IMSML Website Article 30/2025: Zion Shipping Limited v The Owners And/Or Demise Charterers of And/Or Other Persons Interested In The Ships Or Vessels ‘MV HAN THAR’ and MV ‘U THAR’ [2024] MLJU 534 - Jurisdiction for the Arrest of a Ship for Alleged Unpaid Time Charter Party Hire and Claims Based on a Settlement Agreement

What were the Commercial Arrangements between the Contracting Parties?

The shipowners (the Defendant) chartered several Vessels it owned to the Charterer (the Plaintiff) under New York Produce Exchange standard terms. Among the Defendant’s ships (collectively referred to as ‘The Vessels’) being chartered (collectively referred to as ‘The Charters’) to the Plaintiff are:

[1] U Thar;

[2] Han Thar;

[3] Dawei;

[4] Kengtung.

Specifically, in this disputed case, the ‘U Thar’ was hired by the Plaintiff under a 3 months time chartered from the Defendant pursuant to a fixture note dated 9 August 2019.

What was the Dispute All About?

The Plaintiff alleged that the Vessel was off-hire and that the corresponding hire paid in advance to the Defendant should be returned, together with expenses and disbursements incurred whilst the ‘U Thar’ was off hire. According to the Plaintiff, the instances of off-hire, see Paragraph [11], are as follows:

[1] Failure of the Defendant to clean cargo holds from 18 April 2022 to 26 April 2022, causing the ‘U Thar’ to wait at Lumut Port, Malaysia;

[2] A second incident of the Defendant’s failure to clean cargo holds also occurred at the discharge port in Kandla Port, India, from 16 January 2023 to 2 February 2023;

[3] Waiting time for the Plaintiff’s cargo at two different jurisdictions, namely, Kohsichang (Thailand) and Singapore.

What did the Plaintiff Charterer Do?

In order to enforce payment of these off-hire sums, the Plaintiff Charterer arrested the sister ship ‘Han Thar’. The Plaintiff made the arrest pursuant to the UK Senior Courts Act 1981, Section 20(2)(h) for ‘any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship’, see Paragraph [12].

What was the Defendant Charterer’s Reply?

The Defendant shipowner countered that the Charterparty had been superseded by a Settlement Agreement, see Paragraph [12]. The Defendant’s argument was that the Plaintiff’s claim therefore does not fall under the Admiralty Jurisdiction of the High Court, see Paragraph [14] and that the writ in rem should be struck out or set aside because the claim for off-hire was devoid of any merits (ie it was a frivolous and vexatious claim), see Paragraph [15].

What were the Defendant’s Preliminary Objections to the Plaintiff’s Writ In Rem?

The Writ in Rem should state the names of BOTH the sister ship and of the ship in respect of which the claim arises. It should also show the beneficial owners of all the shares in the sister ship at the time when the action is brought, ie who were the owners of, or charterers or in possession and control of the ship in respect of which the claim arises at the time when the cause of action arose, see Paragraph [16].

Mr Justice Ong Chee Kwan held that the preliminary objections regarding the writ in rem were are best an irregularity capable of being remedied by an application to amend, which had indeed been filed, see Paragraph [17]. His Lordship explained that there were two reasons why the preliminary objections are NOT nullities, see Paragraph [17]:

[a] The Defendant knew who the party that was liable in personam and was thus not misled;

[b] The entire basis of the case was properly laid out in the affidavit leading to the Warrant of Arrest. The Defendant was well aware that the off-hire claims were in respect of the ‘U Thar’ and its enforcement was in respect of a sister ship arrest.

Mr Justice Ong Chee Kwan held that non-compliance shall be treated as an irregularity and the proceedings should not be nullified. Where possible the procedural rules are a means of enabling the Court to deal with cases justly. Only in extremely rare cases (see Kenanga Investment Bank Bhd v Swee Joo Bhd [2017] MLJU 2095) where the non-compliance cannot be condoned at all and the court will be obliged to strike out the matter, see Paragraph [18]. On the facts of this case, there was no evidence that there was prejudice to the Defendant which cannot be compensated with costs, and thus no exceptional reason to strike out the or set aside the Plaintiff’s writ in rem, see Paragraph [19].

Did the Settlement Agreement still fall under the Admiralty Court’s Jurisdiction of Section 20(2)(h) as a ‘claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship’?

YES, it still does so despite the Defendant contending that it had superseded the Charterparty. The penultimate paragraph of the Settlement Agreement contains the following: ‘This letter constitutes an integrated part of the Charter Party Agreement signed between MFSL and Zion Company Ltd’, see Paragraph [21]-[22]. Mr Justice Ong Chee Kwan held that the Settlement Agreement stipulates very clearly that it was a part of the Charter Party and that it functioned to preserve the Charter Party, not supersede it, see Paragraph [23].

