The decision of the Court of Appeal in Bunga Melati 5 [2012] SGCA 46 (“Bunga Melati 5”) is welcomed by shipping practitioners as it has clarified the standard of proof required to bring an action in rem and satisfy section 4(4)(b) of the High Court (Admiralty Jurisdiction) Act (“HCAJA”).

In Bunga Melati 5, Equatorial Marin Fuel Management Services Pte Ltd (the “Appellant”) alleged that it had entered into a contractual relationship with MISC Berhad (the “Respondent”) under which the Appellant would supply bunkers to a number of the Respondent's vessels. The Appellant claimed that the relevant contracts were brokered through the respondent’s agent, Market Asia Link Sdn Bhd ("MAL"). According to the Appellant, an employee from the Respondent's bunker unit had represented that MAL was the respondent's bunker broker. The Appellant relied on the representations and believed that MAL acted exclusively for the Respondent as an agent.

The Respondent subsequently applied to strike out the Appellant's action in rem pursuant to the court's inherent jurisdiction under O 18 r 19 of the Rules of Court, on the basis that it had not been in a contractual relationship with the Appellant. The issue in this case was whether a plaintiff needs to show a good arguable case on the merits of its claim in order to invoke the admiralty jurisdiction or if an arguable case will suffice.

The Court of Appeal (the “CA”) held that an arguable case would be sufficient for the Appellant to invoke the admiralty jurisdiction. The CA further held that a plaintiff only needs to show that its claim is of the same legal character as the section 3(1) limb it is relying on. If a plaintiff is unable to show an arguable case on the law, it has failed to prove that it is entitled to invoke the admiralty jurisdiction.

In the earlier case of The “Vasiliy Golovnin” [2008] 4 SLR(R) 994 (“The Vasiliy Golovnin”), the CA held that the arrest of the ship was invalid as the claimants did not have a good arguable case. This decision brought about the need to question the merit of a case in order to invoke the CA’s admiralty jurisdiction.

The impact of decision of the CA in Bunga Melati 5 will be felt by claimants and respondents in admiralty claims as it clarifies the decision in The Vasiliy Golovnin. The following key issues have been answered:

  1. First of all, the decision of The Vasiliy Golovnin has been explained and properly interpreted by the Court in Bunga Melati 5. The CA in The Vasiliy Golovnin did not mean to introduce a new merits requirement in order to invoke admiralty jurisdiction, it simply tried to ensure that should admiralty jurisdiction be subsequently challenged, a plaintiff would need to show that they had a good arguable case on the merits of its claim. The strength of the merits of a plaintiff’s claim was not relevant for the jurisdictional stage, but would be relevant for a striking out challenge against the admiralty court’s jurisdiction. Claimants can be confident that as long as they have an arguable case, the jurisdiction of the admiralty court will be invoked without a close scrutiny of the merits of the case.
  2. Secondly, the CA at [111] acknowledged that ‘the line delineating a "good arguable case" and an "arguable case", if it exists, may be too fine for the CA to draw in many situations’. What was important was for the plaintiff to show that their case had the same legal character as that of the section 3(1) limb it relied on, in order to fulfil the requirements under section 4(4) of HCAJA. CJ Chan also stated that in the preliminary stage, if the defendant is prepared to rely on its affidavits and is not seeking a conclusive finding of fact, the CA need only determine its jurisdiction on a prima facie basis.

The CA went on further to say that the issue of jurisdiction would merge with the issue of whether the plaintiff had proved its claim on the facts on the balance of probabilities, at the liability stage. He then stated that at the liability stage, "[t]he court is not deciding if there is good cause for it to assume jurisdiction - it is deciding if there is good cause for it to give judgment for the plaintiff". This clarified the CA’s position that should further evidence come up at trial during the liability stage, courts would still be able to have a differing opinion on the issue of jurisdiction.

  1. The CA also outlined the steps and standards of proof required in order to invoke a court’s admiralty jurisdiction.

 

  1. Step 1: Prove, on the balance of probabilities, that the jurisdictional facts under the limb it is relying on in sections 3(1)(d) to 3 (1)(q) exist; and show an arguable case that its claim is of the type or nature required by the relevant statutory provision.
  2. Step 2: Prove, on the balance of probabilities that the claim arises in connection with a ship.
  3. Step 3: Identify, without having to show in argument, the person who would be liable on the claim in an action in personam.
  4. Step 4: Prove, on the balance of probabilities, that the relevant person was the owner or charterer of, or in possession or in control of, the ship.
  5. Step 5: Prove, on the balance of probabilities, that the relevant person was the beneficial owner of the offending ship or the sister ship.

In conclusion, the CA in Bunga Melati 5 has shed light on the previously confusing jurisdictional issues in admiralty law and has provided a clear test for ship arrests. The CA was able to draw the distinction between the burden of proof of requiring an “arguable case” when exercising in rem jurisdiction and the increased burden of requiring a “good arguable case” should the application be challenged. It shows the CA’s appreciation for the time sensitive nature of a ship arrest and the evidentiary difficulties at that stage, while remaining fair to the respondents.