The plaintiff arrested the Golden Petroleum on a warrant of arrest for a claim of USD 146,249.72, being the balance of the price of goods or materials supplied to the ship at the defendant's request. The ship was subsequently released from arrest on security. The goods supplied to the ship were bunker oil. However, the oil delivered to the ship was not for its own use or consumption, but was intended for sale to other ships.

The Assistant Registrar upheld the defendant's application to set aside the writ of summons on the basis that: first, the endorsement of the writ of summons was defective in that it did not include a statement that the goods supplied were 'for the ship’s operation'; and secondly, the plaintiff’s claim was not within the admiralty jurisdiction of the Court. The Assistant Registrar ordered that the warrant of arrest be set aside, and the security be returned to the defendants.

The plaintiff appealed against the decision of the Assistant Registrar to the High Court. In the main, the appeal was concerned with the proper construction of s 3(1)(l) of the High Court (Admiralty Jurisdiction) Act (Cap 123) (equivalent to art 1.1.k of the Arrest Convention 1952). The relevant portion of the section reads:

The admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims:… (l) any claim in respect of goods or materials supplied to a ship for her operation or maintenance; …

The plaintiff argued that its claim fell within the scope and ambit of s 3(1)(l) in accordance with the ordinary and natural meaning of the word 'operation'. 'Operation' meant anything done or procured to facilitate and ensure the profitable exploitation of the defendant's business, with the ship as the vehicle. To confine the meaning of 'operation' to the requirements of a voyage in a strict sense, ie bunker oil to enable the ship to get from point A to point B, or for the purpose of ship stability, was bizarre and eccentric.

The defendant argued that the word 'operation', appearing as it did with the word 'maintenance', must be construed in the same context. 'Operation of a ship' means the operation of a ship as an item of machinery. Section 3(1)(l) was not concerned with the business or profit-making aspects of a ship.

Held: Appeal dismissed.

The phrase 'operation of the ship', even if construed liberally, would necessarily entail an aspect of consumption or an element of internal activity, function, utility, or exploitation of the goods supplied, within or by the ship. The meaning of the word 'operation' is not restricted only to the ship's mechanical or motility aspects, which enable it to move from port to port. No distinction can be drawn between necessaries for the ship and necessaries for the voyage and all things reasonably requisite for the particular adventure on which the ship is bound are comprised in this category. Nevertheless, the historical background connotes that the goods supplied to the ship must be linked to the working or running of that ship. Bunker oil supplied to the ship for sale to other ships could not be conceived as goods supplied for its operation. The phrase 'operation of the ship' should not be equated with the business activities of the shipowner, and the section as enacted could not cover goods which are loaded onto the ship only to be unloaded or disposed of soon thereafter by sale.

All the cases referred to, including The River Rima [1998] 2 Lloyd's Law Rep 93 (CMI692), do embrace a segment of direct user for or consumption by or within the ship. Goods supplied to the ship for sale, as in this case, could not possibly be bracketed with the user referred to in the cases.

Here, all that was within the contemplation of the parties was that the bunker oil was to be sold to third-party ships, the particular ship in question to be decided by the defendant. This clearly made the contract in question one for the supply of bunker oil to the defendant shipowner, as opposed to a contract for the supply of bunker oil to a ship.

The statement of claim and letter of demand reflected a running account between the plaintiff and the shipowner. A ship could not be liable to arrest for a general balance of account merely by appropriating the receipt and payments in such a manner as to show a balance due for necessaries. The fact that there was a running account between the parties was not made known to the Court when the warrant of arrest was originally issued. A failure to make full and frank disclosure to the Court would entitle the defendant to discharge the warrant without consideration of the merits.