Caveat against arrest - new format to an old form
In a recent amendment to the Singapore Rules of Court, there is a change in the form of a caveat against arrest which may potentially bring about more interest in this procedure.
What is a caveat against arrest?
In the world of admiralty law, a potential claimant has the ability to arrest a vessel in order to obtain security for their claim against the shipowner.
Arrest normally causes significant interruption to the shipowner’s trade. Vessels may be off-hired and delivery dates delayed while costs and expenses continue to accrue without any revenue for the period that the vessel is under arrest.
If a shipowner knows there is a potential claim against the vessel, they may file what is called a caveat against arrest with the High Court of Singapore.
A caveat against arrest is essentially an undertaking provided by the shipowner to the world at large that once an action has been commenced in the High Court of Singapore against the vessel, the shipowner shall enter an appearance in the action, and within three days either give bail in the action for the amount stated in the caveat, or pay a sum that is equivalent to that amount into court.
If the arresting party is unable to show a good and sufficient reason for proceeding with the arrest, the court may order that the warrant of arrest be discharged and that the arresting party pays the damages suffered by the party who filed the caveat.
Therefore, although a caveat against arrest does not prevent the arresting party from proceeding with the arrest, it places them on caution.
Characteristics of a caveat against arrest
In theory, there is no limit to the number of persons who could call on that undertaking to furnish bail bond or payment into court. The only limitation is that each bail bond and each payment into court is limited to the amount stated on the caveat against arrest.
For example, if 10 different claimants file 10 separate writs in rem against the vessel and if the shipowner files a caveat against arrest specifying the maximum amount as $500,000, then each claimant is entitled to call on the undertaking to furnish bail or pay the amount into court for up to $500,000 for each claim. The shipowner’s exposure is therefore $500,000 X 10.
Amendments to Form 162
A caveat against arrest must be filed in Form 162. The recent amendments to Form 162 take effect from 1 February 2018.
The wording of Form 162 is as follows, with the new wording underlined:
“We, ___ of ___, solicitors for ___ of ___ hereby file a caveat against the arrest of (description of property giving name, if a ship) in respect of (Description of the kind of proceedings or claim to which the caveat applies)* and hereby undertake to enter an appearance in any action that may be begun in the High Court against the said ___ and, within 3 days after receiving notice that such an action has been begun, to give bail in the action in a sum not exceeding ___ dollars or pay that sum into Court…
* List the kind of proceedings or claim to which the caveat applies, such as “all proceedings”, “any proceedings on a claim mentioned in section 3(1)(g) or (h) of the High Court (Admiralty Jurisdiction) Act (Cap 123)”, or “a collision between the vessels “ABC” and “DEF”, as appropriate.”
Significance of the new wording
A shipowner can now be selective as to which claim he is filing a caveat against.
For example, the shipowner may be aware of claims by various bills of lading holders for cargo damage. He may also be aware of other claims by the charterer for breach of charter party. The shipowner may wish to file a caveat against arrest in respect of the claims by the charterer only, and leave his P&I Club to handle the demand for security made by the bills of lading holders.
The ability to limit the type of claims to which the caveat applies means that the shipowner’s exposure to demands for the provision of bail bonds or payment into court is better managed.
It should be noted that there are certain requirements for bail bonds to be accepted. Primarily, the sureties to the bail bond must have assets within Singapore that are capable of being executed against (a bail bond from a foreign P&I Club without any assets in Singapore is not acceptable).
Therefore, if a shipowner does not have any suitable sureties to provide bail bond in Singapore, the caveat against arrest effectively becomes an undertaking to pay the amount stated in the caveat into court.
Key lessons learnt
- If a shipowner is aware of any potential claims, a caveat against arrest is a possible tool to prevent the vessel from being arrested.
- Shipowners can now choose which claims to issue a caveat against.
- For charterers or cargo owners, the new Form 162 means that you need to check if your claim is included in the description of the claim covered by the caveat before proceeding with an arrest.
- If the description of the claim in the caveat is vague, it would be advisable for the charterer or cargo owner to call on the undertaking given in the caveat first (if circumstances permit) before going ahead with the arrest.