NAVI- BUNKERING CROP VS M.V. EVANGELI

• Jurisdiction: Sri Lanka
• Court: Court of Appeal (Sri Lanka)
• Date: 21 July 2022
• Citation: 2022SCOA002C2018Y
• Type of Document: Unreported judgment
• Case Number: 2022SCOA002C2018Y

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Navi- Bunkering Crop

VS

M.V. "Evangeli"

CA Case No: CA/REM/02/2018
Action in REM No: 08/2013

In the matter of a claim arising under and in terms of section 2(1) (1) of the Admiralty Jurisdiction Act No. 40 of 1983.

Navi- Bunkering Crop,
Room 1001, 10FL, Busan Trade Centre
87-7, 4Ga- Jungang-dong, Jung-Gu
Busan, Korea, 600-729.

Plaintiff

Against

1. M.V. "Evangeli"

2. KDB Capital Corp.
KDB Capital Building
30, Eunhaeng-ro,
Yeongdeungpo-Gu Seoul 150-740,
South Korea.

Defendants

And Now

In the matter of an appeal in terms of section
13(3) of the Judicature Act No. 02 of 1978 as amended,
against the Judgment dated
02.11.2017 delivered by the High Court of the

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Democratic Socialist Republic of Sri Lanka
in the exercise of its Admiralty
Jurisdiction in Action in Rem 11 /2013.

1. M.V. "Evangeli"

2. KDB Capital Corp.
KDB Capital Building
30, Eunhaeng-ro,
Yeongdeungpo-Gu Seoul 150-740,
South Korea.

Defendants- Appellants

Vs.

Navi- Bun kering Crop,
Room 1001, 10FL, Busan Trade Centre
87-7, 4Ga- Jungang-dong, Jung-Gu
Busan, Korea, 600-729.

Plaintiff-Respondent

Before : D.N. Samarakoon, J.
B. Sasi Mahendran, J.

Counsel : Suren De Silva with Jehan Samarasinghe for the Defendant- Appellant

Chandaka Jayasundera with Rehan Almeida for the Plaintiff- Respondent

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Written Submissions On 26.05.2022 by the Plaintiff-Respondent

:26.05.2022 by the Defendants-Appellants

Argued On : 22.03.2022

Decided On : 21.07.2022

B. Sasi Mahendran, J

The 2nd Defendant-Appellant, the Owner of the 1st Defendant Vessel, "M.V. Evangeli" (hereinafter referred to as "the Owner") invoked the appellate jurisdiction of this Court in terms of the Admiralty Jurisdiction Act No. 40 of 1983 read with Section 13 of the Judicature Act No. 2 of 1978, as amended, to impugn the judgment of the High Court of Admiralty, which entered judgment in favour of the Plaintiff-Respondent in action in rem 8/2013 dated 02nd November 2017.

The sequence of events is important in this matter.

It is undisputed that the 1st Defendant-Vessel, "M.V. Evangeli" (hereinafter referred to as "the Vessel") is owned by the Appellant, KDB Capital Corporation Ltd., which is a company incorporated in and has its registered office in South Korea. By virtue of a Lease Agreement (No. 2007-01841) entered into between the Owner and Bumyoung Shipping Co Ltd. (hereinafter referred to as "the demise charterer") on 01st August 2007 for a period of 63 months ending on 01st November 2012 (amended by Agreement No. 2007-01841-000 dated 02nd August 2007) the said Vessel was leased under a finance lease to Bumyoung Shipping Co Ltd. The Lease Agreement was subsequently renewed on 25th May 2012 by 'Renewed Lease Agreement' No. 2007-01841-040 for a further period of 36 months ending on 24th May 2015.

Subsequent to the initial Lease Agreement the demise charterer chartered the Vessel on multiple occasions, as transpired in the evidence. For example, time charters with JFE Logistics Corporation, Tokyo, and Toko Kaiun Kaisha, Ltd., Tokyo in 2012.

Bumyoung Shipping Co. Ltd., the demise charterer, by way of a Charterparty dated 10th October 2012 sub-chartered the Vessel to ST Korea Co. Ltd. (hereinafter referred to as "the Charterer") for a period of one year and thereafter on 7th February 2013

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entered into a 'Vessel Bareboat Charterparty' with ST Korea Co. Ltd. It is evident that as per the terms of the Charterparty ST Korea Co. Ltd. was paying the hire to the Appellant, which is not disputed by the Appellant.

This agreement was purportedly terminated on 10th April 2013 by the Owner of the Vessel, who informed only the demise charterer of the purported termination. It should be noted that the purported termination took place due to non-payment of hire for a continuous period (since January 2013 as per the evidence of Mr. Lee Kwanyong on page 543 of the Brief - proceedings dated 16.03.2016) and not due to the fact that the demise charterer had acted in breach of the Agreement by not obtaining the consent of the Owner prior to chartering the Vessel to third parties, one of which was to ST Korea Co. Ltd, the charterer.

