrest of a vessel as an interim measure to provide a means of preserving assets out of which a subsequent award may be satisfied under the arbitration proceedings.
His Lordship held that the reason why the powers exercisable under
sections 10 and/or 11 of the AA 2005 are subject to the Court’s discretion and not as of right is to ensure that the arrest or retention of arrested vessel is only ordered in appropriate circumstances. Hence, His Lordship reasoned that the issuance of the Warrant of Arrest
warrants a full and frank disclosure of all material facts and the Court’s consideration of the
bona fide conduct of the applicant as well as all matters relevant for the exercise of such discretion.