Ship Arrest, Limitation Action

By Arun Kasi

Last Updated 25th June 2021

Ship Arrest  Law and Procedure in Malaysia

THE LAW

The admiralty jurisdiction in Malaysia is that provided in the UK Senior Courts Act 1981 (SCA 1981) [ss. 20-24]. Sec 24(b) Malaysian Courts of Judicature Act 1964 (CJA 1964) provides accordingly. This is insofar as the substantive law is concerned. As far as the procedural law is concerned, the Malaysian Rules of Court 2012, particularly Order 70, makes provision for the same.

The admiralty jurisdiction is generally over ships (although it may in certain circumstances be extended to other things like aircraft and cargo), as provided in s 20 SCA 1981. The admiralty jurisdiction may be exercised in personam or in rem, as provided in s 21 SCA  1981. Sec 22 states certain restrictions to exercise of the in personam jurisdiction in collision cases. Sec 23 excludes matters falling within the Rhine Convention from the scope of the admiralty jurisdiction. Sec 24 provides definitions and certain other provisions. It defines the ship to include hovercrafts. It also confers a discretion in the court to refuse to entertain a wages-claim (whether in personam or in rem) in the case of foreign ships.

Sec 20(2) SCA 1981 provides 18 limbs of admiralty jurisdiction. They are, read with mode of exercise in s 21, The Bold Buccleugh (1851) [PC], s 22 and 24(2)a(a), are as follows:

Limb

Provision

 

Exercise

Property

Maritime Lien

Restriction (if any)

a

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

Can arrest concerned ship only

Ship

No

 

b

any question arising between the co-owners of a ship as to possession, employment or earnings of that ship

Ship

No

 

c

any claim in respect of a mortgage of or charge on a ship or any share therein

Ship

No

 

d

any claim for damage received by a ship

In personam only

Ship

No

 

e

any claim for damage done by a ship

In personam In rem

Can arrest concerned ship / sister ship

Ship

YES

Sec 22 SCA

(restriction concerning in personam claims only)

f

(loss of life or personal injury)

Ship

No

 

g

any claim for loss of or damage to goods carried in a ship

Ship

No

 

f

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

Ship

No

 

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

Ship

No

 

j

(salvage)

Ship

YES

 

k

any claim in the nature of towage in respect of a ship or an aircraft

Ship / Aircraft

No

 

l

any claim in the nature of pilotage in respect of a ship or an aircraft

Ship / Aircraft

No

 

m

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

Ship

No

 

n

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

Ship

No

 

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)

Ship

YES

Sec 24(2)(a)

(discretion to refuse to entertain claim against foreign ship in rem / her owners in personam)

p

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

Ship

No

 

q

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

-

No

 

r

any claim arising out of bottomry

-

YES

 

s

any claim for the forfeiture or condemnation of a ship or of 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

In personam only

Ship / Goods

No

 

 

Sec 20(1)(c), read with (d), in effect, add the following limb:

-

supply of necessaires 

In personam

In rem

Can arrest concerned ship

Ship

No

 

The conditions for exercise of in rem jurisdiction are set out in s 21(4) as follows:

  1. The claim arises in connection with a ship; AND
  2. the person who would be liable on the claim in an action in personam (“the relevant person”) was, when the cause of action arose, 
  1. the Owner OR charterer OR in possession OR in control of the ship; AND
  2. The relevant person, at the time when the action is brought, is:
  1. in the case of action against the concerned ship: the beneficial owner of that ship OR the demise charterer of it;
  2. in the case of action against a sister ship: the beneficial owner of that ship.

