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SHIPPING LAW – SHIP ARREST – MORTGAGE – ACTION IN REM – SERVICE WITHIN MALAYSIA

Q: Can I file a Writ In Rem in Kuala Lumpur and have the ship arrested in Kota Kinabalu?
A: Yes. This is because Section 7(2) of the Courts Judicature Act 1964 (“CJA 1964”) allows any writ and warrant issued within the High Court Malaya be executed or served anywhere in Malaysia. This would include Sabah and Sarawak.

Cases In Point: Re Aro Co Ltd [1980] 1 All ER 1067 (EWCA); The Monica S [1967] 2 Lloyd’s Rep 113; ‘The Fierbinti’ [1994] 3 SLR 864 and Nassau Maritime Holdings Designated Activity Co v The Owners of the Ship or Vessel ‘Cape Lambert’ [2020] 11 MLJ 561 

Q: What is a Writ In Rem?
A: A Writ In Rem is a legal document that invoke the admiralty jurisdiction of the High Court against “the thing” or “res” in dispute. The thing or res is usually a ship. A Writ In Rem can be distinguished from a normal writ which is issued against a person or body of person. This is also known as a Writ In Personam. A Writ in Rem may be issued even when the res is outside the territorial jurisdiction of the court. It can then be served when the res eventually comes within the court’s territorial jurisdiction.

Q: How can I invoke the admiralty jurisdiction of the High Court?
A: Admiralty jurisdiction of the High Court may be invoked if the criteria set out in Sections 20 and 21 of the UK Seniors Court Act 1981 (“SCA 1981”) are fulfilled.

Q: My company has failed to pay the loans of the bank in respect of a ship mortgaged to the bank. Can the bank arrest the ship of my company?
A: Yes. Mortgage or charge on a ship falls within the category in Section 20(2)(c) of the SCA 1981. Admiralty jurisdiction of the High Court may be invoked.

Q: What if my company has sold the ship to a new buyer. Can the bank still pursue the claim against the res i.e. the ship?
A: Yes. Mortgage claim falls within the category where an action in rem may be brought against the res in connection with the mortgage. Unlike in a situation of cargo damage claim (which is explained in our previous legal update), the bank does not have to show the owner is liable in personam to pay the loan. Hence, even if the owner of the vessel has changed, an action in rem can still be brought against the res i.e. the ship.

 

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ADMIRALTY IN REM – WRONGFUL ARREST – POSSESORY RIGHT – ARREST GONE WRONG: WHEN A SHIP ARREST BACKFIRES WITH DAMAGES

In Eletson Holdings Inc & Ors v The Vessel “Paros” [2026] 8 MLJ 80, the High Court set aside an arrest after finding that the plaintiffs had no proprietary or possessory right to the vessel at the time of the writ, as the bareboat charter had already been terminated. The Court held that the claim was in substance a corporate control dispute dressed up as an admiralty action, and emphasised that such disputes do not fall within admiralty jurisdiction. Critically, the plaintiffs’ failure to disclose the termination of the charter when obtaining the arrest warrant amounted to a serious breach, leading the Court to find mala fides or gross negligence and order damages for wrongful arrest. The decision reinforces that ship arrest is a powerful remedy that must be exercised with full disclosure and a proper maritime foundation.

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In CE Energy DMCC v Bashar [2026] Lloyds’s Rep 267, the Commercial Court clarified that not all guarantees labelled “on demand” will be treated as demand guarantees. On a proper construction, the court held that the personal guarantee in question was a contract of suretyship, requiring proof of the principal debtor’s liability rather than automatic payment upon demand. Crucially, the court found that the debtor’s “irrevocable” admissions of debt in a payment agreement created a binding contractual estoppel, which the guarantor could not challenge. The decision also confirms that, where payment is due on a “day certain”, a seller may still claim the price notwithstanding retention of title. The case underscores the importance of precise drafting and the risks of entering into settlement agreements that conclusively fix liability.

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MARITIME NEGLIGENCE – PLAINTIFF CLAIMED FOR DAMAGES CAUSED DURING ANCHOR DEPLOYMENT OPERATION – CALDERBANK OFFERS

In Tom Eastwind 365 Sdn Bhd v The Owners of the Vessel “Icon Sophia” [2025] 9 MLJ 397, the High Court held that the doctrine of res ipsa loquitur applied in a maritime collision during an anchor deployment operation, allowing an inference of negligence against the tug owner. The Court clarified that the doctrine is not defeated merely because the defendant adduces evidence explaining the accident – such evidence goes to rebutting the inference, not preventing it. While liability was established due to the tug master’s error of judgment in manoeuvring too close to a stationary barge, the plaintiff failed to properly prove its damages and was awarded only RM50,000. Notably, despite succeeding on liability, the plaintiff was ordered to pay costs after rejecting reasonable Calderbank offers, underscoring the risks of pursuing litigation without properly substantiated claims.

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JURISDICTION – BILLS OF LADING – BREACH OF HIMALAYA CLAUSE – BREACH OF EXCLUSIVE JURISDICTION CLAUSE – ONEROUS OR UNUSUAL TERMS

In Maersk Guinéa-Bissau SARL v Almar-Hum Bubacar Baldé SARL [2026] 1 Lloyd’s Rep 215, the English Commercial Court held that a shipper was liable for breach of an exclusive jurisdiction clause and a Himalaya clause after commencing proceedings in Guinea-Bissau instead of England. The Court confirmed that such clauses are standard and enforceable, and that commencing foreign proceedings in breach of them can give rise to a claim for damages. Notably, the Court also recognised that Himalaya clauses may be used offensively, allowing subcontractors to recover losses caused by wrongful litigation. The foreign judgment was not recognised due to lack of jurisdiction and denial of natural justice.

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DELIVERY WITHOUT PRESENTATION OF BILL OF LADING – LOI WON’T SAVE YOU: SHIPOWNER LIABLE FOR MISDELIVERY DESPITE INDEMNITY

In United Overseas Bank Ltd v The “Maersk Katalin” [2026] 1 Lloyd’s Rep 18, the Singapore High Court reaffirmed that delivery of cargo without presentation of original bills of lading remains a fundamental breach, even where carried out against letters of indemnity. The Court held that LOIs merely shift commercial risk but do not authorise misdelivery, and rejected arguments of consent, ratification and causation. Significantly, the Court emphasised that the burden lies on the carrier to prove that the loss would have occurred in any event – a burden not easily discharged. The decision underscores the continued strict liability regime in misdelivery cases, particularly where banks as bill holders are involved.

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CONTRACT LAW – ‘UK COURTS’ MEANS ENGLAND: COURT UPHOLDS JURISDICTION DESPITE VAGUE CLAUSE

In SMT Global Logistics Ltd v Georgian Airlines LLC [2025] Lloyd’s Rep. Plus 89, the Commercial Court held that a clause referring disputes to “the court in accordance with current legislation of the United Kingdom” was a valid jurisdiction clause in favour of the High Court of England and Wales. The Court also confirmed that the Montreal Convention does not apply to pure contractual claims for non-performance, such as repayment and loss of profits. Emphasising a broad and commercially sensible interpretation, the Court enforced the parties’ choice of forum and refused to stay proceedings, reaffirming that jurisdiction clauses will be upheld unless there are overwhelming reasons to depart.

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