IMSML Website Article 28/2025: China Star Chemical Shipping Limited v Linyang Shipping Navigation Ltd [2024] MLJU 359 - Challenges in Seeking Damages for Wrongful Arrest

The dispute arose under the charter party when Opportunities Sea SA (hereafter referred to as Opportunities), the registered owner of the MT Lingyang at the material time, entered into a voyage charter party with the Plaintiff Charterers, see Paragraph [4]. The voyage charter party provided for ‘loading at one safe port or STS location at safety outside-Port-Limit (OPL) anchorage of MEG including Oman, Fujairah or Khor Fabian in Charterers’ option’, see Paragraph [5]. The Vessel arrived at Khor Fabian OPL and Notice of Readiness (NOR) was tendered. On 29 September 2022, the Plaintiff Charterers discussed with Opportunities on a ship-to-ship (STS) location. This was later agreed as a place near the Persian Gulf, Iran, see Paragraph [6].

Subsequently, Opportunities refused to proceed to the STS location on the grounds that the Plaintiff Charterers failed to provide the relevant documents, for example, mothership documents, STS documents and documentation showing the cargo’s origins. The Plaintiff argued that this was a breach of the voyage charter party. The Plaintiff claimed compensatory damages in the sum of a percentage of freight and a refund of demurrage paid, see Paragraph [7].

There was an arbitration clause in the voyage charter party which provided for arbitration in Singapore. The Plaintiff Charterer then filed a writ in rem and arrest the ship as security for its purported claim for the Singapore arbitration, see Paragraph [8]. The Plaintiff Charterer made a claim against the Defendant, and not Opportunities, see Paragraph [9]. The Plaintiff argued that it was the registered Owner of the Vessel when their cause of action arose, see Paragraph [9].

Mr Justice Ong Chee Kwan set aside the writ in rem, as the Defendant is not liable in personal to the Plaintiff as the Charterers of the Vessel for the sum claimed in the writ in rem. At no time did the Defendant contract with the Plaintiff Charterer. The true party liable for the sums claimed by the Plaintiff Charterers under the voyage charter party is Opportunities, see Paragraph [10]-[11]. When the dispute arose, the Defendant was not the registered of the Vessel in September 2022. Therefore, this was a wrongful arrest of the ship by the Plaintiff. However, his Lordship held that this was not a case where the Plaintiff should be the Defendant compensation for wrongful arrest, see Paragraph [12].

What is the Threshold for Damages for Wrongful Arrest?

A Defendant is only entitled to damages for wrongful arrest of a Vessel by a Plaintiff’s exercise of admiralty jurisdiction if the court finds that ‘the arrest is brought with so little color or with so little foundation, that it implies males or gross negligence’, see Paragraph [13]. This benchmark dates back to classics cases such as The Evangelismos [1858] 12 Moo PC 352. In more recent times in England this is reflected in cases such as The Kommunar (No.3) [1997] 1 Lloyd’s Rep.22. In Malaysia, this standard has been affirmed in The Dong Nai [1996] 4 MLJ 454 (HC) per Abdul Malik Ishak.

In Singapore, Mr Justice Steven Chong (as he then was) in the Xin Chang Shu [2015] SGHC 308 described ship arrest as a draconian remedy as it can be very destructive and may inflict severe economic hardship on a shipowner’s trade and operations. Therefore protection against this draconian measure should be meaningful and effective, ie the judicial threshold should not be set too high so as to render the right to damages practically illusory, see Paragraph [18]. This echos the earlier observation in the Vasiliy Golovin [2008] 4 SLR(R) 994 that ‘maritime arrests can, when improperly executed, sometime be as destructive as Anton Piller Orders and even as potentially ruinous as Mareva Injuctions, the nuclear weapons of civil litigation, see Paragraph [17].

What is the Meaning of Malice?

In the Xin Chang Shu [2015] SGHC 308, Mr Justice Steven Chong quoted with approval The Vasiliy Golovin at Para [134]. One of the tests applied by the Court of Appeal in The Vasiliy Golovin is the classic case of The Evangelismos at p 359 and 948 where it was explained that evidence of either male fides or crassa negligentia implies malice. There are two parts of the test in The Evangelismos test. First, a subject evaluation, ie whether at the time of the arrest, whether the plaintiff had a genuine and honest belief that the arrest was legitimate. Second, an objective inquiry into the available evidence at the time of the arrest, ie whether there is so little color or so little foundation that the action was brought with malice or gross negligence.