A maritime lien is exercisable only against the concerned ship (SCA 1981 s 21(3)). However, this does not prevent the claimant from taking an action under any of the SCA 1981 s 20(2)(d) – (r) limbs against a sister ship but without the benefit of maritime lien privileges. For instances, for outstanding wages, the crew can take an in rem action based on maritime lien / s 20(2)(o) against the concerned ship. Alternatively, the crew can take an in rem action based on s 20(2)(o) limb against a sister ship. The privilege of a maritime lien is that it is attached to the ship herself. This means that even if the ship is sold to a good faith purchaser, the maritime lien follows the ship, and the holder of the maritime lien can issue an in rem action subsequent to the new owner coming into picture. If the action is framed under the SCA 1981 ss 20(2)(d) – (r), without reliance on maritime lien, then no in rem action can be issued once the ownership of the ship has been transferred.

In connection with a cause, a single writ in rem may be issued against multiple ships (the concerned ship / sister ships) or separate writs in rem can be issued against each of the ships (the concerned ship / sister ships). In either case, multiple warrants of arrest may be issued against the ships (the concerned ship / sister ships). However, once any one ship is arrested in connection with the cause, no other ship may be arrested (s 20(8) SCA 1981). All other writs and warrants must be cancelled. If it is a single writ naming multiple ships as defendants, then all the other ships’ names must be removed upon arrest of any one ship. 

 

THE PROCEDURE

A ship may be arrested within the territorial limits of Malaysia, which extends up to 12 nautical miles from the baseline (s 3 Territorial Sea Act 2012 and s 5 Baselines of Maritime Zones Act 2006).

The procedural rules concerning admiralty actions are set out in Order 70 of the Rules of Court 2012. This includes rules concerning issue of writ in rem, service of writ in rem, entry of appearance (acknowledgment), undertaking as to expenses of Sheriff (Admiralty Marshall), warrant of arrest, execution of the warrant of arrest, service of the writ in rem, applications concerning maintenance of the ship under arrest, bail bond, release, caveat against release, withdrawal of the caveat against release, intervener’s action, judgment in default, commission for appraisement and sale, and determination of priorities. 

The Order 70 also contains rules concerning writ in personam and service of notice of writ out of jurisdiction; pollution claim against the Fund; special procedure for collision claim including preliminary acts (collision statements of case) and stay of proceedings; Inspection of ship by assessors; apportionment of salvage; and limitation action and payment into court.

For the same cause, both a writ in rem and a writ in personam (whether at the same time or different times) can be issued, but the two cannot be joined in one writ. Of course, the writs (whether in rem, in personam or both) are subject to the same time limits, which is usually a short time frame in many maritime claims.

A significance of issue of the writ in rem (but not writ in personam or mere lodging of a caveat against release) is that upon the issue, the plaintiff (claimant) becomes a secured creditor. It is not necessary to issue a warrant of arrest or to arrest the ship for this purpose. Accordingly, any subsequent issue of writ of execution against the ship such as writ of seizure and sale (writ / warrant of control) or insolvency does not affect the secured interest.

In the case of insolvency, although the plaintiff who has issued the writ in rem before insolvency of the shipowner is treated as a secured creditor, the plaintiff would need to obtain the leave of the court to proceed with the writ in rem, issue warrant of arrest or execute a warrant already issued. The leave would ordinarily be given as the plaintiff is a secured creditor. Only an insolvency made by a Malaysian court is recognised by the Malaysian courts. Malaysia has not adopted the UNCTIRAL Model Law on Cross Border Insolvency 1997. Accordingly, an insolvency granted by a foreign court does not affect in rem proceeding / warrant of arrest before the Malaysian courts.

The defendant in a writ in rem is named as:

‘Owners and all other persons interested in the ship or vessel (ship name) registered in the port of (port name), (country)’

When the defendant files the appearance, he will identify himself and change the defendant in the intitulement to include his name (Ord 70 r 2(4)), thus:

‘(Shipowner name), the owners of the ship or vessel (ship name) registered in the port of (port name), (country)’

A defendant does not lose his right to challenge the jurisdiction of the court by filing an appearance (Ord 70 r 2(5)). 

