IMSML Website Article 5/2024: Mulair Oleg (mendakwa sebagai Nakhoda Kapal ‘Oriental Dragon’) & Anor v Pemunya dan/atau pihak-pihak yang mempunyai milikan atau kawalan terhadap kapal ‘Oriental Dragon’ dari Pelabuhan Panama (BRT UW Ltd & Ors, interveners) [2022] MLJU 2599, Intervention with a Ship’s Arrest

The Mulair Oleg case concerned an Admiralty in Rem action before Nadzarin Wok Nordin J at the KL High Court. Two superstar lawyers of the Malaysian Bar represented parties in this case. The Plaintiffs (as well as First and Second Interveners) were represented by G Rajasingam (assisted by Tan Hui Ling) of Shearn Delamore and Co. The Third Intervener were represented by Jeremy Joseph (with Matthew Van Huizen) of Joseph and Partners. Also at the hearing was Foo Siew Yin of Shaikh David and Co, also one of Malaysia's well known shipping law firms. A full disclosure here, Jeremy Joseph is a former President of the International Malaysian Society of Maritime Law (IMSML) and I have worked with him in the organisation.

The First Plaintiff, Mulair Oleg, was the Master of the vessel 'Oriental Dragon' (IMO No.7125861). She was registered at the Port of Panama Registry. The Second Plaintiffs were the 194 crew working on board the 'Oriental Dragon'. The Defendant is World Corporation Ltd (WCL), the registered shipowner with its offices in Kowloon, Hong Kong.

The First Plaintiff's claim was for outstanding wages (as at January 2021), Master's Disbursements and repatriation costs. The Master's wages amounted to USD30,660 (equivalent to RM124,571 at an exchange rate of USD1 to RM4.063 at 9 February 2021). The outstanding disbursements made on account of the ship amounted to USD335,179.85 (equivalent to RM1,361,835.73 at an exchange rate of USD1 to RM4.063 as at 9 February 2021).

The Second Plaintiffs claim was also for outstanding wages (as at January 2021), and repatriation costs. This wage claim amounted to USD1,615,512.28 (equivalent to RM6,563,826 at an exchange rate of USD1 to RM4.063 as at 9 February 2021).

On 11 February 2021, the Bailiff served the Writ in Rem on the 'Oriental Dragon'. Soon thereafter, on 4 March 2021, the Plaintiffs served the Statement of Claim on the Defendant.

The Plaintiffs submitted to the court that they had a valid cause of action for wages and disbursements pursuant to Section 24(b) of the Courts of Judicature Act 1964, in particular transplantation of Sections 20(2)(o) and 20(2)(p) of the United Kingdom Senior Courts Act 1982 into Malaysia. Note that the former section provided for the courts Admiralty Jurisdiction for the wages of master and crew. Whilst the latter section was for claims relating to disbursements made on account of a ship.

However, subsequent to the arrest of the ship 'Oriental Dragon', there was much hardship that could be attributed to the Third Intervener, Asia Capital Commodities Trade Sdn Bhd. The Third Intervener argued that, although it had not yet filed its defence, it had the right to challenge the premise of the disbursements. The Third Intervener alleged that the disbursements could not be classified as 'Master's Disbursements. It was pointed out that the payment of disbursements were actually made by Thomas Miller Claims Management (TMCM). The Third Intervener also argued that, at this stage of the hearing, issues relating to the disbursements should not be decided. This was an issue relating to ranking of maritime liens and therefore the proper forum was at the Hearing for Priorities, ie the point in time at the end where all the various claims from the various debtors were ranked.

From the paragraph above, it is clear that there was no dispute that the wages were owed and payable, and the only point of contention was the Master's Disbursements between the Plaintiffs and the Third Intervener. There was a Seafarers' Employment Agreement (SEA) between the Plaintiffs and the Defendant. The shipowner, in its capacity as an employer, has a contractual responsibility to pay wages not later than 10 days of the succeeding month, provide subsistence to the seafarers whilst on the vessel, consistent with good maritime standards and practices, at no cost to the seafarers, see Para [10]. As the ship is registered in Panama, the Maritime Labour Convention 2006 (as amended) is applicable (as Panama is a signatory). According to the 2006 Convention, 'all seafarers shall be paid for their work regularly and in full in accordance with their employment agreement'.

