19 January 2010
In the case of Equatorial Marine Fuel Management Services Pte Ltd (Equatorial) v MISC Berhad (MISC), the United States Court of Appeals for the Ninth Circuit has ruled in favour of MISC, upholding the fact that MISC did not enter into any contract for the supply of bunker with Equatorial, hence there being no basis for the admiralty action brought against MISC by Equatorial. The decision of the appeal was handed down last week by the Ninth Circuit three judge panel, who unanimously upheld the United States District Court for the Central District of California’s vacatur of Equatorial’s maritime attachment to MISC’s property, M/T Bunga Kasturi Lima.
This much eagerly awaited decision is warmly welcomed by all shipping giants globally as no physical supplier can now arrest vessels without the presence of proper legally binding contract supported by sufficient evidentiary documents, causing grave commercial strain on the ship owners.
The legal battle between the two companies began in April 2008, when Equatorial attached M/T Bunga Kasturi Lima, a vessel belonging to MISC in Long Beach, California, to acquire jurisdiction over MISC and to obtain security for their claim. Equatorial alleged that MISC breached a contract purportedly entered into between Equatorial and MISC. Equatorial specifically asserted that MISC had purchased bunker from Equatorial and Equatorial had delivered the bunker fuels to MISC’s vessels for over USD 22 million. It is further alleged that MISC never paid Equatorial for the various deliveries.
It was always the contention of MISC that it had no direct relationship with Equatorial. MISC entered into a contract for the purchase of bunker with Market Asia Link Sdn Bhd (“MAL”), a separate and unaffiliated company. In addition MISC received invoices from, and made remittances directly, to MAL for all bunkers supplied to the various vessels. The fact that MAL procured its bunker supply from Equatorial is immaterial. MISC was never provided with copies of Equatorial’s invoices, and thus there was no contractual nexus between MISC and Equatorial. Hence based on the fact that Equatorial failed to show that it had a valid prima facie admiralty claim, the US District Court of California vacated the attachment. However, Equatorial appealed against the decision to the US Court of Appeals for the Ninth Circuit which is the highest Federal Court in California.
In a published decision, written by Chief Judge Kozinski, the Ninth Circuit panel concluded that the District Court properly vacated the attachment because Equatorial failed to carry its burden of showing it had stated a valid prima facie breach of contract (or a contract at all when applying the evidentiary standard) against MISC.
Following the positive outcome of this case, MISC will now focus on pursuing a legal claim for approximately USD 500,000.00 against Equatorial for all damages caused as a result of wrongful attachment of MISC’s vessel.