Admiralty Law

Date01 December 2018
Published date01 December 2018

2.1 Three decisions pertaining to admiralty law and practice were handed down by the Singapore courts in 2018.

Forfeiture of deposit in Sheriff sale of vessel

2.2 The Swiber Concorde1 presented Pang Kang Chau JC with an opportunity to consider an interesting question of admiralty practice – whether the forfeited deposit from an earlier abortive sale of a vessel should be paid out together with the proceeds of sale to the parties interested in the vessel, or whether the forfeited deposit should be retained by the Sheriff or, perhaps, the State.

2.3 The vessel Swiber Concorde was arrested by the mortgagee plaintiff pursuant to its mortgage claim. The plaintiff obtained judgment in default of appearance, which was followed by an order for appraisement and sale of the vessel. The vessel was then sold to the highest bidder (Valentine Maritime Ltd) on the Sheriff's terms and conditions of sale, who then paid a deposit of US$50,000.

2.4 Subsequently, Valentine Maritime Ltd declined to proceed with the purchase and its deposit of US$50,000 was forfeited by the Sheriff pursuant to the terms and conditions of sale. The vessel was then sold in its third round of bidding and the mortgagee plaintiff applied for payment out of the proceeds of sale paid into court.2

2.5 As the Sheriff's final statement of account distinguished between “proceeds of sale” and the forfeited deposit, his Honour had to consider whether the forfeited deposit should be paid out together with the proceeds of sale.3 Curiously, there was one case4 which treated the forfeited deposit from an aborted sale as part of the proceeds of sale.

2.6 Pang JC noted that while the starting point would be to look to the Sheriff's conditions of sale to determine how the forfeited deposit

should be dealt with, there are no express provisions in the conditions of sale dealing with this issue.5

2.7 In any event, the deposit forfeited by the Sheriff is for the benefit of the parties interested in the vessel because while the Sheriff contracts on behalf of the State in respect of the contract for sale of the vessel, the title to the arrested vessel does not vest in the State but remains with the owner of the vessel.6 Further, as the Sheriff is acting under the court's commission for appraisement and sale, the Sheriff is selling the vessel for the benefit of all parties interested in the vessel. Accordingly, the forfeited deposit should be paid out together with the proceeds of sale to the interested parties.7

2.8 For completeness, as there were no other claimants before the court than the plaintiff, and the plaintiff's judgment sum exceeded the total sum of the proceeds of sale and forfeited deposit, Pang JC ordered the forfeited deposit to be paid out to the plaintiffs.8 As a matter of principle, the decision is, with respect, correct. The vessel represents the arresting party's security; when sold, that security is converted into monetary form. There is no reason to draw a distinction between the sale proceeds and forfeited deposit.

Right to stop judicial sale of vessel and obtaining release of vessel

2.9 The Long Bright9 concerns the plaintiff's application to discharge the sale order and release of the arrested vessel Long Bright after the Sheriff proceeded with the commission for appraisement and sale of the vessel. Crucially, the court had to consider whether a plaintiff is entitled as of right to have the vessel released and to have the judicial sale stopped.

2.10 The factual matrix leading to the plaintiff's application to discharge the sale order are as follows. The plaintiff arrested the vessel for wharfage and related charges incurred by the vessel at the plaintiff's shipyard. Besides the plaintiff, the mortgagee and crew (the first intervener and second to 11th interveners respectively), as well as two caveators had claims against the vessel.

2.11 Following the arrest of the vessel, the plaintiff applied for judgment in default and obtained an order for the appraisement and sale of the vessel. However, the plaintiff subsequently filed an application for the discharge of the sale order and release of the vessel because it had reached a settlement with the first intervener, and that the first intervener intended to commence a separate in rem claim to arrest the vessel for its claim.10

2.12 In support of its application for the discharge of the sale order, the plaintiff and first intervener (relying on The Sahand)11 argued that as the plaintiff had settled its claim with the first intervener, the plaintiff no longer had any claim against the vessel; therefore, the vessel had to be released as of right. Accordingly, so the argument went, the sale order also had to be discharged as the plaintiff no longer had a valid in rem claim against the vessel.

2.13 This was opposed by the second to 11th interveners, who argued that The Sahand was distinguishable and did not apply on the present facts because the first intervener had only settled the plaintiff's claim. In that connection, the second to 11th interveners submitted that the present case was more akin to The Acrux12 where an application to discharge the sale order was declined because the security offered by the defendant could only meet the claims of some (but not all) claimants. Accordingly, the settlement between the plaintiff and first intervener did not extinguish the plaintiff's claim against the defendant.

2.14 While not making any judicial pronouncements on whether the plaintiff's claim had been extinguished (because the terms of the settlement agreement were not before the court),13 Pang JC did not agree that the settlement between the plaintiff and first intervener extinguished the plaintiff's claim against the defendant. Crucially, Pang JC agreed that The Sahand was distinguishable because a settlement between the plaintiff and first intervener in the present case did not bind the plaintiff and the defendant.14 If the defendant could not enforce the terms of the settlement, it did not follow that the settlement could extinguish the plaintiff's claim against the defendant.

2.15 Next, Pang JC disagreed that the plaintiff was entitled as of right to obtain a release of the vessel. This was because the arrest of a vessel affects the rights of all parties who have an in rem claim against the

vessel. Since O 70 r 12 of the Rules of Court15 provides for a system of caveats against release, and a release would affect the interests of the caveators, the court must consider these interests before allowing the vessel to be released.16

2.16 In that connection, Pang JC considered whether an existing order for judicial sale has to be discharged before the vessel...

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