Yard Loses Claim For Sum Owed Under Settlement Agreement

A claim by a local shipyard for monies owing to it under a ‘settlement agreement’ reached between it and its debtor was not an admiralty claim within the High Court Admiralty Jurisdiction Act, the High Court ruled.

lawzmagazine.comSome time at the end of 1999, the plaintiffs Pan –United Shipyard, repaired and supplied material to the vessel Dilmun Fulman, which was then owned by the defendants, Castle Shipping.  The defendants paid $650,000 for the repairs leaving a balance of about $771,000.On May 16, 2001, the plaintiffs commenced an interim action against Dilmun Fulmar and arrested the vessel on August 12.  After the arrest, the plaintiffs and the defendants reached a ‘settlement agreement’ on Aug 14, under which the defendants agreed to pay the sum of $310,000 in three installments as full and final settlement of the plaintiffs’ claims.The vessel was released from arrest on Aug 17 after the first installment of $140,000 was paid but the defendants defaulted on the next two installments totaling $170,000.

On July 29, 2002 the plaintiffs re-arrested Dilmun Fulmar, which had by then been renamed Hailsen following a change of ownership in late 2001.  The new owners, Hailisen Shipping, intervened in the action.  The vessel was released after security was provided, after which the interveners, Hailisen Shipping, applied for the writ of summons and the arrest to be set aside.  They also sought damage for wrongful arrest.

The assistant Registrar granted the Intervener’s application.  The plaintiffs appealed unsuccessfully to the High Court. On appeal, the plaintiff’s argued that the defendants had renounced the settlement agreement when they failed to pay the second and last installment payments and in re-arresting Dilmun Fulmar they were pursuing their original claim under sub-sections 3 (1)(1) and (m) of the High Court Admiralty Jurisdiction Act (Cap 123).The Plaintiffs said they had a right to re-assert the original claim under clause 10 of the settlement agreement, which permitted them to re-arrest.  Dilmun fulmar or any sister ship to claim the full sum owing under the repair contract including interest.The Interveners argued that the second arrest and interim action should be set aside because the court had no admiralty jurisdiction in respect of a claim based only on the settlement agreement.

“The Settlement agreement was also worded in such a way that if the compromise agreement was broken, the plaintiffs could assert their former rights”.

At the outset, Justice Belinda Ang in the High Court pointed out that an agreement of compromise would generally discharge all original claims and counterclaims unless it expressly provides for their revival in the event of breach.

Under the settlement agreement in this case, there was an immediate binding compromise between the parties as, under clause 1, the plaintiffs had agreed to accept a sum of $310,000 (inclusive of interest and legal costs) as full and final settlement.In return, the defendants promised to pay the settlement sum in three installments by certain dates and also agreed to release the plaintiffs from all claims that the defendants may have against the plaintiffs in respect of the repairs.

The Settlement agreement was also worded in such a way that if the compromise agreement was broken, the plaintiffs could assert their former rights.  Clause 10 provided that the non-payment of the installments by certain dates would not prejudice the plaintiffs’ rights to proceed against the defendants or to re-arrest Dilmun Fulmar or any of its sister ships to claim the full sum owing under the original repair contract.However, this judge said that clause 10, in her view, simply spelled out the general rule of contract law that upon a repudiator breach by one party, the other party has a right to elect whether or not to affirm that agreement or to treat it as wholly discharged.The court said that it was clear on the evidence that the plaintiffs had affirmed the settlement agreement and the re-arrest was to enforce the settlement agreement to recover the outstanding installments that totaled $170,000.Although the plaintiffs denied that the sum of $170,000 in their statement of claim did not arise from the settlement agreement, there was no clear explanation from them as to how they arrived at this amount in their statement of claim, said the judge.

There was no claim of $1,154,916.78 as stated in the settlement agreement or $874,274 as stated in the second warrant of arrest outstanding under the tax invoice at the time of the re-arrest.  Neither was there a claim for $630,274 as initially put to the interveners after the re-arrest, which was later withdrawn as a mistake, said the judge.

Instead, the plaintiffs’ statement of account in January 2002 was for a figure of $170,000, which meant that that figure could only have come from the settlement agreement, said the judge.

Justice Belinda Ang ruled that following the affirmation of the settlement agreement, the original admiralty action had been superseded and the agreement gave rise to a new cause of action for which a fresh action had to be started.However, that fresh action for monies owing under the settlement agreement would not fall within the section 3(1) (I) or (m) of the High Court Admiralty Jurisdiction Act to invoke the court’s admiralty jurisdiction.The judge concluded that the re-arrest of the vessel by the plaintiffs was ‘mala fide and an abuse of the court process’.  The plaintiffs have appealed her decision. Pan –United Shipyard Pvt. Ltd. vs The owners of the ship or vessel Dilmun Fulmar (defendants) and Hailisen Shipping Co. Ltd. (interveners), (2003) SGHC 270, 31 October 2003.  Gerald Yee (Joseph Tan Jude Benny) for the plaintiffs; Michael Lal and Wendy Tan (Haq & Selvam) for the interveners.

 

Capt. A K Bansal,

L.L.B. (Hons) London,

Master Mariner, Bar at Law

 

 

3 thoughts on “Yard Loses Claim For Sum Owed Under Settlement Agreement”

  1. Pari says:

    Well written

  2. Sakshi says:

    Well written

  3. Upasna says:

    Good article

Leave a Reply

Your email address will not be published. Required fields are marked *