IMSML Website Article 38/2025: The ‘Dalian Developer’; Cosco Shipping Heavy Industry (Dalian) Co Ltd & Anor v Osta Fleet Sdn Bhd [2024] MLJU 2250 - Who is the Rightful Owner of the Offshore Drilling Unit the ‘Dalian Developer’?

This was the dramatic opening paragraph of Mr Justice Atan Mustaffa Yussof Ahmad’s judgment in The ‘Dalian Developer’ case:

In the annals of ship registration law, few cases have presented as intriguing a puzzle as this dispute over the vessel “Dalian Developer”. It is a tale that unfolds not on the high seas, but in the bureaucratic corridors of maritime registries and corporate boardrooms. At its heart lies a ship of remarkable capabilities, but more than that, it is a story about the intricacies of vessel ownership and the sometimes murky waters of registration procedures, see Paragraph [1].

As his Lordship heard this case, he was faced with lots of documentary evidence, complex facts and complicated registration and administrative procedures. His Lordship nicely summed this up with the following observation:

As I sift through voluminous evidence before me, I am struck by the complexity of the case. On one side stands a giant of Chinese shipbuilding. On the other, a Malaysian company with aspirations in the offshore industry. Between them is a vessel, registered in Malaysia but claimed by a Chinese entity, embodying a dispute that hinges on the minutiae of administrative processes and documentary requirements, see Paragraph [2].

On the disputed facts, this case appears complex, but his Lordship summarised the issues into just one question:

The central question seems deceptively simple: Who is the rightful owner of the ‘Dalian Developer’? But to answer this, we must navigate through a labyrinth of builder’s certificates, registration forms, and statutory declarations. We must scrutinise the very mechanics of how a ship comes to be registered under a nation’s flag, and what the registration truly signifies, see Paragraph [3].

What were the Facts that Led to the Dispute?

Costco (Dalian) Shipyard Co Ltd (The First Plaintiff, P1) worked together with the CEO for AAB Ocean Group of Companies (Mr Azman bin Abu Bakar, ie Azman) to market an offshore drilling unit known as a ‘Dalian Developer’ (the Vessel). P1 and Azman sought to secure charter contracts, in this case, from Petroliam Nasional Berhad (Petronas) in Malaysia. At this point in time, the Vessel was under construction at P1’s shipyard at Dalian, China, see Paragraph [5].

On 3 July 2014, the Vessel was provisionally registered Malaysia’s Ship Registry at Kota Kinabalu, Sabah. On 4 November 2014, the registration became permanent under Osta Fleet Sdn Bhd (the Defendant, the D), ie officially the registered owner, see Paragraph [6].

P1 contended that the permanent registration was not done with their knowledge. On 30 June 2015, when construction of the Vessel was complete, P1 in its capacity as Vessel Builder, issued a ‘builder’s certificate’ (ie the 2015 Builder’s Certificate). This document transferred ownership of the Vessel to Dalian Developer Drilling Co Limited, The Second Plaintiff (P2), see Paragraph [6].

On 19 December 2015, P1 entered into a Commercial and Technical Service Agreement (CTSA) with CH Pavillion Sdn Bhd (CHP). CHP was a special purpose company created by Azman. Its purpose, see Paragraph [7]. The purpose of CHP was to commercially and technically upgrade the Vessel into a Floating, Drilling, Production, Storage and Offloading (FDPSO). The FDPSO would be based on a design by Technip S.A. Paris, and would be used to tender for Petronas contracts in Malaysian waters, see Paragraph [7].

In order to facilitate getting contracts from Petronas, CHP was to acquire a Petronas licensed company. To enable this to occur, the parties entered into a supplementary rider agreement (the Rider Agreement) on 23 December 2015 that set out the shareholding and divestment arrangements, see Paragraph [8].

The D submitted a tender to Petronas Carigali Sdn Bhd (Petronas Carigali) for the the Limbayung Deepwater Development Project (the Limbayung Project), an advanced offshore development project in Sabah. The tender was valued at USD1.861 billion and the D was expecting substantial profits. However, the tender submission process was underway and no firm charter contract was awarded, see Paragraph [9].

Meanwhile, on 28 June 2019, both P1 and P2 sent a letter to the D, demand ding that the Vessel be de-registered within 48 hours and to unwind their venture. The reasons for this by P1 and P2 was that the objective of securing the Petronas contracts, could not be achieved as such a long period had passed. However, the D did not comply with the demands of P1 and P2, see Paragraph [10].

