FIMBank Plc v The Owners and/or Demise Charterer Ship or Vessel now known as ‘Bao Lai’ [2023 6 MLJ 563]

FIMBank Plc v The Owners and/or Demise Charterer Ship or Vessel now known as ‘Bao Lai’ [2023 6 MLJ 563]

Federal Court (Putrajaya)

Admiralty in rem

1. FIMBank PLC (“FIMBank”), a Maltese financial institution involved in trade financing, provided funding to its customers for the purchase of approximately 17,300 metric tonnes of Ukrainian milling wheat. As security for the financing, FIMBank took possession of the original bills of lading for the cargo. The shipment was carried on board the vessel NIKA (the “vessel”), which at the material time was owned by the Respondent, and transported from Chornomorsk, Ukraine, to a port in the Egyptian Mediterranean.
2. On 17 May 2019, FIMBank filed an admiralty writ in rem (legal proceedings against a specific property) in the High Court of Kuala Lumpur, alleging that the vessel owners had wrongfully delivered the cargo to third parties who had not presented the original bills of lading. FIMBank claimed that this misdelivery caused it financial loss.
3. As the writ was issued on 17 May 2019, it had to be served by 16 November 2019. However, the vessel did not enter Malaysian waters during that time. FIMBank therefore relied on Order 6 rule 7(2), which permits up to five extensions of six months each in admiralty matters, provided the applicant complies with the requirements of Order 6 rule 7(2A), including showing attempts at service within one month of issuance and continued efforts thereafter. Between November 2019 and November 2021, the High Court granted all five requested extensions, extending the writ’s validity to 16 May 2022.
4. The present appeal arose when FIMBank sought a sixth extension of the writ’s validity. The High Court refused the application, ruling that the clear wording of Order 6 rule 7(2) imposed a strict cap of five renewals. The High Court held that it could not use its inherent jurisdiction under Order 92 rule 4 to extend the writ beyond that statutory limit, as there was no lacuna permitting the invocation of inherent powers. The High Court reasoned that granting indefinite extensions until the vessel happened to enter Malaysian waters would defeat the purpose of the rule.
5. FIMBank argued that it was not at fault for the inability to effect service because the vessel had never sailed into Malaysian territorial waters. It further contended that refusal of a sixth extension would result in serious injustice: the limitation period for its misdelivery claim had already expired, and the vessel had changed ownership several times, making a fresh action in rem impossible. Despite these arguments, both the High Court and the Court of Appeal dismissed the applications.
6. Aggrieved by the decision of the Court of Appeal, FIMBank appealed to the Federal Court.

