Letter of Undertaking Deposited into Court to Constitute a Limitation Fund and Its Discharge and Cancellation in Rising Star Shipping Sdn Bhd & Anor v Pelabuhan Tanjung Pelepas Sdn Bhd & Ors [2022] MLJU 1299 (High Court, Kuala Lumpur) per Azlan Sulaiman JC
When there is an oil pollution incident in Malaysia, the Protection and Indemnity Club (P&I Club) which mutually insures the ship will issue a letter of undertaking (Club LOU). The Club LOU will be used to constitute a limitation fund for the pollution in accordance with the Merchant Shipping (Liability and Compensation for Oil and Bunker Oil Pollution) Act 1994.
A pollution incident involving the M.T. TRI DENT STAR's fuel oil occurred when she was at Berth#5 at Tanjung Bin Terminal, Johor, Malaysia. Pursuant to a statutory decree, a sum was made available for the fund amounting to 4,510,000 Special Drawing Rights (SDR) or its equivalent at the date of the constitution of the Limitation Fund.
On 24 May 2017, advertisements were placed. There was a 60 days time limit which expired on 24 July 2017. During that period, in response, 19 Defendant entered an appearance to claim for loss and damage arising from the incident subject to the limitation action. Note the Defendant were Pelabuhan Tanjung Pelepas Sdn Bhd, and “All other persons claiming or being entitled to claim for all pollution damage or loss by reason of, or arising out if, the oil spill incident from the ship MT “Trident Star” which occurred at at Tanjung Bin Terminal, Johor, Malaysia on 24 August 2016'. Interestingly, none of the the 19 Defendants applied to set aside the limitation, thus agreeing that the Plaintiff had a right to limit its liability under the statutory provisions.
Eventually, the claims between the Plaintiff and all 19 Defendants were settled amicably. The terms of the settlement were confidential. The 19 Defendants then all filed their respective Notice of Discontinuance. Therefore, the constituted statutory Limitation Fund remained intact and the Protection and Indemnity Club has not had to pay out on any compensation claims. Hence, the issue facing Judicial Commissioner Azlan Sulaiman was whether the Club LOU could be discharged, and shall no longer have effect.
The problem facing the learned Judicial Commissioner is that 'there was no provisions in the Rules for the discharge and release of the security that constituted the Limitation Fund'. Order 70 rule 36A1 of the Rules of Court 2012, merely provided for the constitution of the Limitation Fund for payment into Court. Further, when Order 70, rule 36A(5) is read with Order 70 rule 23(2) & rule 23(3), this merely provided for payment to persons entitled to sums within that constituted Limitation Fund. His Lordship had to decide whether the discharge of the Club LOU could be made under the Court's inherent jurisdiction under Order 92 rule 4.
There was no reported Malaysian case specifically on this. However, the closest precedent for this point existed in the form of a Singapore High Court decision in Thoresen Shipping Singapore Pte Ltd and others v Global Symphony SA and others [2020] 5 SLR 843. However, the LOU in was worded differently and crucially, contained this phrase: '...shall continue and be in place until further Order of the Court'. Due to this phrase, the Court in Thoresen held that these words authorised the Court to exercise its discretion in the matter. This specific authorisation was missing from the drafting of the Rising Star Shipping case.
However, Judicial Commissioner Azlan Sulaiman found a way around this by invoking the approach of VC George in Yomeishu Seizo Co. Ltd & Ors v Sinma Medical Products (M) Sdn Bhd [1996] 2 MLJ 334 that 'when there is a lacuna in the rules and practice, then and only then may the inherent jurisdiction be invoked'. As there would be a procedural injustice in this case, the learned Judicial Commissioner applied the prophetic words of Augustine Paul JC (as he then was) in Re CHS [1997] 3 MLJ 152 that 'when a procedural ... does not provide an adequate remedy ... the court is not only entitled to fill the gaps, butis obliged to do so, in order to avoid an injustice'.
In conclusion, Judicial Commissioner Azlan Sulaiman exercised the inherent jurisdiction of the court the Club LOU to be discharged / cancelled. He said the time for claims had expired. Thus the Club LOU remaining undischarged or 'alive', was in his view, 'a good enough reason to allow it to be discharged and returned to the Plaintiff for cancellation, more so when the 1st Plaintiff has settled all the claims, the time limit for bringing claims has long expired, and no prejudice will result to any party for so ordering'.
Thank you for reading IMSML Website Article 16/2022
Stay tuned for the next IMSML Website Article 17/2022:
Discontinuance of Action for Oil Pollution When There are no Longer Any Outstanding Claims in Rising Star Shipping Sdn Bhd & Anor v Pelabuhan Tanjung Pelepas Sdn Bhd & Ors [2022] MLJU 1299 (High Court, KL) per Azlan Sulaiman JC
Signing-off for today,
Dr Irwin Ooi Ui Joo, LL.B(Hons.); 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
27 October 2022
Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my