An Introduction to Admiralty Law in Malaysia

  1. Introduction

This is the first of a series of articles on Maritime Law in Malaysia which I hope to contribute in the near future. It is not meant to be the “be-all and end-all” thesis for the reader. As the title suggests, it serves as an introduction to this area of law for both practitioners who are new to the area and laymen alike. Should the reader want to go into the area of Admiralty Law in greater detail, this article serves as a guide to the legislation and cases which forms the foundation of the law. Unless otherwise stated, the law cited here is Malaysian law.

 

  1. History

One will have to look at the English position in this area as it will be seen below that English Admiralty Law was imported into Malaysia. Sea-borne trade reached its pinnacle circa the 19th century in England. By then certain practices had been developed by seafarers, which became part of the common law. Before 1852, all actions by claimants were “actions in personam”. This is no different from an ordinary action to recover debts. Since 1852, through the English Admiralty Court Acts in the 19th century, the “in rem” action coupled with the right to arrest was made available to claimants in certain circumstances, namely for non-payment of essential materials supplied or payment for towage services rendered to foreign vessels. As will be noted, the “in rem” action is the cornerstone of Admiralty Law. The “in rem” action was expanded in 1873-75 by the English Supreme Court of Judicature Acts and the right was next consolidated by the English Supreme Court of Judicature (Consolidation) Act 1925. This last-mentioned statute was replaced by the English 1956 Administration of Justice Act (AJA), which itself was replaced by the English Supreme Court Act of 1981 (SCA). The AJA gave recognition to the International Convention on the Arrest of Sea-going Ships, 1952. Much of the English Law was based on this Convention. The SCA then streamlined the law.[1]

It would suffice to say at this point that when the ship is arrested, it would eventually be sold and the proceeds used to satisfy the claim. However, this is not always the case as there would be prior claims which would be satisfied first. Sometimes it might be a situation of “using good money to recover bad money”. In fact, the ship may not necessarily be sold as the owner would through Protection and Indemnity Clubs (P&I Clubs) provide an undertaking to pay the judgement sum should the claim be subsequently proved. The other alternative securities are Bank Guarantees, Bonds, Sureties and the like. This almost always happens as the owner would need the ship to either move his goods around the world or let it out on hire, especially when charter rates are on the rise. When the owner provides security, the ship would be released and the “in rem” action would then turn into a “hybrid” action. The “in rem” action still exists as the cause of action against the “res” remains. For this reason, the “in rem” action is traditionally seen as procedural, that is, to make the owner come forward. However, as mentioned earlier, if no owner or persons with interests in the ship appear, the action “in rem” would take its course culminating in the sale of the ship. An example of this situation is the recent sale of The Equanimity by the Malaysian High Court.

 

  1. Admiralty Jurisdiction in Malaysia

Before 1964, the law administered was as follows:

“with respect to ……..,carriers by air, land and sea,…..,the law to be administered shall be the same as would be administered in England in the like case at the date of coming into force of this Act, if such question or issue had arisen or had to be decided in England, unless in any case other provisions is or shall be made by any written law.” [2]

From 1964, after a few amendments, the law culminated in the following:

“……the civil jurisdiction of the High Court shall include –

the same jurisdiction and authority in relation to matters of admiralty as is had by the High Court in England under the United Kingdom Supreme Court Act 1981;” [3]

 

  1. The United Kingdom Supreme Court Act 1981

As mentioned earlier, the SCA replaced the AJA, which was passed to ratify and comply with the national obligations accepted by the States, which were parties to the Arrest Convention. The purpose of the Arrest Convention was to provide uniform rules as to the right of arrest sea-going ships by judicial process to secure maritime claims against the shipowner. The types of claim or dispute which are in the power of the English Admiralty Court to hear and determine are set out and defined in a list, which may be found in Section 20(2) of the SCA. Section 20 is reproduced here –

“20     (1)       The Admiralty jurisdiction of the High Court shall be as follows, that is to say –

(a)       jurisdiction to hear and determine any of the questions and claims mentioned in subsection (2);

(b)       jurisdiction in relation to any of the proceedings mentioned in subsection (3);

(c)       any other Admiralty jurisdiction which it had immediately before the commencement of this Act; and

(d)       any jurisdiction connected with ships or aircraft which is vested in the High Court apart from this section and is for the time being by rules of court made or coming into force after the commencement of this Act assigned to the Queen’s Bench Division and directed by the rules to be exercised by the Admiralty Court.