1. Under the Rules of Court 2012, a writ in rem must be physically served on the vessel while it is within Malaysian territorial waters (Order 70 rule 7(1) and Order 70 rule 10). Substituted service is expressly prohibited, and service cannot be effected outside Malaysia (Order 70 rule 3(3)). This requirement reflects the principle that admiralty jurisdiction is premised on the presence of the res within the jurisdiction, as articulated in Aichhorn & Co KG v The Ship MV Talabot (1974) 132 CLR 449 (High Court of Australia). Furthermore, a writ remains valid for six months from its issuance (Order 6 rule 7(1)).
2. The Federal Court held that the Courts below had erred in treating Order 6 rule 7(2) of the Rules of Court 2012 as imposing a rigid, inflexible ceiling of five renewals for an admiralty writ in rem. The Federal Court clarified that the intention behind this provision must be understood through its purpose, which is to ensure that Plaintiffs do not file writs and then neglect to serve them. This objective, as articulated in Duli Yang Amat Mulia Tunku Ibrahim Ismail Ibni Sultan Iskandar Al-Haj Tunku Mahkota Johor v Datuk Captain Hamzah bin Mohd Noor and another appeal [2009] 4 MLJ 149; [2009] 4 CLJ 329, aims to deter litigants from allowing writs to remain dormant and thereby contributing to unnecessary backlog.
3. However, the Federal Court emphasised that admiralty proceedings operate under a specialised framework governed principally by Order 70. Under Order 70 rules 7(1), 10 and 3(3) of the Rules of Court 2012, a writ in rem must be physically served on the vessel itself when it is within Malaysian territorial waters. Substituted service is unavailable, and service out of jurisdiction is expressly prohibited. Thus, unless the vessel sails into Malaysian waters, no Plaintiff can make the “efforts to serve” required under Order 6 rule 7(2A). In this case, the vessel had never entered Malaysia since the writ was issued, making service factually impossible. The Federal Court therefore concluded that Order 6 rule 7(2) could not sensibly operate as a bar to further renewals in such circumstances.
4. The Federal Court further held that the issuance of a writ in rem vests the Plaintiff with a statutory right of action against the vessel. This right carries with it the status of a secured creditor and crystallises upon the issuance of the writ, even before service is effected. In support of this, the Court referred to In Re Aro Co Ltd [1980] Ch 196; Deutz MWM Far East (Pte) Ltd v Owners of and other persons interested in the ship or vessel “Hull No. 308” (Standard Chartered Bank, interveners) [1991] 3 MLJ 393; [1991] 3 CLJ 2984 and The Hull 308. Crucially, such a right survives any subsequent change in vessel ownership, consistent with the long-standing principle in The Monica S [1968] 2 WLR 431. To construe Order 6 rule 7(2) as extinguishing this right because the ship never entered Malaysian waters would undermine the entire structure of admiralty security and contradict the statutory foundation of in rem proceedings. The Rules, being subsidiary legislation, cannot be read to abrogate a statutory right validly acquired within the limitation period.
5. The Federal Court also rejected the reasoning of the lower courts that inherent jurisdiction may only be used where a “lacuna” exists, as derived from Yomeishu Seizo Co Ltd & Ors v Sinma Medical Products (M) Sdn Bhd [1996] 2 MLJ 334; [1996] 2 BLJ 142. It clarified that this approach is overly restrictive and inconsistent with authority. The Court reaffirmed the position in Ho Yoke Kwei & Anor v Ong Eng Hin [1997] 4 MLJ 292; [1997] 1 CLJ 603 and Permodalan MBf Sdn Bhd v Tan Sri Datuk Seri Hamzah bin Abu Samah & Ors [1988] 1 MLJ 178; [1988] 1 CLJ 31, which held that inherent powers may be exercised to prevent injustice, even where the Rules provide some form of procedure. The absence of a lacuna does not bar the court from invoking its inherent powers when strict adherence to procedural rules would lead to manifest unfairness.
6. The decision in Arab-Malaysian Credit Bhd v Tan Seang Meng [1995] 1 MLJ 525; [1995] 1 CLJ 773 was also endorsed as illustrating that courts may extend the validity of a writ beyond the literal wording of the Rules where circumstances demand it. Although that case was decided under an earlier version of Order 6 rule 7(2), the Federal Court held that the principle, namely, that procedural rules must not obstruct justice remains fully applicable.
7. Additionally, the Court observed that its interpretation is aligned with the approach of major maritime jurisdictions. Singapore, England, Hong Kong, and Australia impose no numerical limit on renewing admiralty writs (see rule 61.3(5) of the Civil Procedure Rules 1998 (UK); rule 20 of the Admiralty Rules 1988 (AU); Order 6 rule 8(2) of the Rules of the High Court (HK)). Courts in these jurisdictions consistently renew writs where service is impossible due to the vessel remaining outside the jurisdiction.
8. The Federal Court concluded that applying a fixed five-renewal limit regardless of the vessel’s whereabouts unjustly penalises diligent litigants and enables vessel owners to avoid liability simply by staying outside Malaysian waters until limitations expire. Such an outcome would undermine the entire system of maritime claims in rem.

Issuing an admiralty writ in rem gives the Plaintiff a statutory right to proceed directly against the vessel, similar to having a secured claim. This right continues even if the vessel is sold or changes owners, as confirmed in The Monica S [1968] 2 WLR 431.