In Writ in Rem, if defendant enters appearance, it is treated both as writ in rem and writ in personam. Judgment can be given and executed for more than the value of the ship, against the ship and the personal defendant (usually the shipowner). However, if defendant does not enter appearance, jurisdiction is limited against ship only. Any execution is limited to the proceeds of sale of the ship.

A writ in rem can only be served within jurisdiction, usually on the ship, and there is no such thing as serving a writ in rem out of jurisdiction. A writ in personam can be served out of jurisdiction, subject to the rules and laws (Ord 70 r 3 / Ord 11 / Sec 23 CJA 1964).

There are special procedures applicable to collision claims in respect of pleadings and filing preliminary acts (collision statements of case). Similarly, there are some special procedures concerning claims against the Fund in pollution cases. Malaysia is a member of the CLC 1969 (as amended by the 1992 Protocol) and the Fund Convention 1971 (as amended by 1992 Protocol). See Merchant Shipping (Oil Pollution) Act 1994.

Arrest is a matter of right of the plaintiff. When a ship is arrested, or security has been given to prevent or lift an arrest, the court may stay the in rem action in favour of an arbitration clause (s 10 Arbitration Act 2005), an exclusive foreign jurisdiction clause or because a court of another jurisdiction is the appropriate forum. In such case, the court may maintain the arrest or security (Ord 70 r 12(11)-(13)). 

Arrest

Before issuing an arrest warrant, a plaintiff should perform a ‘caveat against arrest’ search. If there is a caveat, that does not prevent the plaintiff from issuing the arrest warrant, but the plaintiff may be held liable in damages for wrongful arrest unless he has sufficient reason to arrest despite the caveat (Ord 70 r 6). 

Usually, the documents filed to initiate a writ in rem coupled with a warrant of arrest are these: writ in rem, praecipe for service of writ in rem, warrant of arrest, affidavit in support, praecipe for warrant of arrest, undertaking as to Sheriff’s expenses. A certificate of urgency will be accompanied where the writ in rem / warrant of arrest is to be issued on an urgent basis. Upon filing the papers, a court deposit of MYR15,000 must be paid for issuance of arrest warrant in Peninsular Malaysia. There is no deposit for arrest in East Malaysia (Sabah, Sarawak and Labuan), but the expenses are secured by the solicitors’ undertaking.

The Admiralty Court in Kuala Lumpur operates 7/24 and handles writs in rem and warrants of arrests throughout Peninsular Malaysia. This means, the papers can be filed in the Kuala Lumpur High Court irrespective of where the arrest is to be effected within Peninsular Malaysia. 

In the case of wages claim in rem under s 20(2)(o) SCA 1981 or possession claim under s 20(2)(a) or (b) SCA 1981 against a foreign ship, a pre-notice to the consulate office of the ship’s flag in Malaysia must be given before issuing arrest warrant, unless leave of the court is obtained to dispense with the pre-notice requirement (Ord 70 r 4((4)).

Once the papers are duly filed, the Sheriff will write to the necessary port / authorities. He will go to the ship to effect the arrest and, usually, also serve the writ in rem at the same time. He will effect the arrest/service by affixing the writ/warrant on ship’s mast/superstructure. By an amendment to the rules in 2020 during the Covid-19 pandemic, the registrar may, in exceptional circumstances, permit service of the writ/warrant by affixing the same on the hull and sending a copy by electronic means to the appropriate person. A representative of the plaintiff’s solicitors must accompany the Sheriff in arresting the ship. Post arrest, the Sheriff may apply for necessary directions such as concerning maintenance, etc (Ombudsman order) (Ord 70 r 11).

Security

Once an arrest is effected, usually security will be furnished to lift the arrest. Similarly, security may be furnished in advance to prevent an arrest. This is particularly so where there is a caveat before arrest, by which the shipowner’s solicitors would have agreed to accept service of any writ in rem and to furnish security.

