Ship Arrest Gone Wrong

Ship Arrest Gone Wrong

The legal question that arose here was, whether the service on the master was in compliance with the governing law and the answer is simply ‘No’.

A ship may be arrested in Malaysia as long as the arresting party’s claim falls under any of the provisions of Section 20 (2) and Section 21 of the Supreme Court Act 1981 of England and Wales.

A Party who wants to arrest a ship in Malaysia must strictly comply with the Rules of Order 70 of the Rules of High Court 1980 (“RHC”) which govern admiralty proceedings in the Malaysian High Court.

In a recent case of Kertih Port Sdn Bhd V Owners of the Vessel ‘Shema’ (2009) a vessel named Shema was arrested on a claim arising out of an alleged breach of contract for the hire of tugboats. Here, a security of RM2,384,000 for the release of the vessel was demanded. However, after arresting the ship for 104 days the ship was released. The Owners of the ship in the meantime applied to set aside the writ and warrant of arrest alleging that the warrant of arrest against the vessel was wrongful and without basis.

The arrest warrant in this matter was served on the master of the ship. The legal question that arose here was, whether the service on the master was in compliance with the governing law and the answer is simply “No”. The writ and warrant of arrest must be served on the property against which an action is brought (Order 70 Rule 7 of the RHC) and this must be done by affixing the warrant or writ for a short time on any mast of the ship or on the outside of any suitable part of the ship’s superstructure as Order 70 Rule 10 of the RHC uses the word “Shall” and therefore it means the act specified was mandatory and there is no other form of service specified by these Rules. As such these Rules must be complied with.

The Malaysia High Court affirms the English decision in the case of The Prins Bernhard (1963) 2 LLR 236 where it was stated that “it is too great a departure from the recognized and long establish practice” when the service on the Master was said to be a good service.

The Court held that upon the failure to comply with mandatory requirement, the consequence was that the service of the writ in rem and the warrant on the master of the ship was defective and ought to be set aside.

The Court in Kertih Port’s case further held that foreign ships, owners and parties shipping goods expect compliance with the letter of the Rules, for they conduct their operations on that basis. Any tolerance of defective application of the rules to allow the use of the writ in rem to hold a ship while a claim and negotiations for settlement is made and then releasing the same at will 104 days later created the image of a nation which allows its laws and rules to be used for what may be termed collateral if not improper purpose and thus damaged Malaysia’s reputation generally as a trading nation and that was too high a price to pay by the nation for one Claimant.

In conclusion it is important to say that a party who intends to arrest a ship when, having received the order from the Court to arrest a ship has to strictly comply with the mandatory requirements of the law or else the consequence will be similar to Kertih Port’s case where the service of the writ in rem and the warrant on the master of the ship was held to be defective and set aside by the Court.

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