The Plaintiff-Respondent (hereinafter referred to as "the Plaintiff") which carries on the business of, inter alia, supplying marine diesel oil, marine gas, and other fuel and oil to vessels, supplied bunkers to the Vessel at the cost of USD 253, 989.49/- at the Port of Singapore East OPL on 5th April 2013. This was at the request of the charterer. The payment was due on 3rd May 2013. (See Commercial Invoice "X5" and Bunker Delivery Notes "X4(a)" and "X4(b)")

As the payment was not made (despite the assurance of the charterer that it will settle same by letter dated 13th June 2013 "X5(b)") the Plaintiff preferred a claim under Section 2(1)(l) of the Admiralty Jurisdiction Act No. 40 of 1983 against the Vessel, M.V. "Evangeli", in the High Court of Colombo, exercising admiralty jurisdiction. Upon the claim being supported the High Court issued a writ of summons in rem and a warrant of arrest against the said Vessel. The said Vessel was arrested on 19th July 2013 at the Port of Trincomalee.

On the Owner entering appearance on 08th August 2013 and providing security by furnishing a Bank Guarantee the Vessel was released from detention on 25th November 2013. Subsequently, the Plaintiff filed its Petition on 09th June 2014, the Owner (2nd Defendant) filed its Answer on 7th August 2014, and then the Plaintiff its Replication on 25th September 2014.

The following admissions were recorded by both parties:

1. The Motor Vessel "Evangeli" [1st Defendant] carries the flag of the Republic of Korea and was at all times material to this action and is presently in the ownership of the KDB

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Capital Corp. [2nd Defendant] situated at KDB Capital Building, 30, Eunhaen-ro, Yeongdeungpo-gu, Seoul, 150-740, South Korea.

2. The 1st Defendant Vessel was leased under a finance lease arrangement to Bumyoung Shipping Company Limited of South Korea.

On behalf of the Plaintiff 11 issues were raised and on behalf of the Appellant 13 issues were raised. At the trial, the evidence of Mr. Lee Cheoloo (Managing Director of the Plaintiff company) was led on behalf of the Plaintiff through an affidavit and thereafter cross-examined. The Owner led the evidence of Mr. Lee Kwanyong (the Senior Deputy General Manager, Collection Management Department of the Owner, KDB Capital Corp.) through an affidavit and was thereafter cross examined.

The learned Trial Judge, after the trial, answering the issues in favour of the Plaintiff and dismissing the Owner's counterclaim, held that the arrest was lawful in terms of Section 3(4) of the Admiralty Jurisdiction Act and awarded the sum of money prayed for. It was the learned Judge's finding that the 'relevant person' when the cause of action arose (for the purpose of Section 3(4)(b) of the Act) was ST Korea Co. Ltd who was the 'charterer' of the Vessel and that the 'relevant person' when the action commenced (for the purpose of Section 3(4)(b)(i) of the Act) was either the Appellant as the 'beneficial owner' or Bumyoung Shipping Co Ltd. as demise charterer (issue no.3). Further, relying on the judgment of Chem Orchid [2015] SGHC 50, it was held that there was no proper termination of the demise charter due to the failure to physically re-deliver the Vessel to the Appellant.

The gravamen of the Appellant's claim is that the learned Trial Judge had failed to consider the following matters:

1. At the time of institution of the action, no valid Charter by demise was in operation with ST Korea Co. Ltd, the charterer, because the Appellant (the Owner) had purportedly terminated the Lease Agreement with the demise charterer.

2. At the time the action was instituted the Appellant (the Owner) had terminated the finance lease with Bumyoung Shipping Co., the demise charterer.

3. There was no privity of contract between the Appellant (the Owner) and the Plaintiff.

Before we deal with the issue of termination it is pertinent to provide a concise account of this branch of law.

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Admiralty jurisdiction may be exercised in personam or in rem. In personam actions proceed against the person concerned directly. This type of claim is essentially no different to an ordinary claim in a civil court. In contrast, the action in rem comprises a unique form of action that is directed against the ship, and not the ship owner (vide The Bold Buccleugh 7 Moo PC 267) This type of action which is unique to the law of Admiralty was defined by Sir George Jessel M.R. in the City of Mecca (1881) 6 PD 106 thus:

"You may in England and in most countries proceed against the ship. The writ may be issued against the owner, and the owner may never appear and you get your judgment against the ship without a single person being named from the beginning to end. This is an action in rem, and it is perfectly well understood that the judgment is against the ship."

The primary purpose for the creation of this legal construct is to obtain security for the Plaintiff's claim, which, if successful, could be enforced by way of judicial sale of the vessel. As Lord Esher in The Cella [1989] 13 PD. 82 held,

"The moment that the arrest takes place, the ship is held by the court as security for whatever may be adjudged by it to be due to the claimants".

The above is succinctly encapsulated in the following dicta of this Court in the case of Colombo Commercial Fertil i ser v. MV "SCI Mumbai " , CA PHC APN 47/2013 decided on 05.05. 2014, by his Lordship A.W.A. Salam J.:

"It is a trite concept in Maritime Law that a vessel is considered a wrongdoer for the purpose of a suit. This is a concept that is peculiar only to admiralty law. This legal fiction was created by courts to allow an injured party to proceed in rem directly against the vessel. Thus, even if the owner of the vessel does not participate in the admiralty proceedings, the judgment entered in...