Generally, security is furnished by a P&I club. Security via undertaking givens by a P&I club who is a member of the IGP&I is widely accepted. Alternatively, a security may be given by a P&I club who is not such a member, a bank guarantee, payment into court or a bail bond. The security may be given as between the parties, without being part of the court record. In the case of a bail bond, it must be filed into the court file in which the writ in rem was issued. A bail bond, unlike other securities, may be straight executed against the person furnishing the bond in the event of default.

The IGP&I has 13 member P&I clubs, which are as follows:

  1. American Steamship Owners Mutual Protection and Indemnity Association, Inc
  2. The Britannia Steam Ship Insurance Association Limited / The Britannia Steam Ship Insurance Association Europe
  3. Gard P&I (Bermuda) Ltd / Assuranceforeningen Gard
  4. The Japan Ship Owners' Mutual Protection & Indemnity Association
  5. The London Steam-Ship Owners' Mutual Insurance Association Limited
  6. The North of England Protecting & Indemnity Association Limited / The North of England P&I Designated Activity Company (North EU)
  7. The Shipowners' Mutual Protection & Indemnity Association (Luxembourg)
  8. Assuranceforeningen Skuld / Skuld Mutual Protection and Indemnity Association (Bermuda) Ltd
  9. The Standard Club Ltd / The Standard Club UK Ltd / The Standard Club Ireland Designated Activity Company (Standard Ireland) /The Standard Club Asia Ltd. (reinsured subsidiary)
  10. The Steamship Mutual Underwriting Association (Bermuda) Limited / The Steamship Mutual Underwriting Association Ltd / The Steamship Mutual Underwriting Association (Europe) Limited
  11. Sveriges Ångfartygs Assurans Förening / The Swedish Club
  12. United Kingdom Mutual Steamship Assurance Association (Bermuda) Ltd / United Kingdom Mutual Steam Ship Assurance Association (Europe) Ltd /UK P&I Club N.V. (UKNV)
  13. The West of England Ship Owners Mutual Insurance Association (Luxembourg)

If parties cannot agree on the security, any party may apply to the court to determine the same. As far as the quantum of the security is concerned, the court will determine the same based on best arguable case of the Plaintiff.

Release

Usually, once security is furnished, the shipowner (or other interested person) will file a praecipe for release. It is not necessary for the shipowner (or other interested person) to have filed an appearance before filing the praecipe for release. Upon the praecipe, the court will issue the release form, provided the following conditions for release are satisfied. All parties must consent for the release. If there are caveats against release, then the shipowner (or other interested person) must first give notice to the caveators to withdraw the caveats. If they do not, then the shipowner (or other interested person) has to apply to the court for an order for release despite the caveat. 

The Sheriff may direct the shipowner (or other interested person asking for the release) to pay expenses (if any) of maintaining the ship, or he may direct an undertaking to be furnished for the expenses. If the direction is disputed, the shipowner (or other interested person asking for the release) has to apply to court to determine the issue.

Stay of Proceedings

Post release, the shipowner may apply for stay of the proceedings for a few reasons. The reasons include existence of an arbitration or exclusive jurisdiction agreement between the parties. The reason may also be that by conflict of laws rules, the substantive claim should be heard in another jurisdiction. If the court orders a stay, then the court may (as it usually will) order the security to be maintained. In case the ship is still under arrest, the court may, as it usually will, order the arrest to be maintained. If court does not order the stay, then the action proceeds in the court.

Appraisement and Sale

If the ship is not released and the court decides the case against the ship/shipowner, then this happens. A party may request for appraisal and sale of the ship by filing Praecipe for Commission for Appraisement and Sale for Issue of Release. Then, the court will issue an order to Sheriff for the same. Upon appraisement and sale, the Sheriff will deposit the proceeds (in MYR or foreign currency) on one day call interest bearing account. Then the court will tax the Sheriff’s expenses, in which process the parties, if they desire, will be heard. Parties may make (and object) applications as to foreign currency long term deposit. 