P1 and P2 alleged that the permanent registration in 2014 was fraudulent and done without their knowledge. P1 and P2 then commenced legal action against D for conversion of property and claimed the accompanying damages. A declaration was sought that either P1 or P2 was the beneficial owner of the Vessel. An order was also sought for the D to de-register the Vessel from the Malaysia Ship Registry, see Paragraph [11].

On 20 September 2019, the Marine Department furnished a copy of the Builder’s Certificate (dated 17 February 2014, ie the 2014 Builder’s Certificate), after a Third Party Discovery application was made against the Director of Marine at Kota Kinabalu, Sabah’s Ship Registry. The certificate was made to the order and account of Guard Offshore (BVI) Ltd (ie Guard Offshore BVI), and had been submitted by the D and used to effect the permanent registration, see Paragraph [12].

On 9 August 2019, the D counterclaimed (later amended) for breach of contract by P1 and P2 based on the CTSA and Rider Agreement. The D argued that it met local pre-qualifications and bidding requirements. D had incurred expenses of USD2 million and paid by P1 for the registration process, see Paragraph [13]. D’s breach of contract was based on P1 and P2’s unilateral termination of the contract. The Limbayung Project tender negotiation with Petronas Carigali was still ongoing, see Paragraph [14].

On 28 November 2019, P1 and P2 obtained an interim injunction. The D was retrained from dealing with or disposing the Vessel or its proceeds of sale, and from altering the registration details until a full trial, or further court order, see Paragraph [15].

Was the 2014 Builder’s Certificate Valid?

No. The Court placed considerable weight on the forensic analysis of Ms Tay Eu Kam (PW6), a forensic document examiner who concluded that the 2014 Builder’s Certificate shed by the D for registration was not an authentic document, see Paragraph [45]. The signature purported to be of Lou Xiaodong on that certificate not genuinely his, but rather an inkjet-printed toner image, thus casting serious doubt on the authenticity of the entire document, see Paragraph [45].

The signature and stamp of the Hajah Jamilah Ismail (PW4), Commissioner for Oaths was also an inkjet-printed toner image. Usually, for such a document, a wet inked stamped impression is expected, see Paragraph [46]. PW6 explained that the signature and stamp in the Builder’s Certificate exulted from a cut-and-paste mechanism where the same image was cut from another document and pasted on the Builder’s Certificate to look like an original, see Paragraph [49].

Does the Lack of Use of Original Documents Mean that PW6’s Analysis Lacks Quality?

For cases where detailed handwriting analysis requires nuanced pressure point analysis, that would be true. However, this case was about an artificial duplication using a cut-and-paste method, a form of forgery which was effectively be demonstrated even in the absence of original documents, see Paragraph [53].

Is the Absence of a Jabatan Kimia Expert a Problem?

The D had argued that there was oversight on the part of P1 and P2 in not verifying the handwriting of the disputed 2014 Builder’s Certificate, especially given the significant involvement of a government agency, ie the Marine Department. The D argued that verification should have been conducted by Jabatan Kimia Malaysia, instead of relying on a private expert witness (ie PW6), see Paragraph [59]. 

Mr Justice Atan Mustaffa Yussof Ahmad rejected this suggestion. P1 and P2’s reliance on a handwriting expert not affiliated with a government agency such as Jabatan Kimia, should not be held against them, see Paragraph [60]. First, there is not legal requirement under the Evidence Act 1950, Section 45 that mandates that expert evidence be exclusively sourced from government agencies, see Paragraph [61]. Section 45 does not prescribe any institutional affiliation as a pre-requisite for qualification as an expert, see Paragraph [62].

PW6 possesses qualifications, experience and knowledge that is both specialised and relevant, which includes but not restricted to site examinations, report writing and court testimonies, see Paragraph [63] and [64]. Further, PW6’s analysis of the 2014 Builder’s Certificate was both thorough and detailed, which adds credibility to her findings, see Paragraph [65]. The Court is not compelled to favour one expert over another purely based on their affiliation with a governmental body. The criteria to determine an expert’s opinion depends on methodological soundness and a relevance of their analysis in relation to the issues under examination, rather than their institutional affiliation, see Paragraph [66].

Is the Misspelt Name in the 2014 Builder’s Certificate Evidence of Forgery?

