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2024 MarsdenLR 1674
HIGH COURT MALAYA KUALA LUMPUR
COSCO SHIPPING HEAVY INDUSTRY (DALIAN) CO LTD & ANOR – Appellant
Versus
OSTA FLEET SDN BHD – Respondent
[Admiralty In Personam No: WA-27NCC-50-07/2019]
The court ruled that the registration of the vessel was fraudulent and void under the Merchant Shipping Ordinance due to the use of a forged Builder's Certificate, establishing the Plaintiffs as the beneficial owners.
Headnote:(A) Merchant Shipping Ordinance 1952 - Sections 11, 16, 21, and 23 - Dispute over ownership and registration of the vessel "Dalian Developer" - Plaintiffs claim that permanent registration was fraudulent and without their consent - Court finds the 2014 Builder's Certificate to be forged and registration invalid under the MSO - Defendant's counterclaim dismissed. (Paras 217, 218)
(B) Ownership - Claim for beneficial ownership of the vessel established - Trust relationship between parties recognized. (Paras 217, 218)
Facts of the case:
The Plaintiffs engaged with a shipyard regarding the construction and marketing of the vessel "Dalian Developer" while the Defendant claimed ownership through registration in Malaysia, which the Plaintiffs contested as fraudulent. (Paras 5-11)
Findings of Court:
The court determined that the registration was obtained fraudulently using a forged Builder's Certificate and the 2014 registration was void under the MSO. (Paras 217, 218)
Issues: The key issues included the legitimacy of the 2014 Builder's Certificate, the validity of the vessel's registration, and the nature of the agreements between the parties. (Paras 36-37)
Ratio Decidendi: The court ruled that the registration was invalid due to non-compliance with the Merchant Shipping Ordinance and that the Plaintiffs retained beneficial ownership. (Paras 217, 218)
Result: Plaintiffs' claim allowed; Defendant's counterclaim dismissed. (Paras 217, 218)
The grounds of appeal are based on the assertion that the original registration of the vessel was obtained through fraudulent means, specifically the use of a forged Builder's Certificate, which invalidates the registration. The appellant contends that the procedural requirements under maritime law were not properly fulfilled, including the failure to produce an authentic original Builder's Certificate and the improper transfer of ownership to a non-Malaysian entity, which contravenes statutory provisions (!) . Furthermore, it is argued that the court erred in upholding the invalid registration without adequately considering the fraudulent nature of the documents presented. The appellant also challenges the lower court's decision to recognize the plaintiffs as beneficial owners and to order de-registration, asserting that these decisions were made without sufficient basis and in breach of established legal principles regarding the validity of vessel registration procedures (!) .
JUDGMENT
[1] In the annals of ship registration law, few cases have presented as intriguing a puzzle as this dispute over the vessel "Dalian Developer". It is a tale that unfolds not on the high seas, but in the bureaucratic corridors of maritime registries and corporate boardrooms At its heart lies a ship of remarkable capabilities, but more than that, it is a story about the intricacies of vessel ownership and the sometimes murky waters of registration procedures.
[2] As I sift through the voluminous evidence before me, I am struck by the complexity of the case. On one side stands a giant of Chinese shipbuilding. On the other, a Malaysian company with aspirations in the offshore industry. Between them is a vessel, registered in Malaysia but claimed by a Chinese entity, embodying a dispute that hinges on the minutiae of administrative processes and documentary requirements.
[3] The central question seems deceptively simple: Who is the rightful owner of the "Dalian Developer"? But to answer this, we must navigate through a labyrinth of builder's certificates, registration forms, and statutory declarations. We must scrutinise the very mechanics of how a ship comes to be registered under a nation's flag, and what that registration truly signifies.
[4] Our task, then, is to chart a course through these bureaucratic waters towards a just and reasoned conclusion. For the implications of this case extend beyond the fate of a single vessel, touching on the fundamental integrity of ship registration systems and the reliance placed upon them by maritime authorities and commercial entities alike.
Background Facts
[5] In early 2014, Mr Azman Bin Abu Bakar ("Azman"), the CEO of AAB Ocean Group of companies, engaged in discussions with the 1st Plaintiff, Cosco (Dalian) Shipyard Co Ltd, regarding working together to market an offshore drilling unit known as "Dalian Developer" ("the Vessel") to Petroliam Nasional Berhad ("Petronas") in Malaysia, specifically to secure charter contracts. The Vessel was then under construction at the 1st Plaintiff's shipyard in Dalian, China.
[6] The Vessel was provisionally registered with the Port of Registry in Kota Kinabalu, Malaysia ("Malaysia Ship Registry"') on 3 July 2014, and then permanently registered on 4 November 2014, under the Defendant, Osta Fleet Sdn Bhd The registered owner was thus the Defendant. The Plaintiffs contend that the permanent registration was done without their knowledge. Upon completion of construction, the 1st Plaintiff as the Builder issued a Builder's Certificate dated 30 June 2015 ("2015 Builder's Certificate") transferring ownership of the Vessel to the 2nd Plaintiff, Dalian Developer Drilling Co, Limited.
[7] On 19 December 2015, the 1st Plaintiff entered into a Commercial and Technical Services Agreement ("CTSA") with CH Pavilion Sdn Bhd ("CH Pavilion"), a special purpose company created by Azman. The purpose was to commercially and technically upgrade the Vessel into a Floating, Production, Drilling, Storage and Offloading (FDPSO) unit based on Technip S A Paris design, and use it to tender for Petronas contracts in Malaysian waters.
[8] On 23 December 2015, the parties entered into a supplementary Rider Agreement ("the Rider Agreement') that set out the shareholding and divestment arrangements regarding the Petronas licensed company to be acquired by CH Pavilion to facilitate getting contracts from Petronas.
[9] On 31 November 2018 the Defendant submitted a tender to Petronas Carigali Sdn Bhd ("Petronas Carigali') for the Limbayung Deepwater Development Project ("the Limbayung Project'), an advanced offshore development project in Sabah, Malaysia with the Defendant expecting substantial profits from the tender with a value of a USD1.861 billion. Over the next few years, no firm charter contract was awarded by Petronas for the Vessel through the efforts of CH Pavilion, the Defendant or otherwise. The tender submission process was still underway.
[10] On
