Admiralty, Shipping and Aviation Law

• Date: 01 December 2013
• Published date: 01 December 2013
• Author: TOH Kian Sing SC LLB (Hons) (National University of Singapore), BCL (Oxford); Advocate and Solicitor (Singapore). CHAN Leng Sun SC LLB (Malaya), LLM (Cambridge); Advocate and Solicitor (Singapore and Malaya), Solicitor (England and Wales). Jack TEO Cheng Chuah LLB (Hons) (National University of Singapore), LLM (National University of Singapore), PGDipTHE (National Institute of Education, Nanyang Technological University); Advocate and Solicitor (Singapore); Retired Associate Professor, Nanyang Business School, Nanyang Technological University; Part-time Lecturer, National University of Singapore; Associate Lecturer, University of Buffalo; Associate Lecturer, Singapore Institute of Management; Sessional Lecturer, Curtin university.
• Citation: (2013) 14 SAL Ann Rev 56

Introduction

2.1 The High Court handed down an important decision in 2013 providing helpful clarifications on a rarely discussed but frequently encountered area of admiralty practice, which reviewed the private direct sale of an arrested vessel ordered to be judicially sold.

The Turtle Bay [2013] 4 SLR 615

2.2 The decision in The Turtle Bay[2013] 4 SLR 615 arose out of two admiralty actions in rem featuring the same plaintiff. The registered owner of the vessels the Turtle Bay and the Tampa Bay (‘the Vessels’), a German entity, went into liquidation in Germany. The plaintiff, the mortgagee bank in respect of the Vessels, obtained the insolvency administrator's consent to a private direct sale of the Vessels, and thereafter arrested the Vessels. The plaintiff also purported to enter into separate contracts with a named buyer to sell the Vessels at a specified price.

2.3 Having obtained judgment in default of appearance in both actions, the plaintiff filed applications seeking court sanction of a private direct sale in respect of each vessel (instead of applying for the Vessels to be appraised and sold through sealed bids placed by interested buyers) (‘the sanction application’). The issue which Belinda Ang Saw Ean J considered was under what circumstances would the court sanction a private direct sale in respect of an arrested vessel, thereby suiting the arresting party's own purposes and turning that sale into a judicial sale, which represents an important part of the court's admiralty jurisdiction (‘an admiralty judicial sale’): at [7].

Conceptual distinction between a private sale and an admiralty judicial sale

2.4 Before arriving at her decision, Ang J helpfully considered the conceptual distinction between a private sale and an admiralty judicial sale. Her Honour noted that in a private sale, the seller would in the ordinary course have to warrant to the buyer that the subject vessel was unencumbered and not subject to any existing debts or liabilities whatsoever. To that end, the seller would usually provide the buyer with an indemnity that is usually counter-secured by a guarantee: at [10]. In contrast, the key (and attractive) feature of an admiralty judicial sale is the fact that the vessel is sold free from all liens and encumbrances; in other words, an admiralty judicial sale extinguishes any and all in rem claims attached to the subject vessel prior to that sale; a judicially sold vessel would therefore no longer be subject to an arrest on account of those claims: at [11].

2.5 In the light of the cleansing effect of an admiralty judicial sale, Ang J emphasised the protection which an admiralty judicial sale affords to existing in rem claimants against that vessel: at [15]. Ang J (at [16]) therefore adopted the reasoning of Waung J in The Margo L[1998] 1 HKC 217 at 218 and 219 (‘The Margo L’), who opined that:

The best way (which is also the normal way) that the...