Allegations of forgery arose when PW3 stated that his name was misspelt as ‘L-V Xiadong’, instead of L-Y-U Xiaodong, see Paragraph [70]. The D countered by pointing out that PW3  himself actually signed his name with the wrong spelling multiple times, thus undermining his credibility as a witness, see Paragraph [71].

Whilst noting the inconsistency pointed out by the D, the Court found that it does not disprove P’s claim of forgery. Individuals may have different ways of signing documents, especially  for different writing systems as that used in China, see Paragraph [72]. When combined with the testimony of PW6 expert testimony, the totality of the evidence point towards the 2014 Builder’s Certificate used to effect registration of the Vessel was most likely forged, see Paragraph [73].

What is the Significance of Lyu Xiaodong Being Present at the Trial Runs (in April 2014) During the Survey, Measurement  and Registration Process of the Vessel at P1’s Shipyard?

The D argued that the registration process involved the active participation and full awareness of P1, getting involved in multiple compulsory documentation including the 2014 Builder’s Certificate, see Paragraph [74].

P1 and P2 countered this by submitting that P1’s active participation in the registration process are unfounded. P1 and P2 pointed out that facilitating an inspection or survey of a vessel at a shipyard is a standard industry practice, and does not imply an intention to transfer ownership. The meetings and inspections were merely preparatory steps for a potential sale, not a completed transaction. Without a genuine Builder’s Certificate, there could not be a valid transfer of ownership. Contractual documents such as the Global Non-Disclosure Agreement (GNDA) dated 2 November 2015, cannot transfer ownership in the Vessel, see Paragraph [75]. As P1 and P2 explained, it is usual for potential buyers to request viewing, inspection and survey of the Vessel at P1’s premises before making a decision to purchase, see Paragraph [77].

A report dated 30 April 2014 which documented the sight inspection and marking of the Vessel, as well as assessing its condition and compliance for registration, for the purpose of meeting the necessary standards and requirements for Malaysian registration. The document unequivocally affirms that mo Builder’s Certificate was issued by P1 to the D or to Guard Shore (BVI). The Court placed significant weight on the absence of this critical document, which is a sine qua non for any genuine transfer of ownership, see Paragraph [78].

The series of inspections and meetings were preparatory steps leading to a potential sale and not a consummated transaction. There was no implied consent to transfer the beneficial ownership of the Vessel to the D. These were necessary steps to flag the Vessel under the Malaysian flag so that Azman and/or the D can market the Vessel to obtain the Petronas charter contracts, see Paragraph [79].

Is Entering the GNDA or CTSA and Accompanying Rider Agreement Sufficient to Effect a Transfer of Ownership, Especially in the Absence of a Builder’s Certificate?

No. Those agreements are procedural steps towards a possible future agreement, and not evidence of an existing , enforceable accord regarding ownership, see Paragraph [82]. Neither of those agreements provide for the sale or charter of the Vessel and/or agreement of P1 to commit to the Vessel to sale or charter to the D, see Paragraph [82]. For a shipbuilder with dealing with many registries around the world, the usual practice is that permanently registration of the Vessel can only be given once a Builder’s Certificate is issued, see Paragraph [84].

Was P1 Aware and Took Active Part in the Registration of the Vessel in Malaysia?

The D’s argument stems from the fact that P1 was part of a state owned company specialising in shipyards and vessels. D argued that P1 should be stopped from denying their active participation in the Vessel’s registration, ie P1’s claim of ignorance is a mere facade and tactical manoeuvre, see Paragraph [86].

The P1 asserts not ignorance of the law (ie ignorance of the law is no defence), but rather ignorance of the particular fact that the vessel was permanently registered. The D has not established the application of the doctrine of estoppel, in particular on how it relied on the P’s supposed acknowledgement or how it has led to an unjust outcome for the D, see Paragraph [88].

The issue at all times, was the permanent registration, not provisional registration, which the P was aware of at all times. Being informed after the fact does not constitute ‘active participation’ or ‘full awareness’, either before or during the event. Hence the email dated 18 February 2015 informing the P of the permanent registration does not negate the P’s case, see Paragraph [90]. Further, none of the other meetings are evidence of active participation as none of those address the matter of permanent registration of the Vessel, see Paragraph [91].

What is the Significance of the Ps Delay in Filing a Police Report for the Alleged Forgery of the 2014 Builder’s Certificate?

The delay does not undermine the credibility of the Ps’ claims. The report was lodged at the first opportunity when representatives of the Ps came to Malaysia. The Ps had initially believed that the permanent registration would aid in the sale of the Vessel after receiving assurance from Azman, see Paragraph [94]. The report was finally filed by the Ps when they finally realised that there was no prospect of the sale going ahead, see Paragraph [94].