(2)       The questions and claims referred to in subsection (1) (a) are –                

(a)       any claim to the possession or ownership of a ship or to the ownership of any share therein;

(The jurisdiction of the English Admiralty Court can be invoked either by an action “in personam” or an action “in rem” in such cases.[4])

(b)       any question arising between the co-owners of a ship as to possession, employment or earning of that ship;

(By virtue of Section 20(4), the court has power to settle any account outstanding and unsettled between the parties in relation to the ship and to order that the ship or any share thereof be sold and to make such other order as the court thinks fit.)

(c)       any claim in respect of a mortgage of or charge on a ship or any share therein;

(All mortgages and charges, whether registered or not, whether legal or equitable, including mortgages and charges created under foreign law are covered by this paragraph [s.20(7)(c)].)

(d)       any claim for damage received by a ship;

(The damage received may not necessarily be caused by another ship. It may be damage received upon a collision with a buoy or pier. There is no provision for proceedings “in rem” but most cases here may be brought under paragraph (e).)

(e)       any claim for damage done by a ship;

(The phrase “damage done by a ship” cannot be taken literally to mean direct contact with the ship.[5])

(f)        any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or in consequence of the wrongful act, neglect or default of –

  • the owners, charterers or persons in possession or control of a ship; or
  • the master or crew of a ship, or any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible,

being an act, neglect or default in the navigation or management of the ship, in the ship, in the loading, carriage or discharge of goods on, in or from the ship, or in the embarkation, carriage  or disembarkation of persons on, in  or from the ship;

(g)       any claim for loss of or damage to goods carried in a ship;[6]

(h)       any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship;

(This paragraph covers claims whether in contract or in tort arising out of any agreement relating to the carriage of goods in a ship. The phrase “arising out of” means “connected with” and not the narrow meaning of “arising under”.[7])

(j)        any claim in the nature of salvage (including any claim arising by virtue of the application, by or under Section 51 of the Civil Aviation Act 1949, of the law relating to salvage to aircraft and their apparel and cargo):

(Salvage gives rise to a maritime lien.[8] This paragraph includes claims for services rendered in saving life from a ship or an aircraft or in preserving cargo, apparel or wreck as, under Sections 544 to 546 of the English Merchant Shipping Act 1894, or any Order in Council made under Section 87 of the English Civil Aviation Act 1982, are authorised to be made in connection with a ship or aircraft [see s.20(6)]. Owners of property salved cannot make a claim against salvors for negligence during salvage operations under this paragraph but may do so under paragraph (h) (see The Eschersheim above). This paragraph also does not cover a claim by salvors against shipowners for failure to use their best endeavours to obtain security from cargo owners before a cargo is released under the Lloyd’s Open Form 1990 as this is not a claim for salvage.)

(k)       any claim in the nature of towage in respect of a ship or an aircraft;

(Towage includes escort services.[9] Towage in relation to aircraft means when it is waterborne.[10])

(l)        any claim in the nature of pilotage in respect of a ship or an aircraft;

(Pilotage in relation to an aircraft means pilotage when the aircraft is waterborne.[11])

(m)     any claim in respect of goods or materials supplied to a ship for her operation or maintenance;

(The “goods or materials” are commonly known as “necessaries”, examples of which are bunker fuel, crew’s clothing, repairs and expenses of destroying contaminating or rotting cargo. However, the term “necessaries” is not found anywhere in SCA, though it is found at common law and in old statutes. Advances made to enable necessaries to be purchased were “necessaries” within subsection (m).[12] The goods and materials must have been supplied to a particular ship and not just the owner.[13])

(n)       any claim in respect of the construction, repair or equipment of a ship or in respect of dock charges or dues;

(Claims for consumables are not covered by this sub-section. It must be of a more permanent nature.[14] However a claim by a classification society for charges was caught by this sub-section.[15]

(o)       any claim by a master or member of the crew of a ship for wages (including any sum allotted out of wages or adjudged by a superintendent to be due by way of wages);

(A maritime lien is created for such wages.[16] A master’s claim for wages ranks pari passu with seamen’s wages.[17] However severance page does not give rise to a maritime lien.[18]

(p)       any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship;

(A maritime lien exists for disbursements properly incurred by a master, but no such lien arises for shippers, charterers or agents. Agents’ out of pocket disbursements, their fees, charges or commission are included in this sub-section.[19] Insurance premiums are not included in this sub-section as it is not necessary for the physical operation of the ship but they are only needed for the financial benefit or comfort of the shipowners.[20])

(q)       any claim arising out of an act which is or is claimed to be a general average act;

(r)       any claim arising out of bottomry;

(Bottomry bonds were given to lenders of money whereby the ship was pledged for the loan. It is now virtually obsolete but it nevertheless gives rise to a maritime lien.)

