IMSML Website Article 12/2024: Astimewa Sdn Bhd v Budget Marine Limited & Ors [2023] MLJU 2010 - Part 1 (of 2), Measurement of Cargo Quantity, Ownership of the Cargo, the Fixture Note and Passage Plan

The Astimewa case was heard before Leonard Shim J at the High Court Kota Kinabalu. The subject-matter of the dispute was the loss of and/or non-delivery of a cargo of scrap metal that was being transported by a tugboat towing (Budget 11) a dumb barge (Budget 21) (hereinafter referred to as the Vessels), both arguably imaginatively named to attract the cost conscious customer.

The First Defendant (D1) was the owner of the Vessels. Both Vessels were contracted under a 'bareboat charter' to the Third Defendant (D3), who managed and operated the Vessels. D3 also acted as forwarding agent for the shipowner D1.

The Second Defendant (D2) was the former owner of the Vessels. D2 was the named carrier in the Bills of Lading. Note, there were two Bills of Lading, No. SDK/PEN-01 and KK/Pen-01. The cargo was scrap metal weighing a total of 4,399.971 metric tonnes.

On 3 December 2017, the cargo was loaded at Sandakan. On 10 December 2017, more cargo was loaded at Kota Kinabalu. The destination for the cargo was Butterworth, Penang. The Plaintiff (P) had an agreement with Southern Steel Bhd to sell scrap metal to them. Note, the cargo was described in the law report as 'bulk cargo of scrap metal'.

The litigation that took place between the parties was a rather uncooperative affair. There was no agreed statement of facts, as well as no agreed issues for trial were filed. From the pleadings filed, the issue was whether the Defendants were liable for a breach of the contract of carriage and/or were negligent in the total loss and/or non-delivery of the cargo. If the Defendants were indeed liable, a secondary issue was whether there could be limitation of liability.

At the trial, there was also a counterclaim by D2 and D3 for port charges, handling fees/expenses and unpaid freight.

Measurement of the Cargo Quantity

Although in liquid form, the cargo of scrap metal was technically dry bulk, just like a cargo of coal or mineral ore. Hence, the quantity of such cargo was to be determined by its weight. The law report documents the bulk cargo of scrap cargo as 4,399.971 metric tons. This figure was calculated by KM Technical and Marine Inspection Sdn Bhd between 3 to 10 December 2017, based on draught surveys of the Vessels (in particular the dumb barge, Budget 21), see Para [5].

Note, that in the commercial contract for the purchase of the scrap metal between the P and Southern Steel Bhd, thus draught survey was to be taken as the the weight of the cargo that was being transported. The documents revealed that 2194.448 metric tons was loaded in Sandakan and 2,205.523 metric tons was loaded in Kota Kinabalu, see Para [8]. Representatives of the P were supervised by the Defendants and their staff when the draught survey was conducted. The draught documents were counter-signed by both parties, as well as by the master of the Vessels, Darius Dose.

The Defendants did not raise any issues regarding the amount of tonnage of cargo loaded on board the barge at first instance, see Para [15]. First, if the Defendants wanted to do so, it should have been raised at first instance. Second, the P contended that a party not doing so would be estopped and precluded from raising it, citing the cases of Borneo HY Ocean Tours and Rent A Car Sdn Bhd v Oceania Hotel Sdn Bhd [2020] 1 LNS 2312 and Sarawak Electricity Supply Corporation v MS Shipping Sdn Bhd [2000] 2 CLJ 256, see Para [12]. Third, a failure to raise it would render any subsequent defence based on it an afterthought, see Para [13]. Fourth, there is further irony in the fact that the counter claim of the Defendants is based on the disputed tonnage measurement made by KM Marine and Technical Inspection Sdn Bhd, see Para [16]. Fifth, no witnesses were provided by the Defendants to dispute the tonnage of the cargo loaded on board the Vessels, see Para [17]. Sixth, even though there was recorded tonnage from the weigh bridge ticket (ie measurements made on land for the scrap metal), the P and Senaja Sdn Bhd (the seller of the scrap metal in Kota Kinabalu) had clearly agreed that the draught survey would be the agreed tonnage of the scrap metal cargo, even where there surveyor's readings differ, see Para [18].

Who Owned the Cargo of Scrap Metal Carried on the Vessels?