The D had argued that fraud allegations are serious and immediate action is typically expected, if the claims of fraud are genuine. Therefore the D argued that the delay cast doubt on the sincerity of the Ps’ claims. The D submitted that an adverse inference should be made against the Ps’ allegations of fraud because of the delay. Mr Justice Atan Mustaffa Yussof Ahmad rejected cases cited by the D such as Kulai Edible Oils Refinery Sdn Bhd and Another v Lim Tian Huat and Others [2011] 8 MLJ 331 and CS Petroleum’s (M) Snd Bhd v Public Bank Berhad [2011] 1 LNS 1349, see Paragraph [96]. First, his Lordship pointed out that the Ps have offered a reasonable explanation for the delay in lodging a police report, ie logistical necessity meant that the report was only filed at the nearest opportunity when the Ps’ representative arrived in Malaysia. Second, the Ps had relied on Azman’s assurance that there was a likely charter contract from Petronas after the anticipated sale of the Vessel to the D, which rendered the dispute of permanent registration moot, see aragraph [97]. Third, the D’s suggestion that the P’s police report was of little probative value would be rejected. The fact that the P lodged the report in response to pressure from its legal department and a subsequent letter of demand does not automatically cast aspersions on the P’s allegations of fraud, see Paragraph [98]. Fourth, the court is constrained from drawing adverse inferences solely from the timing of the police reports, as the case involves a complex interplay of expectations, legal rights and commercial relations between the parties, see Paragraph [99]. Fifth, the Ps were actively pursing matters through legal channels, even before filing the police report. For example, on 28 June 2019, the Ps sent a letter to D, demanding that D de-register the Vessel, see Paragraph [101].

Does Azman’s Visit to the Commissioner for Oaths Office on 18 March 2013 Implicate the Legitimacy of the 2014 Builder’s Certificate?

The Ps point out that the visit to the office for stamping of the document does not align with the 2014 Builder’s Certificate which is dated 17 February 2014. This bolster the Ps’ case that the 2014 Builder’s Certificate was forged, with the signature and stamp possibly transferred onto the certificate a year later, see Paragraphs [103] to [104]. The anachronistic timing greatly undermines the credibility of the 2014 Builder’s Certificate, thereby elevating the issue of the stamp’s authenticity to a point of legitimate dispute, see Paragraphs [107].

Was the Registration of the Vessel by the D in Accordance with the Regulatory Framework of the Merchant Shipping Legislation?

The 2014 Builder’s Certificate purports to transfer the Vessel’s ownership and title to Guard Offshore (BVI), not the D (ie Osta Fleet Sdn Bhd). BVI is not a Malaysian company and this is in breach of Section 11 of the Merchant Shipping Ordinance 1952 which stipulates that only a Malaysian owned Vessel can be registered in Malaysia, see Paragraphs [114] to [115]. In reality, BVI was a British Virgin Islands entity, rendering the registration defective, see Paragraphs [116]. Further, the registration must be accompanied by a statutory declaration under Section 16(2). The ‘Deklarasi Hak Malik dan Kerakyatan’ was not attested and thus fell short of a statutory declaration. The Commissioner for Oaths merely compared the documents rather than witnessing an actual signature, ie ‘originals have been sighted and contents verified to be identical copies’, see Paragraph [118]. Therefore, the registration of the D as owner is wrongful and is in breach of the regulatory framework in Malaysia, thus rendering the registration of the Vessel in Malaysia void because it was fraudulently obtained, see Paragraphs [127].

Could the Presumption of Regularity be Invoked to Validate the Registration of the Vessel?

The D relied heavily to on the testimony of Kota Kinabalu’s Director of Marine, that the registration was done properly and in accordance with the law. The D pointed out that the Director of Marine was involved in the registration process and which was made regularly. According to the D, the best evidence rule, this provides evidence that registration was done properly, see Paragraphs [128].

Was there a Second Builder’s Certificate which Facilitated the Registration?

KK’s Director of Marine could not account for the existence of a second certificate which was not the 2014 Builder’s Certificate thus not being able to explain who the Vessel was wrongly registered. It appears that the story of the Second Builder’s Certificate may have been concocted, as its existence has not been credibly established, see Paragraph [134] to [135].

