The court determined that ownership of vessels passed during construction upon progress payments contrary to the plaintiffs' claims of ownership pending full payment.

Introduction

[1] In the Originating Summons, the Plaintiffs are seeking the following declaratory orders:

(i) that the First Plaintiff is the rightful owner of two (2) Vessels known as 'Gagah Samudera' and 'Teguh Samudera' ("the Vessels"), including the hulls, machinery, auxiliaries, weapons, systems and equipment as defined in the Shipbuilding Contract dated 21 February 2012 between the First Plaintiff and the Defendant ("the Agreement");

(ii) that the Vessels are, at all material times, charged to the Second Plaintiff by the First Plaintiff; and

(iii) that the Second Plaintiff as chargee of the Vessels and/or Mr Duar Tuan Kiat as the Receiver and Manager of the First Plaintiff, are entitled to deal with and/or dispose the Vessels.

[2] The grounds of this application are, inter alia, as follows:

(a) by the terms of the Agreement, the First Plaintiff was to construct the Vessels and thereafter sell the same to the Defendant. The Plaintiffs contend that at all material time, the Vessels belonged to the First Plaintiff;

(b) The Second Plaintiff had granted various credit facilities to the First Plaintiff. To secure the said facilities, the Debentures dated 24 January 2008, and 11 June 2010 and four further Debentures, all dated 26 June 2012 ("the Debentures") were executed by the First Plaintiff in favour of the Second Plaintiff. The Debentures created both fixed and floating charges over all of the assets of the First Plaintiff including the Vessels;

(c) A Receiver and Manager over the First Plaintiff have been appointed on 3 April 2013, and the First Plaintiff was wound up by the Court on 14 May 2013.

(d) The Defendant had terminated the Agreement on 27 January 2014 and alleged that it is the owner of the Vessels;

(e) The Plaintiffs contend that pursuant to the terms of the Shipbuilding Agreement and the Debentures, the Defendant's rights, if any, are not as owner of the Vessels but, if at all, the Defendant is only entitled to damages, which stands as an unsecured debt due from the First Plaintiff.

The Salient Facts

[3] The salient facts, as submitted by learned Senior Federal Counsel, Puan Alice Loke in her written submission, are not in dispute. On 21 February 2012, the First Plaintiff and the Government of Malaysia executed the Agreement to supply two (2) units of training vessels for the Royal Malaysian Navy. The contract sum was agreed at RM 294 million. The completion dates were agreed to be on 15 May 2013 and 30 June 2013 respectively.

[4] Payment for the Vessels was as stipulated in Schedule No 3 of the Agreement, which was subsequently amended by way of a Supplementary Agreement dated 9 November 2012. Payment by the Defendant was based on the completion of the stages mentioned therein.

[5] Pursuant to a Letter of Assignment dated 2 June 2011 which was consented to by the Defendant on 6 June 2011, payment for the progress of works was to be made to Malayan Banking Berhad.

[6] On 14 December 2012 and 27 February 2013, a launching ceremony was held where both Vessels were named "Gagah Samudera" and "Teguh Samudera" respectively. For the purposes of the launching ceremony, the Program Books were exhibited as "ZJ-4". In the Program Book for the launching ceremony on 14 December 2012, the Executive Chairman of the First Plaintiff said as follows in his "Kata Alu-Aluan":

"Pembinaan Kapal Latihan ini dianggap amat istimewa buat kami kerana Kapal Latihan ini merupakan kapal milik TLDM yang pertama dibina oleh syarikat kami..."

[7] After the said launching, the Vessel "Gagah Samudera" was kept at the TLDM base, Lumut, whilst "Teguh Samudera" was kept at the First Plaintiff dockyard.

[8] Before the Vessels could be completed, a Receiver and Manager ("R &