This is an important issue for determination as only the owner of the cargo had locus standi to sue for the total loss of and/or non-delivery of the cargo. Even though the scrap metal was bulk cargo, it technically did not require ascertainment to determine who owner property in the goods. The P acquired the scrap metal from his own stockpile and from his suppliers, see Para [22].

Note, that the Sale of Goods Act 1957, does not apply in Sabah. Instead, by virtue of the Civil Law Act 1956, Section 5(2), the applicable statute for sale of goods is the Sale for Goods Act 1979 (UK), see Para [23]-[26].

In the commercial contract between the P and Southern Steel Bhd, it was the intention of the parties that the property and/or title in the cargo of scrap metal will only pass from the P to Southern Steel Bhd upon its arrival at Butterworth, Penang, after a determination by Southern Steel's surveyor, see Para [36]. Even where the shipment of goods used Bills of Lading, this is relevant to the contract of carriage. For the title or property under the commercial contract, the intention of the parties is the determinant factor, see Dayakayuan Timur Sdn Byhd v Kesawan Shipping Sdn Bhd [1998] 1 CLJ Supp 87.

The Bills of Lading second famous function is that it is a document of title. The person who is the lawful holder of the bill of lading is also the person who has property in the goods covered by that bill of lading. But on the facts of the Astimewa case, the P's case against the Defendants is found on a breach of the contract of carriage. Therefore, as correctly pointed out by Nallini Pathmanathan J (as her Ladyship then was), the issue of title to cargo under the commercial contract is not pivotal in determining whether or not there is a breach of contract and total loss and/or non-delivery of the cargo, see P.T. Karya Sumiden Indonesia v Ocean Masters Marine Services Sdn Bhd [2016] 7 MLJ 589. 

Note, that the Learned Judge now sits on the Federal Court's bench, the highest court in Malaysia.

Alleged Breach of the Fixture Note and Towage Recommendations

According to the executed Fixture Note, the Defendants expressly agreed to be 'fully responsible and must comply with the towage recommendations', see Para [38]. The prepared 'passage plan' for the navigation process from Sabah to Penang, was also attached to the towage recommendations.

Note, a question which was left unanswered was this: Were these 'towage recommendations (emphasis added)' mandatory or merely directory? Anyway, a heads-up on this issue here, Leonard Shim J's approach with the rest of the case is more consistent with the former.

Two of the Towage Recommendations are relevant to this dispute. First, the Master to take and keep abreast of daily weather report and to plan his route accordingly; Second, the Master is advised to seek shelter in the event of adverse sea and weather conditions, see Para [39].

Note, that this responsibility extends to the agents of the Defendants, see Para [40].

The parties agreed that on 13 December 2017, a tropical storm warning was issued. That became heavier weather until 20 December 2017. The Defendants contend that they complied with the 'Towage Reccomendations' with respect to monitoring and responding to the weather report, see Para [41]. This was apparently done through WhatsApp messaging. Somewhat mysteriously, these messages were not tendered in evidence. The Defendants attempted to brush off any adverse inference by explaining that those serving on board the Vessels either 'did not retain the messages', or had switched phones, see Para [42]. Another excuse tendered for the absence of the WhatsApp messages was that the person concerned did not use an iPhone, but instead used a 'normal handphone only', see Para [42]. These are, of course, flawed reasons. WhatsApp automatically backs up its messages daily to a Google Drive, or the smart phone's internal storage, or external storage, see Para [43].

Based on these facts, the P argued that it was entitled to draw an adverse inference under the Evidence Act 1950, Section 114(g) against the Defendants. The P argued that the Defendants suppressed the WhatsApp messages. The P also argued that the Defendants did not call any witnesses who were on board the Vessels to testify as to exactly happened when the cargo was lost on 20 December 2017, see Para [44]. This particular omission was a particularly damaging for the Defendants as in the MV Viva Ocean; The Owners of the Cargo Lately Laden on Board the Shipping or Vessel MV 'Viva Ocean' v The Owners or Demise Charterer of the Ship or Vessel MV 'Viva Ocean' [2004] 6 MLJ 134, Richard Malanjum (as his Lordship then was) at p 145, para 26-28, held that it would be appropriate to draw a statutory adverse inference  when those on board the ship were not called as witnesses, but rather reliance was instead place on witnesses who were not on board.