An order for sale can also be made as an interim measure, where necessary such as to save the value of the ship that will otherwise deteriorate or to mitigate against the cost of maintaining the ship.

Priorities

Before releasing the proceeds, the court will determine the priorities. The priorities are usually as follows:

  1. The Admiralty Marshal’s charges and expenses.
  2. Costs incurred by parties in relation to the sale.
  3. Maritime lien holders’ claims.
  4. Mortgage and other others.
  5. Other claims that give an in rem right.
  6. Shipowner.

Priorities within a group (eg. maritime lien holders) and within a sub-group (eg. salvage claimants) can be a complex question. Port authorities exercising statutory right of detention and sale may rank at higher level. Lien holder (eg. repairer) may also have certain priorities, which again can be quite a complex question.

 

 

By Arun Kasi

Last Updated 25th June 2021

Limitation Action Law and Procedure in Malaysia

Tonnage Limitation Action in Malaysia: Law and Procedure

THE LAW

Malaysia has two regimes of tonnage limitation. One, Peninsular Malaysia has ratified the Convention on Limitation of Liability for Maritime Claims 1976, signed in London (LLMC 1976) as amended by the 1996 Protocol. It must be noted that Malaysia did not ratify the amendments made by the 2012 Protocol, which increased the liability-limit amount. The states of Sabah and Sarawak have ratified the International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships 1957 signed in Brussels (Limitation Convention 1957).

LLMC 1976 amended by the 1996 Protocol is given effect to by the Malaysian Merchant Shipping Ordinance 1952 through s 360 and Sixteenth Schedule (LLMC 1976 as amended by the 1996 Protocol). For Sarawak, effect is given to the Limitation Convention 1957 by Part III of the Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and Others) Regulations 1960. For Sabah, effect is given to the same convention by the Merchant Shipping (Applied Subsidiary Legislation) Regulations 1961 through reg 3 importing by reference the 1960 Sarawak Regulations.

The Limitation Convention 1957 provides a lower liability-limit amount than the LLMC 1976. However, the Limitation Convention 1957 sets a high threshold for the shipowner to be entitled to the limitation. Conversely, the LLMC 1976 sets a higher liability-limit amount but a low threshold for the shipowner to be entitled to the limitation. The LLMC 1976, unlike the Limitation Convention 1957, extends the protection to salvors with a dedicated scheme for salvors.

Art 1(1) of the 1957 Convention provides:

‘The owner of a sea-going ship may limit his liability … unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner’.

The English courts have interpreted the article to say that the burden of proving absence of ‘actual fault or privity of the owner’ is on the shipowner. This is a formidable burden that will practically render the entitlement to limitation illusory. In giving such an interpretation, the English courts have been influenced by the predecessor s 503 UK Merchant Shipping Act 1894 that made available the limitation where the occurrence happened ‘without’ the ‘actual fault or privity’ of the shipowner, which was interpreted by the House of Lords in The Marion [1984] AC 563 to formidably impose the burden on the shipowner. See Herceg Novi (owners) v Ming Galaxy (owners) [1998] 4 All ER 238; The Tojo Maru [1969] 2 All ER 155; Bradstock Shipping Cort v Aldington Shipping [1986] LRC (Comm) 182 Gibraltar.

Art 1(6) of the 1957 Convention provides:

‘The question upon whom lies the burden of proving whether or not the occurrence giving rise to the claim resulted from the actual fault or privity of the owner shall be determined by the lex fori.’

Secs 102 and 103 Malaysian Evidence Act 1950 seems to place the burden rather on the person making the claim against the ship/shipowner. These sections are identical to ss 103 and 104 of the Singapore Evidence Act. Despite this, the Malaysian and Singaporean courts have been influenced by the House of Lords decision in The Marion to treat the burden as being on the shipowner, however without reference to these sections of the Evidence Act. See The Red Gold [2011] 1 MLJ 239; The Borcos Takdir [2012] 5 MLJ 515; The Sunrise Crane [2004] SGCA 42.