How weak a claim must be before malice can be inferred?

In the The Kiku Pacific, see Para [38], it was suggested that the question could not be comprehensively answered in every case by a single threshold test. It is inevitably a matter of judgment, and can only be determined by the court on the facts of each case. Although the phrase ‘reasonable or probable cause’ was rejected in The Kiku Pacific, see Para [32], counsel in that case did suggest that an absence of reasonable or probable cause alone can be sufficient to give rise to an inference of malice. The Court added that the finding of malice would be made even more compelling in circumstance where the court determines that the arresting party knew or must have known that no reasonable cause of action existed when arresting the vessel, see Para [42].

Who was the Registered Owner of the Vessel?

A search of Lloyd’s Seasearcher Report revealed that Lingyang Shipping was the registered owner of the ship from 27 April 2022 to present. The Plaintiff also had a Palau Provisional Certificate of Registry which showed that the Opportunities was registered there from the 27 April 2022 to 26 October 2022, under a ‘provisional certificate’. This covers the the period of September 2022 when the Plaintiff’s cause of action arose, see Paragraph [20].

The Plaintiff also noted that the Vessel was named after the Defendant, ie Lingyang Navigation Shipping Ltd. Lloyd’s Seasearcher Report also indicated that the Defendant was the registered owner of the ship since 27 April 2020. Both Opportunities were connected as both shared the same registered address and the Legal Director of Signum Ship Management Ltd (ie hereinafter referred to as Signum Ships). The Plaintiff found that Signum Ships were the authorized representative of Opportunities under the Charterparty. Note that Signum Ships is also the Legal Director for the Plaintiff. Strangely, there are two unusual arrangements. First, Arc Ship Management Ltd (ARC) is listed as the ‘Technical Manager’ of the Vessel in the Lloyd’s Company Records. Jointly with Opportunities, on 8 May 2025, there was signing and issuance of a nomination for a third party bank account for the receipt of freight under the Charterparty. Second, the sale of the vessel from Opportunities to the Defendant were not based on the usual standard terms, see Paragraph [21].

All the above inquiries show that the Plaintiff had not acted with male fides or crassa negligentia when obtaining the warrant of arrest for the vessel, see Paragraph [22]. The Defendant had not shown that the Lloyd’s Seasearcher Report was wrong, see Paragraph [23].

Should the Letter of Indemnity issued by the Protection and Indemnity Club (ie WOE - West of England Shipowners Mutual Insurance Association, Luxembourg) contain ‘irrevocable confirmation’ that the cargo was not subject to sanctions?

The Letter of Indemnity issued by WOE used standard wirings commonly used in and accepted by the Court in Malaysia. However, the Plaintiff insisted that the Letter of Indemnity contain words that cargo was ‘not Venezuelan cargo, or cargo belonging to PDVSA (a sanctioned entity)’ and that WOE would pay under the Letter of Indemnity regardless of the origin and ownership of the cargo. Based on this, the Defendant claimed that the Plaintiff was acting in an oppressive and unjustified manner, thus causing delay in release of the vessel, see Paragraph [25]-[30].

Mr Justice Ong Chee Kwan rejected this contention as there were serious repercussions and risks that may come from dealing with sanctioned cargo. His Lordship held it cannot be said that the insistence on that particularly worded Letter of Indemnity was unreasonable, or that the Plaintiff was intentionally dragged its feet, see Paragraph [33]. Hence, there was no evidence of mala fides or crassa negligentia that justified the payment of damages for wrongful arrest of the vessel.

Thank you for reading IMSML Website Article 28/2025

Stay tuned for the next IMSML Website Article 29/2025: Unicious Energy Pte Ltd v The Owners And/Or Demise Charterers of The Ship or Vessel ‘Alpine Mathilde’ [2024] MLJU 532 - Application for Wrongful Arrest of a Ship Carrying Sanctioned Cargo

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Tuesday,  15 July 2025

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my