Note, that Tun Datuk Seri Panglima Richard Malanjum was the ninth Chief Justice of Malaysia, and before that, the Chief Judge of Sabah and Sarawak. His Lordship is the most famous alumnus of the Faculty of Law, Universiti Teknologi MARA (UiTM) Shah Alam.

After a careful reading of the Fixture Note, Leonard Shim held that the Defendants agreed to be fully responsible, and comply with the Towage Recommendations, including the agreed 'Passage Plan' signed by the Master (unless there is a valid reason for not doing so), see Para [50].

Why is the 'Passage Plan' so Important?

Passage planning is of essential importance for the safety of navigation, see The CMA CGM Libra [2021] UKSC 51. In order for a ship to be seaworthy, her charts must be up-to-date and accurate for safe navigation. The CMA CGM Libra case extends the seaworthiness requirement from charts to 'passage planning'.

In the Fixture Note, Clause 10, at the centre of the dispute in the Astimewa case, the drafting is wide enough to make the carrier fully responsible even if the default or non-compliance was made by the master or crew or servants of the Defendants, see Para [50]. The Defendants therefore have the responsibility to take all appropriate steps and measures to comply with the Towage Recommendations and Passage Plan.

According to the undisputed facts of the Astimewa case, the Vessels deviated (for unknown reasons) from the original passage plan after departing Kota Kinabalu. Instead of taking a direct and shorter route to the Singapore Straits, the Vessels instead took a route further away from the coast / shore. This deviation from the original Passage Plan takes away two advantages: First, the option of replenishing bunkers off Miri. Second, hugging the coast as close as possible for shelter and emergency services in the event of bad weather. The latter was important in the light of forecasted tropical storm Kai Tak, see Para [51].

Leonard Shim J held that failure to comply with the Towage Recommendations and the Passage Plan resulted in the total loss and/or non-delivery of the cargo of scrap metal, and amounted to a serious breach of the terms of the contract of carriage. In doing so, his Lordship held that the Defendants and the Master were negligent and therefore breached their duty of care as carrie of the cargo, see Para [53]. According to Leonard Shim J, ever since the Federal Court decision in Syarikat Lee Heng Sdn Bhd v Port Swettenham Authority [1971] 2 MLJ 27, whenever cargo was lost (eg through non-delivery) whilst in the possession of Vessels belonging to the Defendants, this is primarily facie evidence of negligence by the Defendants their role as carrier. The principle of res ipsa loquitur is applicable, and the burden is on the Defendants to show that as a carrier, it was not negligent, see Para [54].

Did the Fixture Note Place a Responsibility on the P to Purchase 'All Risk' Insurance?

Answering the question posed above, even if there was an obligation under the Fixture Note, Clause 7(h), to do so, it was impossible for the P to perform. The P contended that it could not have obtained a better policy (ie the all risks policy) than the current one it had (ie standard cover). The reluctance of insurers is due to the poor physical condition of Vessels used by the Defendants, see Para [57]. The obligation on the P under Clause 7(h) to take out insurance, is not expressed in the form of an exclusion clause in favour of the Defendants for negligence resulting in the loss or non-delivery of the cargo of scrap metal, see Para [58].

Leonard Shim J said that even if the P had successfully taken up an All Risks Marine Insurance policy, this does not absolve the Defendants of liability for loss or non-delivery of cargo. When the Insurer indemnifies the P under the marine policy, the Insurer will be subrogated all rights, claims and/or causes of action which the P has against the Defendants, see Para [59]. Therefore the Defendants could still be sued by the Insurers in the name of the P. In support of this explanation, Leonard Shim J cited Newfield Peninsular Malaysia Inc v The Owners of the Ship or Vessel 'Tanjung Pinang 1' [2013] 10 MLJ 650, Lin Lin Shipping Sdn Bhd v Govindasamy Malalingam [1993] 2 MLJ 474 and Rothmans of Pall Mall (M) Bhd v Neo Kim Har and Another [1998] 3 MLJ 478.

[to be continued next week]

Thank you for reading IMSML Website Article 12/2024

Stay tuned for the next IMSML Website Article 13/2024: Astimewa Sdn Bhd v Budget Marine Limited & Ors [2023] MLJU 2010 - Part 2 (of 2), Liability, Exclusions, Limitations and Determining the Carrier

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

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Thursday,  8 February 2024

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