The above discussion of the issue of burden under arts 1(1), read with 1(6), is only relevant to the states of Sabah and Sarawak that has currently ratified the Limitation Convention 1957. It is not relevant to Peninsular Malaysia that has ratified. The federal territory of Labuan in East Malaysia, that was severed from the state of Sabah in 1984 seems to have no convention applicable directly by the Malaysian legislation, as neither the 1952 Act, nor the 1960 or 1961 Regulations apply to Labuan.

Under the LLMC 1976 as amended by the 1996 Protocol, by art 1(1), the limitation is available to the shipowners as a matter of course. This is subject to a restriction that the shipowner will lose the right to limit, by art 4, ‘if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result’. The burden of proving this exclusion is on the person making the claim against the ship/shipowner. This is a formidable burden for such a claimant to prove.

To sum up, the shipowner’s liability in Peninsular Malaysia is limited by the LLMC 1976 as amended by the 1996 protocol. Although this provides a higher limit, the shipowner will almost always be entitled to the limit. The shipowner’s liability in Sabah and Sarawak is limited to a lower limit by the Limitation Convention 1956, which is almost illusory as the shipowner won’t be able to satisfy the pre-condition. But this position is challengeable by reference to ss 102 and 103 of the Evidence Act 1050, although such challenge can be counter-challenged by policy arguments. For Labuan, there is no liability limitation available.

The act of invoking liability limitation is not considered to be an admission of liability (art 1(7) Limitation Convention 1957 / art 1(7) LLMC 1976 as amended by 1996 Protocol). The claims included within the scope of limitation are set out in art 1(1) Limitation Convention 1957 / art 2 LLMC 1976 as amended by 1996 Protocol. The claims excluded from the scope are set out in art 1(4) Limitation Convention 1957 / art 3 LLMC 1976 as amended by 1996 Protocol, which include salvage and general average claims.

Peninsular Malaysia

The liability limit, in LLMC 1976 as amended by the 1996 Protocol, is provided by arts 6 and 7, which are reproduced below in relevant part.

  • The general limits

 

  1. The limits of liability for claims other than those mentioned in art 7, arising on any distinct occasion, shall be calculated as follows:

 

  • in respect of claims for loss of life or personal injury,
  • 2 million Units of Account for a ship with a tonnage not exceeding 2,000 tons,
  • for a ship with a tonnage in excess thereof, the following amount in addition to that mentioned in (i):

for each ton from 2,001 to 30,000 tons, 800 Units of Account;

for each ton from 30,001 to 70,000 tons, 600 Units of Account; and

for each ton in excess of 70,000 tons, 400 Units of Account,

 

  • in respect of any other claims,
  • 1 million Units of Account for a ship with a tonnage not exceeding 2,000 tons,
  • for a ship with a tonnage in excess thereof, the following amount in addition to that mentioned in (i):

for each ton from 2,001 to 30,000 tons, 400 Units of Account;

for each ton from 30,001 to 70,000 tons, 300 Units of Account; and

for each ton in excess of 70,000 tons, 200 Units of Account.

The liability is limited by art 6 by reference to the gross tonnage of the ship at fault (art 6(6)). The units of account referred to in arts 6 and 7 are Special Drawing Rights (SDR) (art 8), whose daily exchange rate is determined by International Monetary Fund (IMF).

  • The limit for passenger claims
  1. In respect of claims arising on any distinct occasion for loss of life or personal injury to passengers of a ship, the limit of liability of the shipowner thereof shall be an amount of 175,000 Units of Account multiplied by the number of passengers which the ship is authorized to carry according to the ship's certificate.

Sabah and Sarawak

The liability limit, in Limitation Convention 1957, is provided by art 3, which is reproduced below in relevant part.