The dispute between the Plaintiffs and the Third Intervener arose because TMCM had apparently assisted the ship with the requisite disbursements, subject to the condition that TMCM (ie the claims management company) will hold the Master and/or Shipowners responsible for the costs of supplying the ship.

On 21 December 2020, in an email to the Master, TMCM stated that as the Master was requesting the items 'for and on behalf of the vessel and/or vessel owners', TMCM was therefore 'holding the Master and/or vessel owners ... responsible for the costs of supplying the vessel and will issue the necessary invoice for the supply of the vessel in due course'.

His Lordship Nadzarin Wok Nordin J held that the disbursements were incurred by the master for the ship. The master was responsible for all the supplies, and could thus recover the disbursements as 'Master's Disbursements', see Para [18]. His Lordship adopted the definition of this phrase from The Orienta [1895] P49 where disbursements by the master in respect of things that were necessary for the ship, ie had to be used immediately, would make the Master personally liable and could therefore be claimed as Master's Disbursements, see Para [19].

The lawyers for the Third Interveners had argued that the Master must have the authority to pledge the Owner's credit. Otherwise, this would be equivalent to the court giving itself jurisdiction through the act of the registrar, and convert a liability into a disbursement. As established in The Feronia (1868) LR 2 A&E 65, if the master had borrowed the money and paid with it the bills an hour before the suit was instituted there would have been a valid disbursement, see Para [20].

This contention by the Third Intervener was rejected by Nadzarin Wok Nordin J. His Lordship observed that the passage quoted by lawyers for the Third Intervener was a decision by the Registrar in a different case known as The Red Rose. On the facts of the Mulair Oleg case, the disbursements were incurred by the master before the suit in court was instituted, and was incurred for and on account of the shipowner, see Para [21].

Nadzarin Wok Nordin J was satisfied that there was evidence that the ship actually received the benefit of the articles paid for by the disbursements as required by The Feronia case. On the facts of Mulair Oleg case, The supplies purchased with monies for the disbursements were for necessities for the ship, for example, food, fresh water, bunkers. These were items 'which were required to be had immediately and on urgent basis for and on account of the ship as there were 194 crew who were stranded on the ship', see Para [24]. The crew suffered extreme hardship after the ship was abandoned by the Defendant shipowner. Although paid for by TMCM, these necessities were incurred by the Master for the ship as well as crew, and should qualify as Master's Disbursements, see Para [24].

When the ship was released from arrest by the Third Intervener, the only practical and obvious thing for the master to do was to turn to TMCM. This entity was the claims handler named in the Certificate of Seafarer Abandonment Insurance issued by Seacrus (representing several underwriters at Lloyd's). At all times, although TMCM gave the supplies, it was on the express conditions that TMCM will hold the Master liable for the associated costs, see Para [25]. This was incurred by the First Plaintiff, by pledging the Defendant Owner's credit as this was contractually authorised under the Seafarers' Employment Agreement (SEA) for the Master to do, see Para [25]. Merely because TMCM sourced (via its local correspondents) and paid for the necessities does not prevent it from becoming Master's Disbursements, see Para [27]. It does not matter that the invoices were not made out to the Master and the Master had no contact with the suppliers, see Para [28].

Nadzarin Wok Nordin J held that there was no legal requirement that the necessaries must first be paid by the Master himself before it is deemed to be Master's Disbursements, see Para [29]. In doing so, his Lordship rejected the Third Intervener's contention that the Master had not ordered the supplies directly from the suppliers. His Lordship also distinguished The Mons [1932] P.109 which was cited by lawyers for the Third Interveners. According to the learned judge, the Master's Disbursements in The Mons were for bunker coal to the vessel before she started her voyage to England. It was not like the facts in the Mulair Oleg case where the ship and the crew were abandoned, see Para [32].

