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
What were KSL’s Allegations?
Karina Shipping Ltd (KSL) allegedly paid EA Technique (EAT) a deposit of USD1,080,000.00 for the purchase of the Vessel, ‘Nautical Muar’. The sale was marketed by CTI Shipbrokers, who were reputed international shipbrokers. It was represented that Hung Hoo was authorized to sell the Vessel on behalf of EAT. This induced KSL to enter into an agreement for the purchase of the Vessel, thus paying the deposit, see Paragraph [1]-[2].
Note, that KSL was registered in St Vincent and the Grenadines. It carried on the business of buy-in and selling ships, as well as offshore assets for trading and/or recycling. KSL was represented and acted through its commercial managers, GMS (Global Market Services) DMCC (GMS), see Paragraph [11].
Also note that, EAT (the Defendant) was a Malaysian shipping company which was in the business of marine operations and the provision of port marine services. EAT was the registered shipowner of the ‘Nautica Muar’ at all material times, see Paragraph [12].
KSL alleged that EAT acted in concert with Hung Han to defraud KSL. Later EAT denied any involvement or knowledge of Hung Hao. EAT claimed that it never entered into any agreement with KSL. EAT further claimed that its signatures and company stamp on the agreement as well as addenda were forged or falsified. KSL then alleged that the denial was a part of a conspiracy to defraud, see Paragraph [2].
There was no dispute that at all material time, that a contract existed between EAT and Hung Hao. Under this contract, EAT agreed to sell the Vessel to Hung Hao in return for a newly-built chemical tanker that Hung Hao would sell to EAT (hereinafter referred to as Contract D06), see Paragraph [4]. KSL claims that EAT neither intended to sell nor deliver the ‘Nautica Muar’ to Hung Hao and/or KSL. It was KSL’s claim that Contract D06 was part of a conspiracy to defraud, see Paragraph [5].
There was no delivery of the Vessel ‘Nautica Muar’ or her documents. Further, there was also no return of the deposit to KSL, see Paragraph [3].
What was EAT’s Version of the Story?
EAT was aware that Hung Hao was intending to sell the vessel, but categorically denies any conspiracy to defraud. EAT said that it was Hung Hao’s prerogative to sell the Vessel, provided that Hung Hao first [aid EAT under Contract D06, and subsequently acquired legal as well as beneficial ownership to the Vessel, see Paragraph [6].
Note, that under Contract D06, Hung Hao had the ‘right and power to sell, transfer, rent and refit or otherwise’ the vessel, see Paragraph [18].
EAT also claimed the KSL knew of Hung Hao’s authority to sell the vessel. EAT pointed out that KSL had in its hand a copy of Contract D06 before it concluded the purchase of the Vessel with Hung Hao.
EAT referred to a subsequent agreement between KSL and Hung Hao (hereinafter referred to as Hung Hao’s Admission and Repayment Agreement, ie HHARA). In this subsequent agreement, Hung Hao expressly acknowledged that they were NOT the registered owner of the Vessel. Hung Hao also stated that they were not authorized to enter into the sale agreement with KSL on behalf of EAT. Hung Hao also said that they had received and had not returned the deposit to KSL. It was under HHARA that Hung Hao agreed to return the Deposit, plus interest and cost to KSL, see Paragraph [8].
Did KSL discharge its evidentiary burden of establishing fraud and/or conspiracy to defraud?
Mr Justice Ong Chee Kwan held that this burden had not been discharged by KSL after considering the testimonies of witnesses, reading the written submissions and perusing all the relevant documents as well as hearing oral submission of legal counsels. It had not been established that Hung Hao acted as agent of EAT during the sale of the Vessel, see Paragraph [9].
His Lordship also noted that EAT had filed a counter claim for damages for loss of reputation and good standing, but subsequently withdrew it during trial, with costs to be in the cause, see Paragraph [10].
KSL had not proven to the Court that Contract D06 was entered into between EAT and Hung Hao was not a genuine commercial transaction, see Paragraph [72]. There was evidence that the Vessel had attracted interests from potential buyers and Hung Hao had previous business transactions with EAT prior to Contract D06. Mr Justice Ong Chee Kwan therefore concluded that both EAT and Hung Hao were genuine business entities, see Paragraph [74].
What is the Law Governing KSL’s Evidential Burden to Prove Fraud?
As the party making the assertions of fraud, KSL must prove that those facts exist, see Evidence Act 1950, Section 101(1). The burden lies on that person to prove the existence of any facts, see Section 101(2). KSL would fail if no evidence at all were given of fraud, see Section 102. It is the Plaintiff that must establish the case. If it fails to do so, there is no need for the Defendant to establish a defence, see Selvaduray v Chinniah [1939] 1 MLJ 253 (CA). KSL had not established any evidence of an agreement entered into between EAT and Hung Hao to defraud KSL, see Paragraph [117]-[118].
Could recovery under HHARA be made from EAT when Hung Hao Defaulted in its Obligations to Pay?
Any claim would be barred by the Limitation Act 1953 by the time the action was filed, see Paragraph [122]. The claims for this arose more than a decade ago.
Thank you for reading IMSML Website Article 31/2025
Stay tuned for the next IMSML Website Article 32/2025: Advantage Marine Services (M) Sdn Bhd v TS Maritime Sdn Bhd [2024] MLJU 1348 - Services for Re-Floating of the ‘Ocean Serene’ at Sungai Klang
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, 5 August 2025
Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my