Therefore, this lends credibility to the argument of the Ps that the registration was based solely on the 2014 Builder’s Certificate. This registration would undeniably be invalid. Given the absence of any other credible Builder’s Certificate, and given the requirements of the regulatory framework for registration, the Ps’ were correct about the invalidity of the registration of the Vessel as a Malaysian Vessel, see Paragraph [138] to [139].

Were the Ps correct in Arguing that Lyu Xiaodong Never Personally Appeared Before the Commissioner for Oaths?

There is evidence which contradicts the D’s claim that Lyu Xiaodong personally appeared before the Commissioner for Oaths for the attestation of the Builder’s Certificate. First, Lyu Ziaodong denied ever visiting Malaysia during the period of attestation. Second, Lyu Xiaodong’s passport corroborates this as it lacks any entry or exit stamp for Malaysia during the timeframe, see Paragraph [144].

Were the Ps under an Obligation to Include the Marine Department and/or the Government of Malaysia as Parties to these Proceedings?

The D argued that the omission should lead to an adverse inference against the Ps given the extensive involvement of the State in the registration process, see Paragraph [149]. This submission was rejected by Mr Justice Atan Mustaffa Yussof Ahmad because the Ps’ claim was specifically directed at the D, ie seeking the de-registration of the Vessel or cancellation of the permanent registration of the Vessel, see Paragraph [150] and [151]. The Ps’ action evince a purposeful and strategic approach that should not be construed as negligence or oversight, see Paragraph [152]. Further, the Ps had procured the necessary document from the Marine Department via the process of discovery. The law does not compel the naming of every party tangentially involved in a case, see Paragraph [154]. The focus was on whether the D procured registration fraudulently, and not whether the Marine Department was negligent in its duties, see Paragraph [156].

Was there any Truth to the D’s Suggestion that the Transation Between P1 and P2 was a Sham Transaction?

The D’s submission was based on the ‘close’ relationship between P1 and P2. The D pointed out that the companies had the same Director, and the fact that the Vessel remaining at P1’s shipyard, even after the alleged sale, ie despite P2’s ownership, P1 continued to operate the Vessel as if it owned the Vessel, see Paragraph [172].

The Ps countered by arguing that the close relationship between the companies did not invalidate the transaction. It is common practice in the shipping industry for parent companies to sell Vessels to their subsidiaries. Further, the Ps contended that the lack of physical delivery of the Vessel is not indicative of a sham transaction. The Ps said that a legal transfer of ownership can occur without physical relocation, especially when the parties are closely related, see Paragraph [173]. Mr Justice Atan Mustaffa Yussof Ahmad held that the Protocol of Delivery and Acceptance served as evidence that a legal transfer of ownership did occur, see Paragraph [175]. From a commercial perspective, P1 could not reasonably be expected to wait indefinitely for a charter contract to be awarded, especially when the existing MOUs had expired. P1 therefore had a right to proceed with the sale to P2, see Paragraph [178].

Was P1’s Failure to Mobilise the Vessel to Malaysia a Breach of the Collaborative Agreement Under Section 40 of the Contracts Act 1950?

Mr Justice Atan Mustaffa Yussof Ahmad found in favour of the Ps. First, mobilising the Vessel to Malaysia would only be commercially viable if a firm chartering contract had been awarded by Petronas. Under the Collaborative Agreement, P1 is only under an obligation to take reasonable and commercially viable steps to facilitate the procurement of a charter contract. It does not compel P1 to undertake a risky and financially burdensome operation in the absence of a confirmed charter contract. This is a case considering the substantial costs and risks involved, including certification, crewing, bunkering and anchorage fees, see Paragraph [197].

Further, the Ps are legally required to cover the high costs involved in the absence of an indemnity agreement, given the considerable expense and risks involved in mobilisation. The Vessel itself represents a significant investment and any decision to move it must be based on sound commercial principles, see Paragraph [199].

The D’s claim that it had informed the P that it had obtained a licence from Petronas was irrelevant. Such a licence is not equivalent to a firm chartering contract, which remains a pre=requisite for the mobilisation under the Collaborative Agreement, see Paragraph [200].

Thank you for reading IMSML Website Article 38/2025

Stay tuned for the next IMSML Website Article 39/2025: Tom Eastwind 365 Sdn Bhd v Pemunya-Pemunya Kampala Atau Vesel Icon Sophia [2024] MLJU 2834 - Anchor Deployment Operation and Res Ipsa Loquitur at Dulang B Oilfield

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,  23 September 2025

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