The Third Interveners expressed concern that the necessaries were supplied at a more expensive price. Nadzarin Wok Nordin J dismissed this and instead took judicial notice that because the COVID-19 was prevalent at the material time, supplies were limited and thus consequently more expensive, see Para [33]. The Third Interveners had provided quotations from Pan Marine Trading, and Ecleanol Marine Solution. This was compared to suppliers sourced by TMCM's local agent in Penang. His Lordship said that the dates, unit sizes and qualities are not identical and/or the same. Hence this was not an apple to apple comparison, and an unfair comparison, see Para [34]. Nadzarin Wok Nordin J held that the disbursements were not exorbitant, there was no over-charging and the prices were not unreasonable, see Para [35]. Using the words and phrases in The Fortuna 4 L.T.N.S.840, his Lordship described the conduct of the master as care and business like. He noted that every proper precaution seems to have been complied with by the Master. Hence the actions of the Master could not be invalidated unless fraud is proven, or it could be shown that the money was raised for a purpose other than necessary repairs and expenses, see Para [35].

The Third Interveners also raised the contention that the Master's Disbursements is not a Maritime Lien under the Maritime Laws of Peninsular Malaysia. In support of this argument, lawyers for the Third Interveners argued that a Maritime Lien was only recognised by virtue of Section 145 of the Merchant Shipping Act 1952, ie the Minister's power to make rules concerning the transfer of a Master's wage right, liens and remedies for the Master's Disbursement. As a result of the Merchant Shipping Ordinance (Amendment) Act 2016, Section 4, a Master's Disbursement cease to be recognised as a maritime lien. This point was also rejected by Nadzarin Wok Nordin J as the argument is not supported by any case law authority, see Para [40] and [41].

Instead, his Lordship referred to The Halcyon Isle; Bankers' Trust International Ltd v Todds Shipyard Corporation [1980] 2 MLJ 217 where the Privy Council did recognised a Master's Disbursement as a maritime lien. This was a case based on the Admiralty Court Act 1861 as enacted in the High Court (Admiralty) Jurisdiction Act of Singapore, see Para [42]. As there was no relevant difference between the laws of England, Singapore and Malaysia, in the exercise of admiralty jurisdiction, The Halcyon Isle case should be equally applicable in Malaysia, see Ocean Gain Shipping Pte Ltd v Owner and/or Charterer of Demise Vessel Dong Nai Reistered at Haiphong Port, Vietnam (The Dong Nai) [1996] 4 MLJ 454. The recognition of Master's Disbursements as a maritime lien is also found in the judgment of Hassan Lah JC (as then was) in Lee Wong Yu and Others v The Owners of the Sip or Vessel 'MV Hua Hong Satu' [1999] 6 CLJ 197. What is amazing is that Nadzarin Wok Nordin J used a publication co-authored by lawyers for the Third Interveners against them. In the Maritime Law Handbook, the lawyers had written that ‘the master of a vessel has a lien against his/her vessel to the extent of his/her outstanding disbursements’, see Para [46].

Concluding on the Merchant Shipping Ordinance 1952, Section 145, as amended by the Merchant Shipping (Amendment) Act 2016, Nadzarin Wok Nordin J held that the amendments were introduced to ensure that that Malaysian Law was in line with the Maritime Labour Convention 2006 (MLC 2006). His Lordship formulated this view from reading Hansard to determine the intention of Parliament on the effect of the amendment. It was never intended to get rid of a Master’s Disbursement legal status as a maritime lien, see Para [47]. The effect of this is that the Third Intervener could not step into the shoes of the Defendant to oppose the action in rem.

Thank you for reading IMSML Website Article 5/2024

Stay tuned for the next IMSML Website Article 6/2024: Cockett Marine Oil (Asia) Pte Ltd v MISC Bhd and another appeal [2022] 6 MLJ 786

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

Tuesday, 16 January 2024

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