Keppel Corp Ltd v Chemical Bank

• Judge: Karthigesu JA
• Judgment Date: 07 January 1994
• Neutral Citation: [1994] SGCA 3
• Citation: [1994] SGCA 3
• Defendant Counsel: Richard Kuek Chong Yeow (Gurbani & Co)
• Published date: 19 September 2003
• Plaintiff Counsel: Oo Gin Lee and Patricia Ong (JYP Chia & Co)
• Date: 07 January 1994
• Docket Number: Civil Appeal No 201 of 1992
• Court: Court of Appeal (Singapore)
• Subject Matter: Practice and procedure of action in rem,Judicial sale of vessel,Sheriff's expenses,'Sheriff's expenses',Whether crews' wages part of sheriff's expenses,Necessary and proper expenses,Admiralty and Shipping,Words and Phrases

(delivering the grounds of judgment of the court): The parties involved in this appeal are Keppel Corp Ltd (`Keppel`) and Chemical Bank, both of whom were interveners in an admiralty in rem action commenced by Chandling International Ltd (`Chandling`) against the owners of the ship or vessel Atlas Pride (`Atlas Pride`) on 24 June 1992.

Chandling`s claim was for necessaries (goods, provisions and materials) supplied to the Atlas Pride between December 1991 and January 1992 at Cape Town, South Africa, in the sum of South African Rands 191,660.65 (about US$170,000). Keppel`s claim was also a necessaries claim, being a claim for repairs carried out to the Atlas Pride at Keppel`s repair yard in Singapore amounting to about S$18.5m. However, at the date of the commencement of Chandling`s in rem action against the Atlas Pride and her consequent arrest, she was still in Keppel`s repair yard. Accordingly, Keppel claimed a possessory lien over the Atlas Pride. Chemical Bank were the mortgagees of the Atlas Pride. There were also numerous other interveners and caveators, all of whose claims ranked as `necessaries claims` except for one, Alexander G Tsavlivis & Sons Maritime Co, who had rendered salvage services to the Atlas Pride and whose claim would rank third in the order of priorities for the payment of claims, ie next to the sheriff`s costs and expenses and Chandling`s arresting costs. The crew of the Atlas Pride, who were aboard her when Chandling commenced the in rem action, also had a claim for unpaid wages and refused to leave the vessel unless they were paid their wages and repatriation expenses.

On 28 August 1992 Chandling entered a judgment in default of appearance for South African Rands 191,660.65 and interest and obtained an order for the appraisement and sale of the Atlas Pride by the sheriff free of all liens, charges, encumbrances and claims but without prejudice to Keppel`s possessory lien which was ordered to be transferred to, and preserved against, the proceeds of sale of the Atlas Pride. It was also ordered that all questions affecting the priorities or the validity of claims of any party against the proceeds of sale would be reserved for determination at a later date but the costs of and incidental to the application for the appraisement and sale of the Atlas Pride were ordered to rank immediately after the sheriff`s costs and expenses but in priority to all other claims.

Accordingly, the claims against the proceeds of sale of the Atlas Pride, having regard to the established order of priorities in admiralty in rem actions, would rank in the following descending order:

(1) sheriff`s costs and expenses;

(2) Chandling`s costs of and incidental to the application for the appraisement and sale of the Atlas Pride;

(3) Alexander G Tsavlivis & Sons Maritime Co`s salvage claim;

(4) Keppel`s possessory lien for the repairs to the Atlas Pride;

(5) crew`s wages and repatriation expenses;

(6) Chemical Bank`s claim as mortgagees;

(7) the other necessaries claims, including Chandling`s claim, pari passu.

The value of the Atlas Pride estimated at S$10m was insufficient to meet all these claims in full. Even if the Atlas Pride was sold by the sheriff for S$10m, it would only be sufficient to meet in full the first three claims set out above and a small part of Keppel`s possessory lien claim for the cost of repairs. The crew, Chemical Bank, Chandling and the other necessaries claimants would receive nothing. The owners of the Atlas Pride were insolvent.

Pursuant to the court`s order for the appraisement and sale of the Atlas Pride, the sheriff advertised the sale by public auction to be held on 6 November 1992. There was no sale as there were no bids matching the appraised value. The sheriff was unable to engender interest in the Atlas Pride since the vessel was saddled with a foreign crew whose wages were unpaid and who refused to leave the vessel unless their wages were paid and they were repatriated to their home port. It was evident to the crew, as it was to everyone concerned with the Atlas Pride, that the entire proceeds of sale would be consumed by the claims having priority to the crew`s claim for wages. The crew`s claim amounted to US$137,836 in addition to which there would be the repatriation expenses.

In normal practice, when a situation such as this is encountered, the arresting plaintiff would usually apply to court to pay off the crew and repatriate them and to stand subrogated of the crew`s claim and enjoy the same priority as the crew in the order of priorities. (See The Mogileff , The Berostar; Sameiet Stavos (OH Meling Rederi) v Owners of The Berostar , The Vasilia , The World Star .) This rarely caused any problems and the sheriff was always able to obtain the best price available. Crew`s claims usually ranked high in the established order of priorities for the payment out of claims in admiralty actions in rem except when there were, as in this case, salvage and possessory lien claims. It is understandable, therefore, that there being the salvage claim of Alexander G Tsavlivis & Sons Maritime Co and the possessory lien claim of Keppel, both of which ranked above the crew`s claim, the arresting plaintiffs, Chandling, were not moved to make such an application. Alexander G Tsavlivis & Sons Maritime Co and Keppel, although they stood to lose nothing but would have gained were the sheriff able to sell the Atlas Pride without the unpaid crew `as sitting tenants`, were also not moved to make such an application for reasons best known to themselves. They ought to have realized that a sale without the crew `as sitting tenants` would command a higher price. As Hewson J said in The Fairport , at p 184 `it is no good selling a ship with a sitting tenant`.

The result was an impasse. It appeared that no one was interested in purchasing a vessel with an unpaid crew as `sitting tenants`. Chandling as the arresting plaintiffs were concerned as, until the Atlas Pride was sold, they would be responsible to the sheriff for the costs of maintaining the vessel, although ultimately these costs would be recovered by the sheriff as his costs and expenses in priority to all other claims. The longer the Atlas Pride remained unsold the smaller would be the net proceeds of sale for distribution to the claimants. The sheriff too was concerned for the longer the Atlas Pride remained unsold the greater would be his responsibilities for her care and safety. The Atlas Pride was fast becoming a wasting asset and it was becoming increasingly difficult for the sheriff to carry out his commission of the appraisement and sale.

The two claimants who would undoubtedly benefit from the sale of the Atlas Pride not having come forward to break the deadlock, Chemical Bank, who stood to gain nothing, came forward with a proposal. They proposed to the sheriff that they would be prepared to advance to him the funds necessary for him to pay the crew`s wages in full and to meet the crew`s repatriation expenses provided they were reimbursed by the sheriff...