Singapore's seventeenth-biggest bunker supplier in 2014,
Equatorial Marine Fuel Management Services Pte. Ltd., has failed in its bid to get
Malaysia International Shipping Corporation (MISC) to pay for fuel that was supplied via a third party after the case was dismissed by the Singapore High Court this week.
In a 64-page judgement, Justice Judith Prakash concluded that the plaintiff, Equatorial, had "not been able to establish liability on the part of the defendant, MISC, for the bunkers delivered under the disputed contracts", and, as a result, "the plaintiff's claim must therefore be dismissed with costs."
The case covers the period between June 2006 and September 2008 when Equatorial delivered approximately 198,000 metric tonnes of fuel to MISC vessels pursuant to bunker supply contracts brokered through London-based broking firms
Compass Marine and
OceanConnect.
Compass Marine and OceanConnect both dealt with Equatorial and
Market Asia Link Sdn Bhd (MAL), a Malaysian firm involved in the distribution of transportation equipment and supplies, but the UK companies did not have direct dealings with MISC.
MISC had approved MAL as a registered vendor of bunkers in March 2005. Thereafter, until the end of 2008, MISC purchased bunker fuels directly from MAL on several occasions, pursuant to both fixed price contracts and to spot contracts.
Equatorial's claim of US$21,703,059.39 plus contractual interest was for non-payment of fuel delivered to vessels owned or operated by MISC under three bunker contracts it had concluded with MAL.
MISC's position was that it was not liable at all under any of the disputed contracts as it was not a party to those contracts and EMF must look to MAL, the counterparty, for payment.
Equatorial, in turn, alleged that there was a special relationship and course of dealing between MISC and MAL from 2005 to 2008. MISC's approval of MAL as its registered bunker vendor was, according to Equatorial, only a formality, designed to carry into effect a plan for MISC to award bunker contracts to MAL and for MAL to generate bunker invoices to obtain financing from Affin Bank Bhd.
It was alleged that, in order to secure the bunker contracts, MAL had to bid at the lowest prices, at a loss to itself. On its part, MISC then used the low prices to justify the award of bunker contracts to MAL.
It was claimed that MAL used MISC's name in order to purchase bunkers from the market on credit since MAL was not an established bunker trader. On the ground and in the performance of the bunker contracts, MISC regarded MAL as no more than its broker, according to the plaintiff.
Before March 2005, MAL was registered with MISC only as a ship spares supplier. MAL had been supplying MISC with spare parts since 2000, with its sales to MISC between 2000 and 2005 amounting to RM 47,988,285 (US$12,585,100 using current exchange rates). On January 3, 2005, MAL wrote to MISC to "officially register its interest" in expanding its business with MISC to include the supply of bunkers. The letter included the following:
"We act as principals in all transactions, not as a broker, taking all responsibilities for the sale of bunkers and lubricants in the way of quantity, quality and effective delivery procedure. We are able to offer to supply your vessels at very competitive prices with reliable and prompt service based on 30 days credit from the date of delivery. We would welcome any inquiries from you in the future."
Thereafter, MAL was registered in MISC's system as a vendor of bunkers and it was informed of the registration on March 24, 2005.
Equatorial's position was that MISC granted MAL actual authority to act as its broker or agent and to purchase marine fuel as its broker or agent to fulfil bunker contracts.
"EMF's submissions in respect of the Inference Argument focus on MISC's approval of MAL as a registered bunker vendor, the manner in which the bunker contracts were awarded by MISC to MAL, the manner in which the bunker contracts were performed and the underlying relationship between MISC and MAL," the 64-page document said.
In a summary of the key questions to be addressed, the judgement stated: "The question to be answered in this case is whether the defendant, a substantial shipowner and operator, has to pay the plaintiff, a marine fuel supplier, for bunkers supplied to the defendant's ships. The answer to the question depends on the role played by an entity called MAL which ordered the bunkers from the plaintiff. Was MAL acting on its own account as purchaser or was it acting as the agent of the defendant? Alternatively, even if MAL did not have actual or apparent authority from the defendant to act as its agent, is the defendant stopped from denying MAL's authority?"
After examining the evidence, Equatorial's claim was dismissed by Justice Prakash on the basis that the Singapore-based fuel supplier had failed to establish a link between MAL and MISC such that MISC was liable to pay for the bunkers.