(1) The amounts to which the owner of a ship may limit his liability under Article 1 shall be:

 

(a) where the occurrence has only given rise to property claims an aggregate amount of 1,000 francs for each ton of the ship's tonnage;

 

(b) where the occurrence has only given rise to personal claims an aggregate amount of 3,100 francs for each ton of the ship's tonnage;

 

(c) where the occurrence has given rise both to personal claims and property claims an aggregate amount of 3,100 francs for each ton of the ship's tonnage, of which a first portion amounting to 2,100 francs for each ton of the ship's tonnage shall be exclusively appropriated to the payment of personal claims and of which a second portion amounting to 1,000 francs for each ton of the ship’s tonnage shall be appropriated to the payment of property claims: Provided however that in cases where the first portion is insufficient to pay the personal claims in full, the unpaid balance of such claims shall rank ratably with the property claims for payment against the second portion of the fund.

 

(7) For the purpose of this convention tonnage shall be calculated as follows:

 

-        in the case of steamships or other mechanically propelled ships there shall be taken the net tonnage with the addition of the amount deducted from the gross tonnage on account of engine room space for the purpose of ascertaining the net tonnage;

 

- in the case of all other ships there shall be taken the net tonnage.

The liability is limited by reference to net tonnage of the ship at fault with some adjustment (art 3(7)). The units of account referred to are francs (a unit consisting of 65.5 milligrams of gold of millesimal fineness nine hundred) (art 3(6)). The value of ‘franc’ has been fixed at MYR0.2037, by reg 9(2)(b) and (c) the 1960 Sarawak Regulations which is made applicable also in Sabah by reg 3 of the 1961 Sabah Regulations.

THE PROCEDURE

Ord 70 rr 35 – 38 of the Rules of Court 2012 (ROC 2012) provide for limitation action.

A limitation action must be instituted by a writ in personam (Form 2, with additional words ‘admiralty action in personam’) (claim form). The shipowner must be named, and not described, in the writ. At least one defendant must be named. Subject to this, any other defendants may be named or described, eg. ‘owners of the cargo last laden on the ship (ship name)’. However, if a potential claimant has described, rather than naming, himself, eg. a claim from a solicitor acting for the owners of the cargo described as the owners of the cargo, then the shipowner may accordingly describe the defendant which will satisfy the requirement that at least one defendant must be named. The writ must be served on the named defendant but need not be served on the other defendants described (if any).

In limitation actions, only the writ will be served but not the statement of claim by the shipowner-plaintiff. The named defendant and any other described defendants served with the writ has to file an appearance (acknowledgment) within the time limited. The time limited is 14 days in cases where the writ is served within jurisdiction. In cases where notice of the writ is served out of jurisdiction, the time will be as determined by the court when granting leave to serve out of jurisdiction. If any defendant files appearance or the time limited for appearance has expired, then the shipowner-plaintiff must within seven days file a notice of application returnable before the Registrar in Chambers for limitation decree. The application must be supported by an affidavit. The affidavit in support must contain certain procedural and substantive matters. The procedural matters to be stated are:

  1. i) the names and addresses of all potential claimants against the shipowner-plaintiff in relation to the incident in question if they were not named but described in the writ; and
  1. ii) the affidavit must also state the details of service of the writ/notice of writ on the named defendants.

The substantive matter to be stated is the shipowner-plaintiff’s case, i.e. the basis on which it is entitled to limit liability and the quantum at which it is to be limited.

The application and the affidavit in support must be served on the defendants who have entered appearance, at least seven days before the hearing – the first return date. At this date, one of the three things may happen:

  1. i) If the defendants do not dispute the entitlement of the shipowner-plaintiff to limit liability, then the Registrar will give the decree sought and fix the limit amount.
  1. ii) If the defendants need more time to decide whether the dispute or not, then the Registrar will give directions for further conduct and adjourn the hearing.
  • iii) If the defendants dispute, whether at the first return date or at a subsequent date, then the Registrar will give directions for further conduct. The Registrar may direct a formal application for directions under Ord 33 (Trial) or Ord 34 (Pre-Trial Case Management).