(s)       any claim for the forfeiture or condemnation of a ship or if goods which are being or have been carried, or have been attempted to be carried, in a ship, or for the restoration of a ship or any such goods after seizure, or for droits of Admiralty.

(3)       The proceedings referred to in subsection (1)(b) are –

(a)       any application to the High Court under the Merchant Shipping Acts 1894 to 1979 other than an application under Section 55 of the Merchant Shipping Act 1894 for the appointment of a person to act as a substitute for a person incapable of acting;

(b)       any action to enforce a claim for damages, loss of life or personal injury arising out of –

(i)        a collision between ships; or

(ii)       the carrying out of or omission to carry out a manoeuvre in the case of one or more of two or more ships; or

(iii)      non-compliance, on the part of one or more of two or more ships, with the collision regulations;

(c)       any action by ship owners or other persons under the Merchant Shipping act 1894 to 1979 for the limitation of the amount of their liability in connection with a ship or other property.

(4)       The jurisdiction  of the High Court under subsection (2)(b) includes power to  settle any account outstanding and unsettled between the parties in relation  to the ship, and to direct that the  ship, or any share thereof, shall be sold, and to make such order as the court thinks fit.

(5)       Subsection (2)(e) extends to –

(a)       any claim in respect of a liability incurred under the Merchant Shipping (Oil Pollution) Act 1971; and

(b)       any claim in respect of a liability falling on the International Oil Pollution Compensation Fund under Part I of the Merchant Shipping Act 1974.

(6)       The reference in subsection (2)(j) to claims in the nature of salvage includes a reference to such claims for services rendered in saving  life from a ship or an aircraft or in preserving cargo, apparel or  wreck as, under Sections 544 and 546 of the Merchant Shipping Act  1894, or any Order in Council made under Section 51 of the Civil Aviation Act 1949, are authorised to be made in  connection with a ship or an aircraft.

(7)       The preceding provisions of this Section apply –

(a)       in relation to all ships or aircraft, whether British or not and whether registered or not and wherever the residence or domicile of their owners maybe;

(b)       in relation to all claims, wherever arising (including, in the case of cargo or wreck salvage, claims in respect of cargo or wreck found on land); and

(c)       so far as they relate to mortgages and charges, to all mortgages or charges whether registered or not and whether legal or equitable, including mortgages and charges created under foreign law;

Provided that nothing in this subsection shall be construed as extending the cases in which money or property is recoverable under any of the provisions of the Merchant Shipping Act 1894 to 1979.”

In practice it has been recognised that the Admiralty Court in Malaysia has the right to preside over the 18 matters listed under Section 20 (2) ([a] to [s]) of the SCA.[21] The matters the Court handles have also been expanded to include:-

(a)       claims relating to carriage of goods by sea;

(b)       limitation of actions for maritime claims, including actions seeking to limit liability or for the extension of time where the limit of liability or the time for commencement of proceedings is prescribed by maritime convention or legislation;

(c)       disputes pertaining to marine insurance and reinsurance contracts, including marine insurance agents and brokerage contracts;

(d)       disputes arising from shipbuilding agreements, including issues with regard to the construction, design, maintenance and repairs of ships;

(e)       disputes arising from the sale and purchase of ships;

(f)        civil claims arising out of marine pollution;

(g)       marine or shipping-related agency, freight and multimodal transport and warehousing of goods at any port in Peninsular Malaysia;

(h)       claims related to ship financing and documentary credit for the carriage of goods by sea;

(i)        death or personal injury, loss or damage arising out of a marine activity in or about a marine facility, which includes ports, docks, berths, or any form of structure  defined as a “ship” under maritime law;

(j)        civil claims arising from any breach of any marine regulations, notices, by-laws, rules and guidelines;

(k)       disputes pertaining to the welfare of any seaman, including wages and contract of service;

(l)        applications in connection with maritime arbitrations, including applications for the preservation of assets pending maritime arbitration and the review, setting aside and enforcement of maritime arbitration awards;

(m)     appeals in respect of a maritime claim determined by the Subordinate Courts.