What was the Content of the Settlement Agreement?

Mr Justice Ong Chee Kwan made the following observations about the Settlement Agreement:

[1] It did address the outstanding charter hires due from the Plaintiff to the Defendant, see Paragraph [24];

[2] There is no indication that all other issues relating to or arising out of the Charterparty (including the issue of off-hire) had been addressed, see Paragraph [24];

[3] There is no confirmation or acknowledgement by the Plaintiff that ALL issues relating to the Charterparty had been fully and finally resolved by the terms of the Settlement Agreement, see Paragraph [24];

[4] The Settlement Agreement was only a letter of commitment on behalf of the Plaintiff to pay the Defendant the outstanding charter hires and nothing more, see Paragraph [25].

[5] There is not mention of claims with respect to the ‘U Thar’. Only the other three Vessels are mentioned, ie ‘Kengtung’, ‘Dawei’ an ‘Han Thar’, see Paragraph [25].

What was the Basis of the Charterparty dispute between the Plaintiff and Defendant?

It dispute has its roots in Clause 9 of the Fixture Note states that ‘All holds to be cleaned and dried up before the arrival at the loading port and in all respects suitable to receive Charterer’s intended cargo, see Paragraph [26].

According to the Defendant shipowner, it only had an obligation to provide clean holds at the time of the initial delivery pursuant to Clause 2(c) of NYPE. After that, the obligation to clean the holds falls on the Plaintiff Charterer under Clause 10(b) and 86 of NYPE, see Paragraph [28].

By contrast, the Plaintiff Charterer argued that Clause 9 of the Fixture Note makes no reference to ‘delivery’. The obligation for ‘delivery’ is only found in Clause 2(c) of NYPE. The Plaintiff argued that Clause 9 in the fixture note should override Clause 2(c) of NYPE because the former is a typed form, as opposed to the latter being a printed standard form, see Paragraph [29].

The Plaintiff Charterer also refuted the reading together of both Clause 10(b) and 86 of NYPE. It was argued that it merely obliges the Plaintiff to pay for the cleaning agents required to clean the holds. It also made the Plaintiff responsible for consumables for the cleaning, in addition to the time relating to the removal and disposal of the cargo related waste residues and waste, see Paragraph [30].

The Plaintiff Charterer therefore concluded that the claims do not relate to costs of the cleaning, but rather the claims for off-hire when the holds were not clean and fit to receive the Plaintiff Charterer’s intended cargo, see Paragraph [30]. Accordingly, the Plaintiff stated that its claim fell under Clause 17 of NYPE which provided that ‘in the event of loss of time from deficiency an/or default … of officers or ratings … the payment of hire or overtime if any shall cease for the time thereby lost … All bunkers use by the vessel while off hire shall be for the Owner’s account’, see Paragraph [30].

What were the Court’s Conclusions on Whether the Plaintiff’s Claim Fell within a Properly Invoked Admiralty Jurisdiction?

Mr Justice Ong Chee Kwan held that the Plaintiff Charterer’s Writ in Rem was not an abuse of the Court process given the difference of interpretations regarding the claim for hire, see Paragraph [33]. The Defendant shipowner was trying to get the case dismissed as frivolous, vexatious and or is otherwise an abuse of the court process, see Paragraph [36].

His Lordship resisted making an assessment of the merits of the dispute between the parties. This was a matter reserved for arbitration, as agreed between the parties. It is trite law that there should be minimum interference on the contractual choices of the parties, see the Arbitration Act 2005, Section 8 which provides that ‘unless other provided, no Court shall intervene in any matters governed by this Act’, see Paragraph [40]. Arbitrators shall remain the sole determiners of the fact, see Paragraph [41].

The Plaintiff’s claim is not an abuse of the process of the Court. Mr Justice Ong Chee Kwan noted that there was an email from the Master of the ‘U Thar’ which suggests that despite the Settlement Agreement in July 2023, the issue of the off-hire claims appears to be still alive in November 2023, see Paragraph [42].

As the Plaintiff Charterer had not taken a substantive step in the dispute to indicate any intention to abandon its right to arbitration, the Plaintiff is entitled to a mandatory stay of proceedings pending arbitration in Singapore, see Paragraph [50].

Thank you for reading IMSML Website Article 30/2025

Stay tuned for the next IMSML Website Article 31/2025: Karina Shipping Ltd v The Owner of The Ship Or Vessel ‘Nautica Muar’ [2024] MLJU 1371 - Alleged Fraud in the Sale of Ship Transaction

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,  29 July 2025

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