It is not compulsory in Malaysia to constitute a limitation fund. Indeed, the rules do not even cloth the court with the discretion to mandatorily order constitution of limitation fund. Notably, art 4 of the Limitation Convention 1957 leaves it to the domestic laws to provide for constitution of the limitation fund. In the case of LLMC 1976, art 10 allows the member states by domestic law to provide that the entitlement to limitation will be subject to constitution of limitation fund. Malaysia has not so provided. Hence, constitution of the limitation fund is at the option of the shipowner-plaintiff. If it elects to constitute the limitation fund, the fund amount must be paid into court (Ord 70 r 36A) – there is no provision, unlike the case in England and Wales, allowing constitution of the fund by other security. The advantage of the shipowner-plaintiff voluntarily opting to constitute the limitation fund are these:

  1. i) once the limitation fund is constituted, the claims will lie against the fund and no execution against other assets of the shipowner (art 2(4) Limitation Convention 1957 / art 13 LLMC 1976 as amended by the 1996 Protocol); and
  1. ii) the court may, as it will usually, order release of the ship arrested (art 13(2) LLMC 1976 as amended by the 1996 Protocol).

In Malaysia, unlike England and Wales, only a ‘limitation decree’ is available that is general in nature, and a restricted decree binding only certain defendants (i.e. certain potential claimants against the shipowner) is not available. Once the limitation decree has been granted, the shipowner-plaintiff will be required, by the decree itself, to advertise usually in three newspapers unless there is no potential claimant against the shipowner-plaintiff in respect of the incident in question other than the named defendants. The decree, and the advertisement, will also state the time within which any person wishing to challenge the limitation decree may file appearance and take out a notice of application to set aside the decree. Apart from this, the decree, and the advertisement, will state the time by which the claimants against the ship/shipowner in respect of the incident in question must file their substantive claims (usually by writs issued by them) in relation to the incident in question. The time referred to here will minimum be two months, unless there is a special reason for the court to limit the time to a shorter period. Once the time is past, no appearance and application to set aside or claims in respect of the incident in question may be filed except with leave of the Registrar. The advertisement will identify the action, the incident in question and the fact that a decree has been made. Once the advertisement has been published, the shipowner-plaintiff must file an affidavit affirming the publication within the time limited for filing of appearance and application to challenge and the claims, mentioned above.

An application to set aside the limitation decree must be supported by an affidavit. The affidavit in suppose must show:

  1. i) the defendant in question has a bona fide claim against the plaintiff in respect of the incident in question; and
  1. ii) he has sufficient prima facie grounds for the contention that the plaintiff is not entitled to the limitation as granted by the decree (whether in terms of substance or quantum).

The application and the affidavit in support must be served on the shipowner-plaintiff and all other persons who have filed appearance, at least seven days before the return date, which will be before the Registrar. On the return date, if the Registrar will usually give directions for further conduct of the application and give a hearing date before the Registrar. Upon hearing, the Registrar may do one of the two things:

  1. i) dismiss the application, thereby ending the challenge (subject to appeal to a Judge in chambers); or
  1. ii) allow the application and give suitable directions for further conduct of the matter for a final determination, including a direction for an application to trial directions under Ord 34 (pre-trial case management).

Dr. Arun Kasi

LLB (Hons), LLM, CLP, Barrister, FCIArb (London), PhD

Nicole Lee Hui Ching

LLB (Hons)

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Disclaimer: While every effort has been taken to ensure the accuracy of the information freely provided online as of the date they were uploaded, no liability is accepted in the event of any inaccuracy. Readers are to independently ensure both their accuracy and currency. © Dr. Arun Kasi, 2020. All rights reserved