 

  1. The Admiralty Court

The High Court at Kuala Lumpur has been designated as the Admiralty Court. In practice one of the courts in the Commercial Division of the Kuala Lumpur Court has been assigned to hear Admiralty matters. Irrespective of which High Court in Malaysia a maritime claim is filed, it will be transferred to be heard by the Admiralty Court in Kuala Lumpur.[22]

 

  1. Arrest pending arbitration

The Arbitration Act 2005 was amended[23] to vest the Malaysian Courts with power to order the retention of vessels or the provision of security pending the determination of arbitration proceedings related to admiralty and maritime disputes.

 

  1. Ship collision cases

The International Regulations for Preventing Collisions at Sea 1972 was adopted in Malaysia as a schedule to the Merchant Shipping (Collisions Regulations) Order 1984 and implemented vide Sections 250 and 252 of the Merchant Shipping Ordinance 1952. The Merchant Shipping (Collisions Regulations) Order 1984 is referred to as the “collision regulations” under the 1952 Ordinance or “Colregs” for short.

A particular issue that arises from collision cases is the limit of the liability of the ship-owner according to the ship’s tonnage. Malaysia has now adopted the 1976 Limitation Convention where the limit of liability is tonnage-based compared to the previous 1957 Limitation Convention, which was based on fault or privity.[24] With the adoption of the 1976 Convention, Malaysia is now in line with the jurisdictions such as England and Singapore.

 

  1. Conclusion

25% of Malaysia’s trade is sea-borne. It was inevitable that we should have a dedicated court dealing with Admiralty and Shipping matters. I was on the Shipping and Admiralty Law Sub-committee of the Bar Council chaired by Sitpah Selvaratnam that organised the first National Maritime Conference. It was very well received and was in fact over subscribed. The impetus of the conference laid the foundation towards the formation of the Admiralty Court. Recently procedures have been simplified based on the Rules of Court 2012 with the publication of a hand-book for practitioners on, inter-alia, arrest and related matters.

ADC recently conducted a “sister ship” arrest successfully. In fact, our client arrested its own accommodation barge which was moored off Labuan. It had been let out to a defendant (the “disponent owner”) who defaulted on its charter rates. In the midst of the trial, the defendant capitulated and settled.

It is hoped that Malaysia will be seen as a viable venue to settle Admiralty and Shipping disputes.

_____________________________________________________________________________________

By Lt. (Rtd) Paul K.W Kwong (Royal Malaysian Navy) (view profile)
Partner , Azman Davidson & Co (Family Law, Insolvency, Litigation, Shipping)
+603 2164 0200 (ext no. 114)
paul.kwong@azmandavidson.com.my

 

[1] Christopher Hill, Maritime Law.

[2] Section 5, Civil Law Act 1956.

[3] Section 24 (b), Courts of Judicature Act 1964 as amended by Section 2, Courts of Judicature (Amendment) Act 1987.

[4] Currie v M’Knight [1897] AC 97, HL; The Minerva (1933) 46 Ll.L.Rep.212;

[5] The damage need not be caused by direct contact or physical damage – The Dagmara and Ama Antxine [1988] 1 Lloyd’s Rep. 431.

[6] The expression “goods” includes baggage belonging to passengers or travelers and not the Master’s and crew’s personal effects [see s.24(1)].

[7] The Antonis P Lemos [1985] 1 Lloyd’s Rep. 283, HL; see also The Hamburg Star [1994] 1 Lloyd’s Rep. 399 and The Eschersheim [1976] 2 Lloyd’s Rep. 1, HL.

[8] Maritime liens will be discussed in a future article.

[9] The Leoborg [1962] 2 Lloyd’s Rep. 146.

[10] See s.24 (1) SCA.

[11]S.24(1) SCA, supra.

[12] The Fairport (No.5) [1967] 2 Lloyd’s Rep. 162.

[13] The River Rima [1988] 2 Lloyd’s Rep. 193.

[14] The D’Vora [1952] 2 Lloyd’s Rep. 404.

[15] Stinne Peter [1982] folio 171, referred to in the Supreme Court Practice 1995, Volume 2, Page 341.

[16] A maritime lien is significant when discussing priorities. This will be discussed in a latter article.

[17] The Royal Wells [1984] 2 Lloyd’s Rep. 255.

[18] The Tacoma City [1991] 1 Lloyd’s Rep. 330.

[19] The Wesport (No.3) [1966] 1 Lloyd’s Rep. 342.

[20] The Sea Friends [1991]2 Lloyd’s Rep. 322.

[21] See Practice Direction 1 of 2012 – Admiralty and Maritime Claims.

[22] Practice Direction 1 of 2012.

[23] Arbitration (Amendment) Act 2011.

[24] Merchant shipping (Amendment and Extension) Act 2011.

 

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